Tag Archives: merchant services

Industry Terms: Card-Not-Present

This is the latest installment in The Official Merchant Services Blog’s Knowledge Base effort. Well we want to make the payment processing industry’s terms and buzzwords clear. We want to remove any and all confusion merchants might have about how the industry works. Host Merchant Services promises: the company delivers personal service and clarity. So we’re going to take some time to explain how everything works. This ongoing series is where we define industry related terms and slowly build up a knowledge base and as we get more and more of these completed, we’ll collect them in our resource archive for quick and easy access. Today’s terms are card-not-present and card-present.

Card-Not-Present

A card not present transaction (CNP) is a credit card purchase made over the telephone or over the Internet where the physical card has not been swiped into a reader. We touched lightly on the topic in our Knowledge Base Entry on MO/TO found here.

CNP  can be a major route for credit card fraud. If a fraudulent transaction is reported, the bank that hosted the merchant account that received the money from the fraudulent transaction must make restitution. Whereas in a swiped transaction the bank that issued the credit card is liable for restitution. Because of the higher risk, CNP transactions have a specific set of rules that is more restrictive than the rules for retail merchants.

CNP merchants must take extra precaution against fraud exposure and associated losses, and they pay higher rates for the privilege of accepting cards. Fraudsters bet on the fact that many fraud prevention features are not used for small transactions. Merchant associations have developed some prevention measures, such as single use card numbers, but these have not met with much success. Customers expect to be able to use their credit card without any hassles, and have little incentive to pursue additional security due to laws limiting customer liability in the event of fraud. Merchants can implement these prevention measures but risk losing business if the customer chooses not to use the measures.

Card Present

A type of transaction in which the card is present and is swiped through an electronic device that reads the contents of the magnetic stripe on the back of the card. Most transactions run through a payment processing terminal are of the card present type and that’s essentially what the terminal is there to do — validate the presence of the card by recognizing the consumer is present at the point of purchase.

Mastercard Credit Card 19100982

MasterCard Site Tools

Today The Official Merchant Services Blog takes a close look today at card association juggernaut and industry titan MasterCard. A card association is a network of issuing banks and acquiring banks that process payment cards of a specific brand, and along with Visa, MasterCard is one of the big wigs in the industry — Card associations Visa and MasterCard each comprise over 20,000 card issuing banks.. They help set the standard for the payment processing industry. Other payment card association brands include Discover, Diner’s Club, American Express and JCB. Among United States consumers alone, over 600,000,000 payment cards are in circulation. Visa, MasterCard and American Express issuers co-brand with the individual card association, for example, “WellsFargo-Visa” or “Citi-MasterCard.”

Making Moves

It was reported here in our May 4, 2012 Blog Entry, that MasterCard was gaining ground in the Swipe Debit sector of revenue, potentially crowding in on Visa’s dominance.  Speculation suggested that the hard cap on Debit Card Swipe fees imposed by the Durbin Amendment from October 2011 may have helped MasterCard take some of that market share away from Visa.

MasterCard has been winning deals to handle processing of debit transactions according to the company’s Chief Financial Officer Martina Hund-Mejean. Bloomberg quotes Hund Mejean as saying in a conference call to analysts: “In every quarter we’re going after business very surgically and opportunistically. You can see those results in our numbers.”

And according to Tien-tsin Huang, a JP Morgan Chase & Co. analyst in a May 1 research note, Bank of America Corp. — the biggest debit-card issuer and catalyst of post-Durbin media frenzy — switched to MasterCard.

Mastercard Credit Card 19100982

Collaboration on Chip Cards

On May 21, MasterCard proposed the formation of a cross-industry group to foster collaboration and alignment between networks, issuers, merchants, acquirers, processors, terminal manufacturers, card manufacturers and other groups for the implementation of EMV technology in the United States. This proposal comes from MasterCard’s January Roadmap for the transition to EMV, something the entire credit card industry is moving toward including Visa and which we discussed in our February 7, 2012 Blog Entry. MasterCard emphasized this need for a payments ecosystem to be fully aligned across the board, citing the upcoming implementation of EMV standards in the U.S. as the catalyst for that need.

