There are many parameters that decide the interchange cost paid by merchants for accepting credit and debit cards. Card schemes have come up with different pricing based on certain qualification criteria. Usually, transactions qualify for the lowest possible price If it meets the highest qualification. Non-qualified transactions will attract higher interchange. The number of days elapsed between authorization and settlement is one common criterion that qualifies a transaction for the lowest interchange. A retail merchant, in order to qualify for the lowest possible interchange, should perform settlement within one day after authorization. Missing settlement by a day could increase the rate from 1.51% to 1.8%. Auto batch out is a great feature to optimize interchange cost.
One way to ensure that settlement happens within a day is to set POS devices on automatic batch close. This feature, if offered by the POS application will ensure that the device batch out automatically at a specific time of the day. Usually, this auto batch out time is set at TMS and downloaded to the POS device. Merchants should opt for this feature in order to avoid delayed settlement caused by human error. This feature will also reduce the number of calls received at ISOs helpdesk due to payment issues. Overall, this feature will reduce the Total Cost of Ownership (TCO) for the ISOs.
There are varying degrees of smartness that are determined by the way the solution is implemented. Not all “auto batch out” implementations are the same. If the batch is maintained at the POS terminal then there is a possibility of batch out failure in case of Telcom, Power or Hardware failure. Certain smart payment gateways that maintain batch at the host level will be able to avoid this failure. From a batch close perspective, “Host-based batch” is considered superior compared to “Terminal based batch”. A well-engineered auto batch out solution will offer a hybrid solution where the merchant will have control to batch out at their will while an automatic batch out option will offer a safety net.
Check out implementation details and understand the nuances before signing up for the auto batch out feature.
