Sixty-three percent of millennials do not own a credit card, that’s why. This is a staggering statistic and one that should be shouted from the retail roofs so merchants can hear it. Let me shout it 63% of MILLENNIALS DON’T OWN A CREDIT CARD! This should be music to a merchant’s ear especially since swipe fees are the second highest operating expense behind labor for most of them. This also means that when millennials are paying online that its out of their bank account (via debit card), but the merchant is being charged high card-not-present rates of nearly 3% or more. Hello, ACH Payments, welcome to my bottom line.
Chime, a mobile-focused bank, reports that 70% of millennials prefer to use a debit card over a credit card. The Y generation learned some tough lessons watching their parents accumulate debt, alerting them to the dangers of spending money they don’t have. They were kids when the recent Great Recession hit Wall Street, banks, citizens, and the rest of the world, reminiscent of the Red Wedding in Game of Thrones where no one survived the bloodbath. No wonder they are cautious about their monies.
When an ACH payment from a consumer’s bank account can offer rewards like credit cards, why should retailers encourage a card payment that takes away from their profits? ‘Come on merchants’, fight back against the high transaction costs, start incentivizing ACH Payments with some of your newly discovered savings. Millennials will jump on board in a heartbeat because they are in the habit of spending directly from their bank accounts, yet not getting anything in return.
We suggest tying the ACH Payment to a loyalty card which will return big data to the merchant along with big bucks to the cash register through lower fees and customer loyalty. Sure, there will be additional marketing efforts to educate consumers about the tight security that supports ACH Payments and their banking information. Consumers will need to understand that they can question their banks for any disputed charges just like they do with credit cards.
Merchants pay $50 billion annually in credit card swipe fees according to the Merchants Payment Coalition, most of which wind up in bank vaults. Obviously, consumers share in the cost of the swipe fees through higher prices, costing the average family over $400 every year – ouch!
The reality stinks . . . it costs banks mere pennies to process credit card transactions, and the coalition affirms that the swipe fee is often higher than what the merchant earns on the sale. It’s time for merchants to open their minds to the benefits of ACH payments by educating consumers on the economic effects of a credit card swipe. Nowhere else in the world do merchants pay these outrageous transaction fees, in fact, the coalition reports we are 7 times higher than the standard European rate. And they go on to admonish that there is no credible reason for our high rates especially since we have higher volume and lower technology costs in the U.S.
Cash Flow Solutions doesn’t believe in wallowing in self-misery, rather our team believes in taking action by resolving the problem. Let’s at least offset some of these swipe fees with an alternative, technology-sound and secure payment solution, the ACH payment. And guess what, Cash Flow Solutions has the solution, called Payments + Loyalty which saves merchants hard-earned money and inspires customer loyalty.