You can read more about MasterCard’s take on EMV at their Website Here.

MasterCard’s Web Site Tools

Speaking of their Website … MasterCard has a very useful resource available to its visitors.

It’s Demos Page, FOUND HERE, has a flash demo that goes through the anatomy of a credit card. This helps people understand the process of using them for payments by breaking the entire item down visually. As it says in the demo, a card is more than just a piece of plastic.

Here’s a screenshot of the demo in action:

Host Merchant Services screenshot of MasterCard's anatomy of a credit card demo.

CLICK HERE to view it.

More interesting to us in the Merchant Services industry, is the next demo, the anatomy of a transaction demo. It’s a flash graphic that walks you through, step by step, a transaction. It gives you an nice journey through each step your payment takes from the moment of purchase.

Here’s a screenshot of the demo in action:

Host Merchant Services image on MasterCard demo of payment processing.

CLICK HERE to view it.

The demo page is a useful resource for any readers at all interested in how payment processing or credit cards work and should at least be thought of as an addition to one’s “favorites” tab.

Mobile Commerce

Mobile Commerce Concerns [2023 Update]

Today The Official Merchant Services Blog turns its tech-obsessed eyes once again to the Mobile Payment Solution sector. Recently, Host Merchant Services became fully mobile and able to offer a mobile payment solution for Android and iPhone devices. This expansion continues, and HMS now also provides a payment processing solution for iPads as well. You can read about the expanded HMS Services in our April 9, 2012 Blog Entry.

Mobile devices are ingrained in the lives of consumers these days. Like the recurring ad sarcastically states, the smartphone beta test is over. And people are wandering around everywhere with their phone bringing their social media, camera, and buying power with them.

Suri, the voice of the iPhone, is holding the hands of stars from Samuel L. Jackson to Zooey Deschanel, helping them manage such difficult life tasks as making gazpacho to putting off cleaning till the next day on one’s calendar.

Coming with this ingratiation into our daily lives are two key elements.

  1. We’re really just one artificial intelligence glitch/accident/sabotage away from launching the type of dystopian sci-fi worldview found in Terminator, The Matrix or Magnus Robot Fighter.
  2. We’re flying full force into a world where we’ll also start to wave our phones around like a Hogwarts Magic Wand, paying as we go from place to place, store to store.

Host Merchant Services dystopian future of Mobile Payments image.

Mobile Payments are brisk and bustling because people are buzzing to take advantage of the convenience they offer. Here’s a graphic based on data compiled by the AITE Group showing the trend in spending via smartphone in a 5-year stretch:

Host Merchant Services graphic on Mobile Payment spending

But it’s not all phones-n-roses. As one might expect, the state that’s home to Cyberdyne Systems and our eventual AI-overlords Skynet, has a university — the University of California — that did a study titled “Mobile Payments: Consumer Benefits and New Privacy Concerns.”

The bottom line of this study is that American consumers are still wary of what this convenient technology will bring. The study found some interesting answers to questions about consumer thoughts on their privacy.

The study found that respondents overwhelmingly oppose the revelation of contact information to merchants when making purchases with mobile payment systems and an even higher level of opposition exists to systems that track consumers’ movements through their mobile phones.

This article by Kit Eaton at Fastcompany.com dissects the numbers in the study. Eaton states that: “The numbers are stark. When asked if they thought their phones should “share information with stores when they visit and browse without making a purchase,” 96% objected to the tracking, 79% said they definitely would forbid it, and 17% said they “probably” wouldn’t allow it–meaning just 4% were indifferent or positive about the idea. When the question was instead about information sharing (phone number, address, and so on) at the actual point of sale, 81% objected to phone-number sharing–a mere 15% said they’d probably allow it and 3% definitely so. Similar figures emerged when the information shared was respondents’ home address. “

This is all well and good and you can download the study here at this link. But what the study seems to overlook is exactly how many people, many of the people most likely polled in that very study, are already well past the point of no return in terms of their privacy concerns.

