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Here’s a fact retailers across the country know all too well: in their customers’ minds, cash is losing ground to cards and mobile payments, albeit much more slowly than most would expect. Consumers experience this every day — when payment comes due, they reach into their wallet, but instead of pulling out cash they likely opt for a card or their phone instead.

Credit, debit, or whatever they choose, it’s easy for the consumer to carry and use. For retailers however, it means additional fees on their already narrow margins.

The card-paying culture is a reality

Given the prevalence of our card-paying culture, it’s no surprise that more and more businesses are offering their own store-branded credit and debit cards. Do you have a Target REDcard or a Nordstrom rewards card that pulls from your checking account? These solutions offer a great consumer experience while reducing swipe fees for retailers.

By tying these cards to a loyalty program and running them through the customer’s checking account, retailers typically pay anywhere from 15-25 cents per transaction as opposed to an average of 2% of the purchase price for credit cards. This could represent over 90% savings on a $100 transaction. Given the millions of transactions that retailers process every year, these savings can really add up if consumers adopt this payment type.

The rise of Automated Clearing House (ACH) cards

To achieve these savings, retailers process transactions by ACH or the Automated Clearing House. The underlying technology in this platform enables electronic batch processing of payments that are tied to users’ checking accounts.

For retailers that aren’t yet in the ACH game, the benefits sounds amazing; however, there are concerns surrounding such programs as well, most notably when the retailer is tasked with pulling payment from accounts with insufficient funds. In these instances fees can be incurred by consumers and retailers will be stuck waiting for payment. Many retailers are also not aware that sales collected through ACH can be reimbursed significantly slower — up to three business days — compared to credit cards, which often settle within 24 hours.

It should be noted that many suppliers in the ACH payment card space are working to specifically address the concerns outlined above by offering a funds guarantee and faster settlement times. However, these services typically come at a cost. Same day ACH payment processing is also right on the horizon.

Lastly, there is the integration piece that must be considered when adopting an ACH strategy. After all, while individual credit cards require nothing more than the retailer choosing to accept them, ACH card plans require additional planning and technical improvements, and that means associated costs.

Is an ACH card plan right for your business?

ACH-based payment cards have gained traction at large big-box and fuel station chains, but this doesn’t mean they’re the only ones who can enter the market. An ACH card strategy can be viable for small to mid-size retailers as well, particularly if they sell fuel as part of their daily offerings.

ACH success typically relies on the existence of a robust loyalty program, one that makes consumers choose the retailer's card over the seemingly endless options they have in their wallet. Many retailers find that tying the right reward to incentivize ACH usage is one of the most critical portions of the strategy. However, if you have a consumer base that values your brand and always pulls out their loyalty card, an ACH card could be just the solution to help your business lower the cost of payment acceptance.

Finding help for your questions

If you’re interested in learning more about ACH cards and the costs and considerations associated with implementing such a plan in your business, we can help. Contact Topco Indirect today and we can help you explore your options and take a proactive role in your payment transactions.

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