Gasolene retailers frown on Visa debit cards
Published:Friday | December 16, 2011 | 12:00 AM
Marcella Scarlett, Business Reporter
The Jamaica Gasolene Retailers Association (JGRA) is threatening to stop accepting Visa debit cards for payment of point-of-sale transactions at retail service stations islandwide because the commission merchants have to pay is cutting into their profit margins.
The action is similar to one the JGRA took in 2008 when it decided not to accept Visa or MasterCard for the same reason.
JGRA president Trevor Heaven said the matter was discussed and agreed to at the association's annual general meeting in September, but the matter has just been made public because they were having discussions with Scotiabank, one of the main distributors of the card.
CIBC FirstCaribbean International Bank, which also distributes the card, did not respond to Financial Gleaner queries up to press time.
In September this year, Scotiabank introduced the new dual-function Visa debit card, which allows users access to both debit card and credit card features. CIBC FirstCaribbean introduced it a year earlier. The cards allow users to shop online and over the telephone, access to more than 900,000 Visa/plus branded ATMs worldwide, and to shop anywhere in the world where Visa is accepted.
National Commercial Bank and RBC Royal Bank said they were working on a similar product that is to come to market in "short order". First Global Bank said it was not looking to introduce that card at the moment, and PanCaribbean does not issue credit cards.
When the Visa debit card is used at ATMs, users are required to enter a personal identification number just like a regular debit card. However, when it is used for point-of-sale transactions customers "simply swipe, sign and go", according to Scotia Visa debit card leaflet provided by Scotiabank to the Financial Gleaner. It is used in the same manner as traditional credit cards, but with the added debit feature.
Heaven explained that service stations did settlements from terminals every day and then the banks pay to their accounts in two or three days. The amount credited to their account is the total settlement less commission, which is 2.5 per cent of the amount if it is a credit card transaction, and $12.10 for each debit card transaction.
"If you are in a business where you are charging a 25 per cent markup then this would not be a problem," the JGRA president said. "In the gas stations, some retailers are marking up by only 2.5 per cent. The largest markup is usually nine per cent, and 10 per cent in rural areas. Already, we are absorbing a 1.5 per cent loss due to volatility and temperature change, so this additional 2.5 per cent from the bank is not sustainable," he explained.
"The bank earns so much by virtue of these transactions, therefore, we will not be accepting the card for fuel sale unless the bank is willing to reduce the charge to no more than 1.5 per cent. We prefer to use the old (debit) card," Heaven added.
fruitless discussions
According to the JGRA president, discussions with the banks "are not going anywhere". He said a senior member at one of the banks advised him the bank has transitioned into the Visa debit card because it has to make money, and that nothing could be done about the cost incurred by merchants for accepting payments by that method. He was further advised, he said, that it was a "financial decision" that the bank had made.
Prior to the introduction of Visa debits the same fees applied to credit card purchases, but Heaven explained that they were a lot more tolerant to accept credit cards because they made up a small portion of their total transactions.
In the event that the banks plan to go through with the Visa debit, "We JGRA members will stop accepting those cards. We understand the implications for customers, but they can come with any other debit card or cash", he said.
"Gas stations will not be accepting Visa debit cards because of the exposure," said Heaven.