Any of those who object to tracking are likely already being tracked by Google and Facebook, social media they use with ease and frequency from their smartphones.

All those who object to sharing contact information may have already shared this information easily and readily when making an online purchase in the past few years. And statistics indicate that e-commerce is booming and replacing brick and mortar in the retail sales tug-of-war.

Eaton catches on to this flaw in the study, and states in her article: “And that’s the key to unraveling this problem right there: When you do use a current-tech store loyalty card you are effectively voluntarily giving the store your personal information, and “tracking” yourself. It’s why the cards exist, of course–they’re partly there as a sales incentive, to get customers back in the door via money-off offers, but mainly so the store can collate information about customers and work out what kind of products to stock, what offers to run, and what future products to plan for.”

And Eaton even points out that in a Pew Research Survey, 71% of Americans use the internet for shopping — meaning that they’ve already typed in their personal contact information.

Host Merchant Services image of the Terminator as a payment processing device.

So essentially, Mobile Payments seem primed to take advantage of the marketplace. The worry over security is still genuine to some extent — identity theft and phasing scams and data breaches abound as we get more and more tech ingrained. But in the end, the American consumers already dove headfirst into this when they fell in love with social media. The tweets, the +1’s and the Likes have already been tracking you. So when Facebook transforms itself into Skynet, or simply when Facebook and Google go toe-to-toe with Visa in the titanic tussle for your smartphone swipes … your dollars will be as easy to find as your latest status update or check-in.

Industry Terms: Interchange

 

Interchange

Interchange is a term used in the payment card industry to describe a fee paid between banks for the acceptance of card based transactions. Usually it is a fee that a merchant’s bank (the “acquiring bank”) pays a customer’s bank (the “issuing bank”).

In a credit card or debit card transaction, the card-issuing bank in a payment transaction deducts the interchange fee from the amount it pays the acquiring bank that handles a credit or debit card transaction for a merchant. The acquiring bank then pays the merchant the amount of the transaction minus both the interchange fee and an additional, usually smaller fee for the acquiring bank or ISO, which is often referred to as a discount rate, an add-on rate, or passthru.

For cash withdrawal transactions at ATMs, however, the fees are paid by the card-issuing bank to the acquiring bank (for the maintenance of the machine).

These fees are set by the credit card networks, and are the largest component of the various fees that most merchants pay for the privilege of accepting credit cards. Visa, Mastercard, and Discover are each known as card associations. And each card association has their own rate sheets known as Interchange Reimbursement Fees. These fees make up the majority of what you pay to your processor and they vary greatly depending on the card type accepted.

Download Visa’s Interchange Fees Here

Merchant Services Document Download Graphic

Download MasterCard’s Interchange Fees Here

Merchant Services Document Download Graphic

 

Interchange Plus Pricing

Interchange Plus pricing means that the acquirer charges you a variable MSC consisting of the cost price plus a fixed markup. Interchange Plus Pricing  is exclusively how we quote at Host Merchant Services. Interchange Plus, also known as Cost Plus, pricing gives the customer a fixed rate over published Interchange Fees. This pricing format is normally quoted as a discount rate (percentage fee) along with a per item or authorization fee. The great thing about Interchange Plus pricing is that you always know exactly what you are paying to your processor to services your account. Think of Interchange, and all the associated fees, as an unavoidable cost. No matter who you process with, you have to pay these fees. They may be labeled differently, or wrapped up in a confusing pricing tier, but one way or the other, you are paying Interchange fees. By understanding the markup you pay over Interchange, you know exactly what you pay to your processor and exactly what is going to the card associations. That allows you to make a decision on whether or not the markup seems reasonable for the service you get and choose your processing partner accordingly.

