Page 16 - Advocacy Playbook

How Payments Work WHY THE COST OF

PLASTICS VARIES

Make a
1 purchase The fee merchants pay to accept
plastics is based on:

Cardholders Merchants 1. Transaction Volume
A higher volume equates
Card 2 to lower cost.
Pay or Networks
promise to Request 2. Collection Risk
pay approval The risk varies by type:

4 Determine • Credit card: The financial
institution accepts all fr aud risk.
6 which network • Signature debit: The financial

Determine which 3 institution checks the account
issuer processor balance, but clears payment later.
• PIN debit: Payment is verified by
Authenticate the financial institution and
& authorize collected immediately.
Issuers 5 Merchant
(Bank or Credit Card Co.) Processors 3. Fraud Exposure
Some merchants have higher
risk of fraud exposure.
Retailers can and do have the
Issuer ability to drive customers to
Processors the payment choice they

prefer.
5 BENEFITS RETAILERS The fee retailers pay to electronically transmit money is a
cost of doing business. It is voluntary. They do not have to
RECEIVE FROM accept cards.

PLASTICS The state reimburses retailers 3.33% to process state
sales tax. The interchange rate is about 2%.
1. Accepting cards increases sales and
profits for retailers. The benefits far outweigh the fee. They include
guaranteed payment, fraud protection, cash flow
2. Unlike checks, in-person debit card and increased sales opportunities.
transactions guarantee merchants are
paid for purchases made. The payment system today transfers all fraud losses
from the merchant to the payment system.
3. Cards save consumers valuable time and
make retail transactions more efficient. The penalties in the bill are absurd and could easily
amount to millions in a week from a single merchant.
4. Merchants benefit from accepting cards The bill does not take into account out-of-state
because their customers prefer to buy merchants doing business in Colorado. Will they have
things using their cards.
the burden of changing their systems to accommodate
5. Merchants pay less for accepting cards this standalone law?
than for accepting cash or checks.

Interchange Issue Overview
Contact: Jenifer Waller, Senior Vice President, 303-825-1575
Jenifer@coloradobankers.org
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