New American Express OptBlue Program May Reduce Your Processing Cost – Part Three

This is the final article in my series on the new American Express OptBlue program.  This article includes a check list that merchants should complete with the salesperson or provider when reviewing this new program to ensure they are being priced correctly.

You can read part 1 here and part 2 here.

I’ve been very deliberate in this article series because I believe that a high percentage of small merchants (but not every merchant) can benefit from this program – if they are priced correctly.   For example, below is specific information from a recent merchant’s statement.

Description # of Trans Amount Rate Per-Item Fee Tran Cost Total Cost
Amex Discount Fee 10 $1,135.62 0.20% $0.10 $0.00 $2.27
Amex Network Fee   $1,135.62 0.15%     $1.71
Amex Tier 1 Rate 10 $1,135.62 1.60% $0.10 $0.10 $19.17

 
This merchant was set up correctly.   They are being charged the same provider mark-up (0.20% + 0 cents) on Amex as they are on the other card brands and the provider is passing through the true American Express wholesale rates and fees.  It now costs this merchant less when customers pay with an American Express card than when customers pay with a Visa or MasterCard Reward or Corporate/Business Card.

Caution: Some providers are automatically enrolling their merchants into this program, but not passing through the American Express lower rates. Notices may be mailed to merchants saying they have a certain number of days to opt out or they are automatically enrolled.  I suggest merchants review the accompanying checklist with the provider to ensure any and all savings are being passed through to the merchant.

Some Basics about the program

This program is now being offered by many Merchant Account Providers and should be offered by most providers in the coming months.  Your provider probably will not use the OptBlue name when discussing this program.  Instead, they may refer to it as a “special pricing program they have with American Express”.

Under this program, the merchant’s processing rates and fees are set by their provider instead of by American Express in a similar fashion to the way providers set the rates and fees for Visa, MasterCard, and Discover.

American Express provides wholesale pricing to Merchant Account Providers.  The wholesale pricing differs by industry.  For example, brick & mortar retail wholesale rates are lower than ecommerce wholesale rates mainly because of the lower risk involved with the transactions.

OptBlue has a simpler rate structure than the V/MC interchange rate structure.  There are only three wholesale rates for each industry type and the rates are based on the individual sale amount.  American Express also charges the providers a Network Fee (similar to the V/MC assessment fees), an additional fee for key-entered transactions (similar to the higher key-entered interchange charged by V/MC), and an additional fee for international card transactions (similar to the V/MC International fees).

An Access fee will also be charged to the provider for 3 years on some existing American Express accounts that convert to American Express OptBlue depending on how the merchant was initially set up on American Express.  Providers are not charged this fee for merchants who sign up for OptBlue and have not previously accepted American Express.  Providers should pass-through all of these fees to merchants without mark-up.  However, some may inflate the fees, invent new fees, or charge the access fee even if not warranted.

In addition to possibly being able to offer merchants a lower cost, the provider would be responsible for the account.  The provider would conduct the underwriting, provide the service, fund the merchant’s bank account, plus the provider would state all American Express sales/rates/fees information on their statement so the merchant would no longer receive an American Express statement (if they received one in the past).

Caution:  Some providers are adding fees that appear to be American Express wholesale fees, but are actually additional provider fees.  This processor is charging an “Amex Sys Processing Fee which is not an Amex fee but is actually an additional provider fee.    This fee virtually doubles the provider’s actual mark-up for Amex transactions.  This is the type of fee that should be listed in the “Additional Fees” section on the checklist.

Description # of Trans Amount Rate Per-Item Fee Tran Cost Total Cost
Amex Discount Rate 3 $5,262.79 0.40% $0.20 $0.60 $21.65
Amex Network Fee 3 $5,262.79       $7.89
Amex Access Fee 3 $5,262.79       $15.79
Amex Key Enter Fee 3 $5,262.79       $15.79
Amex Sys Processing Fee           $21.45
Amex T2 Rate $5,262.79         $102.93

 
Important Point: Always ask the salesperson/provider to show an example of a statement with the OptBlue rates and fees so you can compare it to the information on the check list.  Lastly, always compare the information on the completed check list with the actual statement you receive from the provider should you choose their service.

Important Point:  The provider’s discount rate (mark-up) for American Express should not be any higher than the Visa/MasterCard mark-up.  For example, if the current Visa/MasterCard mark-up is 0.10% + $0.10, than the American Express mark-up should be no higher than 0.10% + $0.10.

The American Express Pricing Checklist for Merchants

The purpose of the accompanying checklist is to enable merchants to make an informed business decision.  When fully completed, the merchant will be able to identify any inflated or unwarranted rates and fees.  In addition, the merchant will be able to compare the new American Express rates against their current rate. If a salesperson cannot complete this form properly or displays unwarranted fees then it could be an indication that the salesperson and/or provider is not the correct one for any of your processing needs.

The checklist is designed for merchants who are currently on Interchange Plus pricing for V/MC.  Merchants who are not on Interchange Plus are on the wrong pricing plan and perhaps with the wrong provider.  Interchange Plus pricing does not automatically mean the merchant is being price fairly and many merchants on Interchange Plus pricing are overpaying.  However, it is the best pricing plan for merchants if priced properly.

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