Here’s a small graphic explaining the basics of how Interchange Plus works:

Host Merchant Services infographic on Interchange Plus pricing

Visa Investigation Update

On May 2 it was revealed by Visa CEO Joe Saunders that the credit card giant was being investigated by the Department of Justice for violation of antitrust laws. One of the key elements of the DoJ’s interest in Visa for antitrust violations is its new fee, the Fixed Acquirer Network Fee (FANF) which went into effect on April 1, 2012. Saunders stated that the investigation began on March 13, prior to the fees taking effect.

Saunders revealed that Visa was being investigated during Visa Inc.’s Fiscal Q2 2012 Earnings Conference Call, which prompted The Official Merchant Services Blog to take its readers through the strange roller coaster ride that was Visa’s beginning of May in THIS BLOG HERE.

The strength of Visa’s earnings in the last quarter was framed immediately by Saunders in the conference call: Credit. As Saunders says, “In the U.S., payment volumes increased 6% for all products. Our star performer for fiscal second quarter was credit. Building on that, we continue to invest in new and expanded long-term credit relationships with our largest U.S. clients to drive growth in our core business.”

The other side of that statement, however, is debit. Where MasterCard took great strides — notably adding the nation’s largest debit card institution Bank of America, which switched from Visa.

Host Merchant Services image of Visa CEO Joe Saunders

Visa claims it was hampered by the Durbin Amendment in terms of making earnings from debit in the last quarter.  As Saunders said in the conference call, “So far, the situation is playing out as we expected, and in line with our updated guidance for fiscal 2012 as well as our guidance for fiscal 2013. During the March quarter, U.S. aggregate debit payment volumes slowed to 2% growth and, as expected, has continued to decline in April. Interlink is bearing the brunt of the regulatory impact.”

Saunders then took a moment to emphasize the individual differences between Visa Debit — the well known Visa check cards that get swiped through terminals around the country — and Interlink, Visa’s PIN-debit product. Saunders noted that Visa’s swipe debit grew, but grew very slowly. And then went into detail about how Interlink was the company’s worst performer in the quarter, “We posted negative payment volume growth in each month of the March quarter. More recently, between the compliance deadline of April 1 and April 28, Interlink payment volume has experienced notable deterioration. Keep in mind, though, that in the March quarter, Interlink contributed less than 10% of U.S. debit revenue and about 2% of Visa Inc.’s overall revenue and was our lowest yielding product in the U.S. market. “

At this point in the call Saunders shifted into a very general discussion of Visa’s “strategies to compete” — essentially their new fees, including FANF, the Transaction Integrity Fee and a revised Network Acquirer Processing Fee. That led Saunders to discuss the Department of Justice investigation: “On March 13, prior to the April 1 implementation date, the U.S. Department of Justice Antitrust Division issued a civil investigative demand requesting additional information about PIN-authenticated Visa Debit and elements of our new debit strategies, including the fixed acquirer fee. In March, we met with the department twice and provided materials in response to the CID. We are confident our actions are appropriate and that our response to the DOJ supports that.”

More Commentary from Visa

During the question and answer period of the conference call, Saunders stepped up to defend Visa’s new fees. Saunders says that the fees are part of “the total structure we’ve put to deal with the Durbin regulation. We are not making money per se off of that fee. The combination of discounts and incentives that we have put together, I think, actually relate in a modest loss in the amount of $100 million a year. So we aren’t doing this with the intent of raising prices.”

Host Merchant Services image of the Department of Justice

Then another question comes up in the call asking about the outlook the company has for recovering from the losses in Debit due to Durbin. Saunders very vocally defends the company’s fees and strategies: “Let me just follow up on that and make perfectly clear one thing, and that is that we are never going to regain all of the market share that we had in the debit card business. Nothing that we say or none of our strategies suggest that that will happen or could happen. And nothing that we have done or thought about or said anticipates that it will happen. The environment has changed by regulation. We are operating in a different world, and we are going to live forever with less share than we once had.”

