A new pos software product is on the market, and with it a new credit card processing network. The network, called Cartel, will compete directly with NYCE and MAC “to bring competition into a noncompetitive environment,” Friedman says. “It will breed lower costs and better service into an arena where retailers currently have no say on costs.”
The new network was developed by Integrated Delivery Technologies, Buffalo, and processing is being provided by Affiliated Computer Services, Dallas.
Price Chopper, an 81-store privately owned chain, operates primarily in upstate New York, but also has locations in Massachusetts, Vermont and Pennsylvania. The large stores are geared toward one-stop shopping.
In 1992, the chain became among the first supermarket retailers to offer consumers the opportunity to pay by debit or credit. It remains among the few supermarket chains to own its own ATMs.
“Over the years, we’ve done an effective job of promoting our debit and credit capabilities to our customers through advertising and in-store signage,” Friedman says. “The results have greatly exceeded our expectations.” exceeded our expectations.”
The average dollar amount on card-based transactions, he explains, has been double those on cash or check transactions. “We have seen incremental sales with credit cards, and the best news is that the majority of those transactions have come at the expense of checks, rather than cash.”
However, Friedman says, supermarket retailers face a major problem in that “we have no control over the price increases or policies relative to debit and credit. We are totally at the mercy of the networks. And fees for both debit and credit have been climbing every year.
“The bottom line is, I’m afraid we’re reaching a point where card-based transactions will become prohibitively expensive for supermarkets.”
Friedman argues that in some respects, supermarkets have been treated like suckers. A few years ago, we got a favored credit interchange rate and what did we do? Naively, we all marched out there at our own expense and installed new POS equipment. We built a whole business case around that level of pricing.
“As the rates have gone up, it’s been unilateral and we’ve had nothing to say about it. Unless something is done, it’s just a matter of time before the cost of debit will exceed the cost of an electronically authorized check. Eventually, it will be as expensive as credit.
“What irks me is there’s no justification for this. Debit carries extremely low risk compared to a check or credit transaction. It’s virtually guaranteed.”
Rises in credit fees for supermarkets are similarly unjustified, he says, since supermarkets experience “very little fraud with credit compared with other merchants.”
Ultimately, Friedman says, supermarkets should receive guaranteed fees from the credit and debit networks. “It’s ridiculous for us to continue to sign contracts with no locked-in pricing.”
But the best option to keep rates low is for supermarkets to continue to get networks of our own, where we have some say over price and policy. Introducing competition is what will keep pricing where it belongs.”