According to the MIC BankCard program, dealers enrolled with it for payment processing can now save an additional 30 percent on their annual costs. But those dealers must ask for it. Nobody will be contacting them.
The cost reductions are due to a new long-term contract between the program and First Data, the country’s largest credit card processor. The program pairs new enrollees with First Data automatically. But as for dealers already enrolled, unless they ask, they will remain with what used to be the program’s only processor, Tsys.
MIC BankCard has agreed with Tsys not to solicit dealers for the free switch. Tsys, after all, is still the 13-year-old program’s primary processor. To compete with First Data, it even may start lowering its own fees and rates for dealers who negotiate.
Dealernews spoke with the MIC BankCard program’s director, Matt Tanzy, to get caught up on all these behind-the-scenes dealings. He makes a strong case for enrolled dealers to switch to First Data, calling the new program a major improvement (which makes the program a bigger draw for dealers not already participating).
First Data benefits not only from economies of scale, but also from owning its own Visa/Mastercard bank and several other businesses related to processing. Virtual terminals, a loyalty program, a gift card program, electronic payroll deposits and other services are available from this one source, making customer service and troubleshooting easier. In fact, dealers switching to the new processor will receive first-tier help desk services usually available only to retailers processing more than $500,000 per year, Tanzy says.
But before we delve into that, let’s define what the savings are, and how they come about.
First Data’s Big-Dog Leverage
First Data owns the network that processes the vast majority of U.S. transactions. “Ninety cents of every dollar that gets processed in credit cards goes through First Data,” Tanzy says, “and 8 cents of every dollar goes through Tsys. So it’s a huge difference in the volume. The remaining 2 cents goes through little specialty networks.”
As mentioned, First Data is the only network that is also a bank, and it owns a bunch of other stuff in the processing channel, making it an end-to-end solution.
First Data is selective about with whom it partners, usually going after big boxes like Wal-Mart. Tanzy had to negotiate with the company for a year, even though the MIC BankCard program processed more than $1 billion in 2008. An agreement was finally reached, and First Data began offering its services at the beginning of the year. Atlanta-based Boaz Group, the manager of the BankCard program, and for which Tanzy is president, changed its name to First Payment Systems to reflect the change. (Continued)