The TLDR Version from Visa

So essentially Visa’s CEO has revealed the company is being investigated by the DoJ for antitrust violations because its new fees could circumvent the point of the Durbin Amendment’s reform. But Saunders states the company is cooperating with the government probe, and stoutly defends the fees as not circumventing Durbin. Saunders says the fees don’t recoup the losses that the company will incur from the hard cap, and that the company is still taking a downturn in the debit sector even with the fees in effect. He admits that these fees are part of their strategy to deal with the legislation but feels that the company isn’t violating antitrust laws.

The transcript of the entire conference call can be read HERE at Seeking Alpha. Many thanks to them for providing it for use to bloggers and media outlets.

social gifting

Trending … Social Gifting [2023 Update]

social gifting

The Official Merchant Services Blog keeps its finger on the pulse of e-commerce, and today we’re giving you the scoop on the latest hot trend … Social Gifting.

What is Social Gifting?

Social Gifting is the activity where consumers on social media channels like Facebook can individually, or in groups, purchase gifts for their friends. Virtual Gifting, or the act of giving someone a gift through an app or a website, was covered right here on November 2, 2011. In our Virtual Gifting Blog we had these prophetic words to say about the activity: “As smartphones ingrain themselves more and more into our society, virtual gifting is going to become a much more commonplace activity. Driving the strength of e-commerce higher and higher. “

The Virtual Gifting Blog was a follow up to the November 1, 2011 blog entry on Mobile Gift Cards. We explained how the process of mobile gift cards works: “The standard way Mobile Gift Cards are designed to work is: The card is sent via email, Facebook or text. The recipient is notified that he or she has a Gift Card, and can take their smartphone into the store and use it immediately. The store clerk simply scans a bar code from the recipient’s phone, and the card is applied to the balance.”

The two key points to take from The Official Merchant Services Blog’s 2011 coverage are:

  • We recognized this trend as being on the cutting edge last year and have been staying ahead of the technology curve effectively.
  • Social Gifting is just the latest mutation in the process, adding in the social media and group aspect to virtual gift technology.

Wrapp That Gavel Up, B!

What prompted Social Gifting to get kicked up a notch in media coverage is that Swedish start-up Wrapp launched a U.S. version of its application with 15 high-profile merchants including H&M, Gap and Sephora. Wrapp takes the form of a mobile application for iOS or Android that you download and then connect to your Facebook account. Once you download the app, you can send gifts or promotional gift cards to people within your network. There is also a Web version of the application.

Since Wrapp launched its first app in November 2011, nearly 180,000 people have used it to give their Facebook friends more than 1.5 million free promotional gift cards for nearly 60 major retailers, according to the company’s background information.

Host Merchant Services image of Wrapp for feature on social gifting for e-commerce and mobile payments

The Pros and Cons

Wrapp cites its biggest strength is that the practice of social gifting often results in sales much larger than the original gift — each sale averages 4 times to 6 times the value. That’s an alluring idea that many retailers will find an attractive marketing tool. But there are some serious concerns about the trend as retailers still feel burned by the rise of the spammy empire that is “the daily deal.”

Host Merchant Services image of Facebook for feature on social gifting for e-commerce and mobile paymentsGroupon and its legion of imitators have helped undermine prices for some businesses (especially small ones) and downright burned others, when the businesses couldn’t keep up with the opportunistic one-time customers they acquired through the big one-time deals that trended in 2011. That has many people gun-shy in terms of social gifting, since the daily deal empire was also built through social media outlets like Facebook and Twitter.

This blog titled “Social Gifting: Helping or Hurting Business?” from techzone360 delves into the negative impact Social Gifting could have. The key criticism is made here: “As it turns out, the overwhelming majority of recipients make sure not to go a penny over the budget of the gift cards – which also isn’t very out of line or unreasonable either. The major flaw in this system is with the mom and pop stores. Sure, everyone wants a lot of business – how else would they make money? But when 500 people come swarming into a business that’s only prepared to deal with 10 or 15 customers at a time, things can get messy.”

