Embrace Corporate Card Surcharging to Protect Margins and Boost Profitability
Kevin Edmunds
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In the face of recent battles over corporate card processing fees charged to merchants, what innovative strategies are emerging to help protect profit margins and revolutionise financial game plans?
At the beginning of June, it was announced that Mastercard and Visa successfully defended themselves against a set of lawsuits brought by the Commercial and Interregional Card Claims (CICC) group. The lawsuits alleged that merchants were overcharged for processing card payments, including corporate/business cards. The Competition Appeal Tribunal ruling denied certification for the collective cases but provided CICC with an opportunity to amend their lawsuits within eight weeks **.
In the wholesale sector, The Grocer, reported there had been a recent influx of corporate cards being used by retailers. This shift resulted in a higher volume of transactions on these cards, which carry higher interchange fees. One wholesaler banned the use of corporate cards altogether due to the high fees eroding their already tight margins ***.
One strategy to battle against card fees which is gaining traction, is surcharging. HMRC is already applying surcharges to those who want to pay them using corporate cards and in the US, apart from a few states, surcharging is applied to both consumer and corporate card transactions.
By introducing a surcharge on corporate/business card transactions, merchants can offset actual fees associated with these cards, ultimately improving their bottom line. Consumer surcharging was prevented in January 2018*, but it is still permissible for the exact amount of interchange and scheme fee to be charged back to the corporate/ business cardholder.
Corporate card surcharging has the potential for businesses to recover the actual cost of processing fees, thereby protecting their profitability, however, there is a argument that imposing surcharges on corporate card transactions burdens businesses with unexpected costs and diminishes the advantages of using such cards. On the flip side, corporate cardholders often enjoy premium rewards and benefits, which merchants end up subsidising. Surcharging promotes fairness in the payment ecosystem by ensuring that the costs associated with processing corporate transactions are more equitably shared among all business customers.
Implementing corporate card surcharging also demonstrates a commitment to innovation and staying ahead of the competition. By effectively managing surcharges, merchants can offset the costs associated with corporate card transactions, protect their profit margins, and showcase their willingness to embrace new strategies.
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So how do merchants add the surcharge to the transaction? One solution automatically adds the surcharge at the transaction stage by identifying the Bank Identification Number (BIN). Using the first six digits of a credit card number can identify the issuing bank, card brand, card type, card level, and country of a credit card. Systems identify that a corporate card has been presented and the surcharge is added to the transaction. The cardholder accepts the transaction, and the sale is completed.
Kevin Edmunds from Planet said “Merchants should look to consult with payment solutions experts to learn more about how corporate card surcharging can transform their businesses. Embracing this innovative approach not only improves profitability but also sets them on the path to a more competitive and prosperous future”.
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