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Kroger May Opt To Discount Cash Transactions


Kroger May Opt To Discount Cash Transactions

Kroger, the largest grocery chain in the United States may bring new definition to the question “Paper or Plastic?” with a new discount concept for customers who pay with cash instead of a debit or credit card.

In light of the recently proposed $7 billion legal settlement regarding swipe fees, Cincinnati-based grocery chain Kroger has a proposal of its own: issue a discount for shoppers who pay with cash. This is an innovative way to deal with the forced swipe fees that credit card financiers are charging. While some retailers will opt for passing the swipe fees on to the customer, Kroger aims to redeem customer confidence by moving in the opposite direction regarding these fees.

“We’ve had no control over those significant costs or the ability to negotiate, says Keith Dailey, a spokesperson for Kroger.” He continues,

There is a lot more work to do before any final decision [but] the settlement will help reduce our costs, and that will benefit our customers in many ways. We’ll want to make sure they are fully informed and know what options are available to them that would result in discounted pricing.

This is a concept that could turn the retail market on its head during a time when more and more retailers have been moving away from cash transactions. Indeed, retailers agree that this is a time of digital and virtual payments, with credit and debit cards being far more secure and more convenient than cash. Plastic makes the transaction process quicker and easier.

However, this quicker and easier process has come at some expense after the imposition of such swipe fees. These swipe fees could charge the retailer, on average, 2 percent of every Visa or MasterCard transaction. Of course, as most consumers already know, this is a charge that many retailers will be able to pass directly to the customer if the proposed settlement is approved.

Kroger believes that the new settlement will not necessarily raise costs for consumers; rather it could open negotiations for merchants to develop alternatives with credit card companies in order to keep these fees to a minimum. Discounting cash transactions, then, could prove to be quite a novel concept. In turn, then, consumers would be able to choose low-fee cards, which would force credit card companies to offer more attractive products.

Mallory Duncan, senior vice president at the National Retail Federation, does not agree. She says that the new regulation is much more complicated and that the simple idea of working around the swipe fees is “a great theory, but the proposed settlement puts so many hurdles in the way of any negotiations with the card companies.” Of course, she concedes that the National Retail Federation is:

trying to keep prices down for consumers, but this puts no restrictions on the card company swipe fees, thus it’s a very disappointing settlement. The bottom line, you’ll never see surcharging, under these terms, despite the hoopla.

The hurdles that Duncan mentions have to do with the settlement requirement that forces merchants who choose to pass MasterCard or Visa swipe surcharges to their customers to also do the same thing for all other card companies (basically American Express and Discover, etc) when they carry charges that are similar. There is a complication in this aspect as American Express is not part of the settlement and has their own rule regarding the prohibition of merchants imposing such surcharges on their customers.

Either way, Kroger is considering their options. They are definitely looking at ways to improve customer experience and have a fair understanding of the importance of properly communicating their next move to their customers.

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Copyright © 2014 | Image: Kroger | Categories: Credit Card News


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