The portion of the discount rate that financial institutions charge retailers for the loss liability on credit card transactions is related to the authorization system (paper, voice, authorization terminals, ECR, etc.) selected by the retailer. Financial institutions frequently sell or lease terminals at highly attractive rates in order to benefit from the reduction in settlement fees offered by MasterCard (1.55% versus 1.7%) and Visa (1% versus 1.64%) when all credit card transactions are authorized through electronic methods.
INPUT’S assessment of credit card authorization costs are as shown in Exhibit 111-16. The costs represent a consensus of the vendors interviewed, expert opinion, and industry data. The costs were used to determine information systems expenditures in Section B and in the Forecast in Section C above.
Voice response, which is operator dependent, is of course the most expensive. It is not likely to be significantly affected by communication industry deregulation. Voice credit card authorization is also the slowest method of services delivery.
Audio response replaces the operator for half of the authorization transaction and reduces response time by 25-40%.