Many factors influence interchange fees and finding the right rocks to look under requires knowledge and experience. Because of all the changes to systems, processes, and resources, our client was concerned about the efficiency of any effort to uncover opportunities and thus the return-on-investment. They wanted a quick assessment to identify low hanging fruit to begin to capture cost reduction opportunities with interchange fees.

It's projected that by 2006, 30% of all U.S. personal expense will be on credit and debit cards. In 2002, Americans charged $1.4 trillion to their bank credit cards. Interchange fees are and will continue to be a significant expense item for major retailers and this client wanted to make sure they were not paying more than they had to.

W. Capra's Role
W. Capra was asked to review the interchange spend, its substantiation, and to identify a course of action to improve the fee qualification (thus reduce costs). This was done in 3 steps:

1. Baseline the as-is spend, compare against normal benchmarks, and determine the opportunity.
2. Analyze systems and processes.
3. Identify an actionable plan to improve.

We started by validating the current interchange trends. We compared the current data to pre-merger states and industry benchmarks. In less than two weeks, we identified a large difference in interchange spend of .03% between the two pre-merger companies. (Yes, that's point zero three percent.) So you say, big deal. For this client, .03% of their $5 billion in annual bankcard sales is about $1.5 million. That's annual savings straight to the bottom line

Outcome
W. Capra then executed a proven process to identify causes for the large gap and the resulting reasons for downgrades. Processes were quickly analyzed, contracts were reviewed and data was scrutinized until all the downgrades were understood. A corrective action plan was then developed and the expected benefits and ROI of each step were explained.

The entire process, from assessment to recommendation, took six weeks. W. Capra recommended quick improvements and assisted with initial implementation steps to reduce interchange fees by $1.2 million per year. Many of these changes required minimal IT investment and were immediately implemented. Additional savings were also identified and the associated work was slated on upcoming POS work queues.

To ensure further erosion did not occur, an "owner" and a process were established to monitor interchange downgrade reports and flag deviations from the established baseline. By creating accountability and a clear method for validating interchange trends, our client is now able to ensure they're only paying their fair share of interchange.

For more information on W. Capra services, click here to contact us or call 1-312-873-3270.