I own and operate an independent community pharmacy. Since the middle of March, we have made numerous changes to our operating procedures to accommodate the safety of my patients and my staff. One significant change that we had to make was to close our doors to the public and instead rely on delivery and curbside service. This has been very well received by our customers and I anticipate that even after the global pandemic is over, we will have customers that will continue to want these conveniences.
Many of the things we have done have cost the business. These costs has spanned across all areas including a large uptick in our expenditures for personal protective equipment to an increase in staff required for the additional services. But not all costs are so easy to quantify or realize.
Recently I was on a conference with some outstanding pharmacy owners and a hidden cost and risk was brought to the forefront. This increased cost of doing business is subtile but significant, and I suspect that many pharmacy owners and managers have given it very little thought. The culprit? Credit card transaction fees.
Since we closed our doors and have relied exclusively on curbside and delivery for our prescriptions, we have also necessarily increased our use of “card-not-present” transactions on or register. This may seem obvious, but the ramifications are not: credit card companies stratify their fee schedules based on the types of transactions.
Swiped or “dipped” (chip) card transactions have lower transaction fees, with these fees increasing depending on the card type, the presence of reward incentives like cash back, and ultimately the transaction type. Card-not-present transactions have some of the highest fees per transaction because they also have the highest risk to the card issuer. Fraudulent transactions are almost exclusively this way.
All of the pharmacists I was talking to had noted a significant increase in transaction fees due to the abrupt decrease in in-person transactions inside the store. To date, I am unaware of any announcements from card issuers to waive the differential fees during the pandemic. And while this is not deliberate, the card issuers are profiting because of this.
To make matters more worrisome are the possible ramifications this change in business model has from your credit card processor. Processors are a lot like PBMs: they sit between the card issuer and the merchant. These companies look at a businesses card history when drawing up contracts. The client’s rate of “card-not-present” category, which poses additional risk, is looked at carefully when they draw up contracts and agree to process for you. A drastic change could put you in jeopardy of being dropped by your processor!
There are some things you can do to ammilorate some of the damage, though these changes do come with additional overhead of their own. First, you could create in house charge accounts for regular customers and get their permission to put their card on file and bill them at the end of the month. This can decrease the number of fees you see. This means the pharmacy will be carrying additional accounts receivable burden. A second option is to move card transactions out of the pharmacy with a mobile payment terminal: the patient could to insert their card and complete the transaction at curbside or at their door. Of course this creates yet another surface that needs to be disinfected each time a customer touches the device. In a perfect world, all customers would have a contactless payment method they could use with that terminal. Finally, you could carry the card into the pharmacy and complete a swipe transaction. This defeats some of the advantages of curbside service or delivery offer.
Incorporating measures like these may help decrease the pain, but the added expense is still there. And pharmacy is not the only industry being hit in this manner. Many restaurants in my area are now limited delivery and curbside as well. The financial windfall to the credit card companies is undoubtedly large. I spent some time this week talking to my State Attorney General’s office about this problem, and they informed me that they are not able to take action. Any action must happen at the Federal level.
So today’s “Encounter” is an assignment: contact your US Representative and Senators. Talk to them about this issue, and ask them if there is something that they could do to address the unintentional profiteering taking place in the credit card industry. Spend a few minutes of your time today to make this encounter count.