But Wrapp CEO Hjalmar Winbladh told smartplanet.com in this blog: “You and I get to give our friends free gifts and promotional cards from great retailers, the gifts we give are stored in our friends’ phones so they’re always with them when they want to buy something they really want, and the merchants get a proven customer acquisition and retention platform built on Wrapp’s friend-to-friend marketing for conducting performance-based campaigns.”

The Full List

The company is comprised of executives that are big players in the retail and social media sectors.  The folks who founded Wrapp are: COO Carl Fritjofsson who was a strategy advisor to Groupon.se; CTO Andreas Ehn was Spotify’s first chief technology officer. The aforementioned Winbladh previously co-founded a mobile software company in Sweden called Sendit, which was acquired by Microsoft in 1999. Wrapp’s chairman, Fabian Månsson, is the former CEO of H&M and Eddie Bauer. In January, the company raised $10.5 million in Series A funding from Greylock Partners and Atomico. And LinkedIn founder Reid Hoffman is on the board of directors, along with Skype founder Niklas Zennström.

The full list of 15 retailers included in Wrapp’s U.S. service are:

  • Björn Borg – designer underwear
  • Brooklyn Industries – innovative designer clothes for men and women
  • Fab – daily design inspirations and sales
  • GANT – American sportswear with a European touch
  • Gap – casual, optimistic, American style
  • H&M – family fashion and quality at the best price
  • Happy Socks – designer socks online
  • Rovio Entertainment – creator of the globally successful Angry Birds franchise
  • Sephora – unparalleled beauty paradise of makeup, skincare, fragrances, hair care and more
  • SpaFinder Wellness – feel-good possibilities from massage to yoga, Pilates and fitness classes
  • The Wall Street Journal – the country’s largest newspaper and leading business publication
  • Threadless – amazing graphic tees from a global community of designers
  • Warby Parker – eyewear with a purpose
  • Wayfair – furniture, lighting, cookware, and more for the home
  • WeSC – street style clothing and accessories

Debit, Merchants and Durbin

Today The Official Merchant Services Blog jumps feet first into an update on everyone’s favorite payment processing industry-focused legislation, the Durbin Amendment. We’ve covered the topic extensively since the blog began. You can read the Host Merchant Services in-depth and official analysis of the legislations itself by CLICKING HERE.

The legislation took effect October 1, 2011. With May beginning its seventh month of officially being on the books, some studies on its impact are starting to come to light.

CardHub’s Interchange Fee Study

According to a study released by Card Hub, the Durbin amendment will cost big banks $8.06 billion and smaller banks $329.4 million on an annual basis. The study, FOUND HERE, also notes in its 2012 impact assessment that the interchange fees charged by large banks (those with more than $10 billion in total assets) have decreased significantly since the Federal Reserve’s interchange fee cap took effect – falling 59.3% for signature transactions and 32.4% for PIN transactions.

The CardHub study is a work in progress and has been updated multiple times with new information as the Durbin Amendment made its way through Congress and ultimately took effect on October 1, 2011. On May 1, 2012 the Federal Reserve for the first time announced hard data on the law’s practical effect, and Card Hub’s 2012 Impact Study concluded that the law has ended up costing banks almost $8.4 billion on an annual basis.

Speaking of the Fed …

The Federal Reserve released statistics on May 1 summarizing the Durbin Amendment’s actual affect on the banking industry through the first six month’s of the law’s existence. The central bank found that in those six months of Durbin’s controversial cap on debit swipe fees being in place, banks subject to the cap saw their average fees drop by 45 percent. This makes some very simple mathematical sense when you consider that prior to Durbin the average fee was 43 cents per transaction, and Durbin itself set a hard cap of 21 cents and 5 basis points — essentially coming out to a 24 cents per transaction upper limit. The only wiggle room on the entire process is found in small banks, who are not subject to the hard cap, but those banks, according to the CardHub study only account for 15 percent of the total market share, so their variance will only have a small impact on the data. And as noted in the Federal Reserve’s data, small banks have held steady with their interchange fees on swipe debit, keeping them at the pre-Durbin height of 43 cents per transaction average.

