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Ed Nilson. Manager Banking Systems. SHOPRITE CHECKERS.

Ed Nilson. Manager Banking Systems. SHOPRITE CHECKERS. Shoprite Checkers. Submission to the Competitions Control Board in respect of the Feasibility Report on charges in the Banking Industry. NUMBERS…. 9,000 checkouts. R32 BILLION Sales. 44 million card transactions per annum.

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Ed Nilson. Manager Banking Systems. SHOPRITE CHECKERS.

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  1. Ed Nilson.Manager Banking Systems.SHOPRITE CHECKERS.

  2. Shoprite Checkers • Submission to the Competitions Control Board in respect of the Feasibility Report on charges in the Banking Industry.

  3. NUMBERS….. • 9,000 checkouts. • R32 BILLION Sales. • 44 million card transactions per annum.

  4. Subjects covered in submission • Changes in Tenders. • Sorting at source. • Interchange fees. • Low cost banking products. • Ad valorum charges on debit cards. • Hidden fees. • EMV Experience. • Cash handling fees.

  5. Changes in turnover value split by tenders • In the period 2002 to 2006; • Cash -11.89% • Cheques - 2.44% • Credit cards + 3.21% • Debit Card +11.12%

  6. Sorting at Source • S.A. Reserve Bank declared sorting at source not clearing, therefore not illegal (January 2006). • Our requirements for sorting at source based on risk element.

  7. Single acquirer scenario

  8. Multiple acquiring scenario

  9. Sorting at source • Using the single acquirer principle, our business is at risk. • Should our single acquirer fail, all transactions requiring an authorisation would not be processed. • Should Bankserv fail, we would only be able to process our single acquirers card transactions. • The banks’ maintain that the cost of going to direct to issuers would be more expensive for themselves, so the larger merchants would not receive reduced fees. • This is based on traditional processing systems and financial structures. • The payments industry is not what it was 5 years ago, so the same rules can no longer be applied.

  10. Interchange Fees • Banks decide on the interchange fees for credit and debit cards. • Public not allowed to know details of the make up of the fee. The Edgar Dunn report never released to the public. • When interchange was reduced, merchants were not given full benefit of the reduction. • Smaller merchants would not be wise to reductions in fees in the industry.

  11. Low cost banking products. • Capitec Bank cheaper than Mzanzi. • In conjunction with Capitec, Shoprite introduced a low cost Money Transfer product for R9,99 regardless of value. • The volumes done by Shoprite this year probably exceed those done by all banks on Mzanzi. Over 50,000 transactions value R20 million. • Postbank wanted R17,99 plus an ad valorum.

  12. Debit card transaction is PIN based, on line, guaranteed, pre funded, minimum fraud element. No justification for an ad valorum fee on debit. Customer pays, merchant pays. Fee is based on old thinking, equated to charging an ad valorum on credit. Previously, merchants were paid by the banks. Fee should be based on transaction processing cost. e.g. Australia is 6 cents. Small merchants are in some cases charged the same rates for debit and credit transactions. Debit card Merchant Fees

  13. Banks have bi laterals for the processing of some card transactions. Details not made public. E.g. Amex, Diners and buy aid cards. Some cardholders are charged 2 fees on a single transaction where goods and cash are involved. But only one slip is signed for. They perceive the retailer to be the recipient of the fees. For franchised ATM services, cardholders are charged an additional fee over and above the normal costs. Double or hidden costs

  14. Shoprite spent millions on becoming EMV (Chip) compliant. No benefit to the merchant. No contribution from the banks. U.K. banks assisted merchants. No reduction in merchant fees, although the fraud element is supposed to reduce dramatically. Initiative driven by Master Card and Visa. Experience

  15. Cash Handling Fees • The volumes of cash handled by Shoprite are massive. • Cash handling fees when added to all related fees e.g. cash in transit costs, insurance, staff requirements etc., are excessive. • Shoprite has requested that Resbank makes allowances for large retailers to process cash directly to themselves.

  16. Conclusion • The fees charged to merchants and customers are not attributable to the cost of a transaction, and more likely due to the fact, that the present system engenders the practice of overcharging by the banks, that has little to do with the activities and operations of the National Payments System.

  17. F i n i s

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