Introduction
Public Sector
Better
information
Private Sector
Better
management
Reduced
banking costs
1
Agenda
Bank
fees
Cash
processing
costs
Card
processing
costs
2
Irish banks
Relationships
based on
historical
lending
Hotel groups may
have syndicated
debt facilities with
international banks
Standard bank fees
- Automated transactions, e.g. EFT, S/O, D/D
- Paper transactions, i.e. cheques issued or lodged
- Cash/coin lodged
- Online banking
- Debit interest, i.e. loans / working capital facilities
3
Bank transaction costs
Based on transaction volumes
Hotels will typically pay full charges
Paper transactions more costly than
automated transactions
Some banks have increased
their standard charges
Standard Charges
Transaction Type
Automated
EFT
Cheques Issued
Cheques Lodged
Notes Lodged
Bank of Ireland
€0.10
€0.08
€0.60
€0.60
€0.60
Unit Cost
AIB
€0.20
€0.08
€0.39
€0.20
€0.45
Ulster Bank
€0.22
€0.07
€0.40
€0.24
€0.45
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Reducing bank fees
Cheques very
expensive
Cash very
expensive
• Large insurance company - each claim cheque issued
cost up to €5.00
• Costs of lodging cash/coin have increased
So how can hotels reduce bank fees?
Reduce number of cheques
issued - make greater use of
online banking
Recycle cash/coin to avoid
bringing it to the bank
5
Security issues around cash
Who takes the cash to the
bank?
How much cash is lodged on
a daily/weekly basis?
Security risk
when lodging
cash
What security protocols are
in place to mitigate risk?
Do you engage a third party
to collect the cash?
6
Engaging Third Party Providers
Engage
third
party
Cost depends on
the volumes
• to collect
• to process cash/coin
CIT companies have a strong presence in the Credit Union
and Retail sectors
GSLS
G4S
TSS
Senaca
→ Collection costs need to be considered
7
Introduction to card payments
Complex costs related to card processing
Comprise Interchange / Scheme / Margin
• Interchange goes to card issuing bank (circa 85-90%)
• Scheme goes to Visa or Mastercard
• Margin goes to provider (Elavon, AIBMS, WorldPay, BoIPA, etc)
Important to separate provider from the bank
8
Interchange fees
• Interchange most expensive element of processing costs
Factors
affecting
interchange
• Card type - debit v credit, personal v commercial, Visa v Mastercard
• Payment channel - Point of Sale v E-Commerce v Phone
• Card region – domestic v intra (within EU) v international (outside EU)
• Security - details taken at point of payment
Rate for domestic personal debit and credit cards
at 0.10% and 0.30% since December 2015
9
Pricing models
Blended
pricing
One single rate for
different groups of cards
Same cost regardless of
how transaction was
processed
Beneficial if many
unsecure transactions
More expensive if
transactions are primarily
chip and pin
Interchange
+ pricing
Pricing broken down to
separate margin and
interchange/scheme are
represented as single
rate
Merchant always pays
same margin fee
Total cost depends on
how secure transactions
are
Interchange
++ pricing
Pricing broken down to
represent margin,
interchange and scheme
Same as interchange+
except merchant has
greater visibility
Most transparent
pricing model
10
Premium Charges
Particular cards
are used to
complete a
transaction
Applied
when
Visa and Mastercard
Corporate and Business
Cards
CVV number not input
online or taken over phone
Transaction was
processed
unsecurely
Card swiped at terminal or
16 digit number input
manually
11
Reducing premium charges
• Not always possible to reduce premium charges
• Certain cards attract higher interchange rates irrespective of
how the transaction was processed
 International cards have 1% rate
• Essential to record every detail at the point of transaction
• Implementing 3D Secure can result in lower interchange fees
• Downside – can frustrate customers causing drop-off online
12
Talk to the market
When
Merchants
should talk
to the
market every
3 years
Changing
landscape
Why
Need to be
aware of
opportunities
and new
payment
technologies
New and
innovative
providers
entering the
market
What is involved in talking to the market
 All about economies of scale
 Build profile of annual transaction activity to help
evaluate pricing proposals
 Benchmarking costs can be challenging
 Choose provider offering best price AND service delivery
13
Other cost areas
Can be single
provider for
acquiring and
gateway
Gateway
costs for
ECommerce
transactions
AMEX
Typically this is
not negotiable
– very much a
grey area!
Dynamic
Currency
Conversion
Terminal
Rental
Fees
Can be
negotiated but
is typically a
50:50 split
Standard
pricing based
on device
functionality
14
How best to reduce bank and card processing costs
All about economies of scale....
• Bank fees negotiable
depending on
transaction
volumes and
the banks you
are prepared
to deal with
• Cash processing
costs - depends
on volumes and
levels of security
you want
• Are you
prepared to
engage a third
party??
• Card costs ensure that
transactions
are processed
securely
• Talk to the
market
15
Question Time??
[email protected]
+353 1 6627679
+353 87 6157427
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