S&P Releases a Study As Well

Standard and Poor’s released its Durbin Amendment Impact study as well, titling it “U.S. Banks are Changing Their Strategies to Mitigate The Financial Impact Of The Durbin Amendment.”

You can read the study at THIS LINK HERE. The basics of the study echo much of what Host Merchant Services‘ analysis predicted last year.

Essentially banks are going to make up the loss incurred by the hard cap in other areas. They are already well on their way to cutting out special programs and offers such as free checking and subsequently raising fees and instituting new fees into their services throughout their bank’s offerings. In short, banks simply moved the fees to other things consumers have to pay for.

The study concludes: “The Durbin Amendment has affected the financial industry in a number of ways, but perhaps not in the ways legislators intended. The benefits to consumers seem largely negligible as banks have sought other ways to generate revenue or cut services.”

Fuel is the Fire

Added to the 6-month impact studies, the Durbin Amendment also popped up into the news at the end of April due to a bold claim made by the Electronic Payments Coalition: Gas retailers were pocketing $1 billion in windfall from the Durbin Amendment and not passing any savings on to consumers. The math behind this claim is not nearly as direct as the headlines made it out to be. So follow along on this. According to the EPC:

  1. The Durbin amendment to Dodd-Frank legislation has seen interchange rates slashed by about 70% for debit card payments for fuel.
  2. With high gas prices likely to play a major role in this year’s presidential elections, the EPC commissioned research from Phoenix Marketing International on the prevalence of debit card use at the pump.
  3. A poll of 5166 consumers shows that 36% of all payments for fuel are made with a debit card – half of all non-cash transactions. The debit card share of both transactions and dollars is higher than any other payment method.
  4. With US Energy Information Administration figures showing that nearly 134 billion gallons of gas were sold in 2011, this means that approximately 48 billion gallons were purchased using debit, claims the EPC.
  5. Yet, despite the $1 billion a year this gives merchants “there continues to be no evidence that retailers are passing along savings,” according to the EPC.

That’s a bit of a leap. Using data from about 5,200 people in a poll and then tying it into the full figures from the US Energy Information Administration on fuel consumption ties two pieces of data together in a relationship that is not a direct connection.

CLICK HERE to view the full Phoenix Marketing Report.

Not so Fast

The National Association of Convenience Stores (NACS) and the Petroleum Marketers Association of America (PMAA) strongly condemned the findings of the EPC report. Both organizations claim the data is seriously flawed.

The NACS replied to the EPC report in multiple media outlets, stating the EPC the study is based on simple arithmetic that shows a lack of understanding about what causes high fuel prices and whether retailers even profit from them. NACS spokesman Jeff Lenard said: “When prices rise, retailers usually cut margins because they want to remain price competitive even if their wholesale costs increased. Data from OPIS shows that the average national markup (gross margin) for gas was 13.0 cents per gallon over the first quarter of the year. We estimate that expenses to sell gas are around 15 cents per gallon, so average retailers experienced an entire quarter where they lost money selling gas.”

Lenard also cited the NACS Fuels Report for 2012 as showing consumer price sensitivity with gas purchases, saying that consumers are aware of discounts and have used them. You can read that Fuels Report at THIS LINK HERE.

In Conclusion

Six months into the Durbin Amendment things are shaping up much like Host Merchant Services predicted. The legislation remains controversial, but that is largely due to the way the legislation was written with large enough loopholes for the banks to easily adjust to the restrictions of the reform. The gas price gouging story seems more sensational sizzle than quantitative substance. Proving that gas prices remain a hot button political talking point in election years, but the whole issue, to us here at Host Merchant Services, seems to be blown out of proportion when you consider that credit cards get used at the pump and they are not subject to any reform legislation currently.