Cutting Payment Costs, Wesco Helps Debitman with Issuer Gap

A Michigan convenience-store chain believes its new Debitman card program will lower its card-acceptance costs while simultaneously boosting customer loyalty by taking some of the sting out of rising gasoline prices. Debitman Card Inc. announced this week that Muskegon-based Wesco Inc., which operates 51 stores in the state, would join Debitman's stable of retailers that issue Debitman-branded PIN-debit cards. Holders can use the cards at 200,000 merchant locations, which besides Wesco's include those of Wal-Mart Stores Inc., drugstore chain CVS Corp., and bookseller Barnes & Noble Inc. Wesco's Debitman cardholders will get a price break of 2 cents per gallon when they buy gas at Wesco outlets. The cost of that perk will be paid from savings on transactions that otherwise would have gone to the major card networks. Wesco processes 2.5 million transactions per month from the pump and inside the store, according to Rachelle Osborn, Wesco's director of information technology, with more than 70% of transactions charged to Visa or MasterCard credit and debit cards. Wesco also accepts American Express, Discover, PIN-debit cards, and fleet cards. The blended average card-transaction acceptance cost on a 13-gallon purchase is 75 cents, Osborn says. In contrast, Debitman costs a flat 15 cents per transaction for the merchant. Also, as an issuer, Wesco receives 6 cents per Debitman transaction in interchange, which means its net cost for on-us transactions will be 9 cents. “The reason we decided to go with Debitman is we feel we're able to offer our customers an alternative to high gas prices,” says Osborn. “The savings with our transactions?we'll be able to pass that on to the customer.” Wesco recently completed a two-store Debitman test. Once rollout is completed, Osborn ultimately hopes to convert about 25% of card transactions to Debitman. Marketing for the new card program consists mostly of signs, applications, and related materials at the pump and in the store. In September, Wesco will offer price breaks of 1 to 5 cents on in-store Debitman card purchases. “If we can get marketing funds from manufacturers to help sell their product, we'll go higher,” says Osborn. Wesco joins the ranks of an undisclosed number of merchants that issue Debitman cards. “The more and more traction Debitman gets in the industry, the more consumers are buying off on the concept,” says R. Scott Hatfield, founder and vice president of business development at the San Mateo, Calif.-based firm. While Debitman has some high-profile acceptors, including Wal-Mart, its big challenge has been getting retailers to issue its cards. This spring it teamed up with private-label card issuer HSBC Retail Services in a deal that included an investment by HSBC in Debitman (Digital Transactions News, May 23). No specific card programs have come out of the deal yet. “HSBC continues to look at ways to utilize Debitman,” says Hatfield. “That's moving forward.” Hatfield was coy when asked what's next for Debitman. “There's a lot of good things coming down the line,” he says.