Unleash hidden savings: Top tips for card payments optimization

Wednesday, August 14, 2019 1:25 pm EDT


Karen Aaron, Head of Strategic Markets – Retail, Elavon

As a retailer, your top priority is offering your customers an enjoyable shopping experience. Naturally, this extends to ensuring they have a seamless and simple payment experience when it comes time to check out. After all, a smooth payment experience is critical to conversions. 

What if you could give your customers the flexibility and convenience to pay the way they want while achieving substantial cost-savings for your business?

This is the beauty of card payments optimization – the use of best processing practices to achieve the lowest fees possible for each transaction, whether it takes place in store, online, over the phone, or through a kiosk or mobile device. With the right payments optimization strategy, it is possible to lower the cost of card acceptance while still delivering convenience, ease and security to your customers and your business.

At Elavon, we’ve enabled our customers in the retail industry to implement these best practices. In this blog, we’ll highlight how you can lower your interchange rates, and in a companion post coming soon we’ll talk about debit optimization. 

Card Payment Optimization

Interchange rates are set by card brands and can constitute up to 90% of the direct cost of every card transaction. They are charged by banks to cover the cost of accepting, processing and authorizing transactions. There are over 700 interchange categories impacting rates.[i] Several factors play a role in determining card interchange rates. Some factors – like the type of card used (debit, credit, reward) and card brand (Visa, Mastercard, American Express) – are usually out of a retailer’s control. 

One of the key drivers of fees that retailers can exert some influence over is payment authentication. This is because typically, the riskier the card transaction, the higher the fee. For example, an in-store payment with a chip card carries less risk than an online purchase with the same card. Why? Because the chip can be used to validate that a card is legitimate when it’s inserted into an EMV payment device. Meanwhile, the online payment relies on key entry by the customer, but the chip cannot be used to validate the card. In this example, the interchange fee will be higher for the online transaction than the in-store transaction. 

Interchange Management

Understanding the nuances of additional rate programs creates a tremendous opportunity to unleash savings. Here are some common ways we can help you reduce costs and increase card security.

Level II and Level III programs. By capturing additional card transaction details at the time of payment that help validate the cardholder, companies can qualify for Level II and Level III reduced interchange card acceptance programs.  These pricing programs are offered by Visa and Mastercard to businesses who sell to other businesses (a B2B model) and/or to governmental organizations. When additional data is collected and transmitted on each transaction, it helps to validate the authenticity of the transaction, providing information about the transaction to the purchaser and the card brand, which in turns qualifies the transaction for a lower interchange rate. Some examples of B2B purchases are office supplies, computer equipment, telecommunications, shipment and delivery, consulting services and catering. 

Transaction Processing & Settlement. How a transaction is processed and settled can also determine the interchange rate category.  Transactions where the card is not physically presented at the time of purchase, such as online and by phone, are considered a higher security risk than transactions where the card is present.  As a result, a higher interchange category may apply to the card not present (CNP) transaction.  However by gathering more information from your customers, a card not present transaction can qualify for a lower interchange rate.  Capturing the card’s security code (CVV, CVC, CMID, CID) in combination with using address verification can help with this.  As an added bonus, collecting this information helps reduce the risk of possible cardholder fraud and/or identity theft, which you and your legitimate customers will appreciate.  

3D Secure 2.0. In response to the dramatic increase in online shopping, the 3D Secure coding protocol was introduced in the early 2000s as an added layer of security, addressing the higher risk associated with online transactions. Originally, the protocol required that customers enter a password known only to the customer and the issuer, which some shoppers found cumbersome since it added a step to the purchasing process. 

To alleviate this issue, the protocol was recently updated. The 2.0 version doesn’t require a password, offering a better user experience that makes paying online and on mobile devices fast and convenient without putting security at risk. Other benefits of 3D Secure include a liability shift to the card-issuer for chargebacks and an increase in authorizations.

Cash wallets. One example of payments innovation that both enhances the customer experience and pays for itself is the cash wallet. Cash wallets such as Zelle and Apple Cash typically connect with checking accounts and use the ACH Network, so interchange fees don’t apply. Like any payment method, cash wallets require businesses to have the right fraud tools, monitoring and reporting in place.  

While newer digital payment options may not necessarily eliminate fees like cash wallets do, supporting emerging payment methods could help you realize additional cost-efficiencies as well as improve customer loyalty and satisfaction.

Getting started

Identifying the opportunities to optimize transaction processing within a large enterprise can be complex, which is why it’s important to work with your payment processor to analyze your card payment data across all your environments. That’s where we can help. Using advanced analytics, Elavon’s Payment Solutions Consultants helps customers identify areas for optimization and makes actionable recommendations to better manage card payments. By evaluating the business’ entire card processing environment, we can help you cost-effectively deliver a satisfying and secure payment experience. 

Click here to read about how Elavon has enabled one our largest customers to achieve millions in ROI.

About the author: Karen Aaron is the VP and Head of the Strategic Market Retail team at Elavon. In her 25-year career in the payments industry, she has held a variety of leadership roles in both sales and relationship management, working with large national customers across all industry segments. In her current position she manages a team of 21 that spearheads business development efforts and supports the existing retail client base. Prior to joining Elavon, Karen had a lengthy career at First Data where she held various management positions in both sales and relationship management.

[i] MAG 2017 Mid-Year Conference, “Optimizing Card Fees”, February 2017


Elavon’s Media Contact:

Katie Lopez 
Corporate Communications 
+1 678-731-5915  

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