John Myers Jr, Senior Reporter
Errol Edwards, president of the Jamaica Gasolene Retailers' Association. - File
Claims by gasolene retailers that the fees banks charge to process card transactions wipe out their profit and could lead to motorists having to fork out more when they use plastic at the pumps.
Or, at an extreme, they may not be able to use credit cards for their fillups if concerned petrol station owners abandon the use of plastic altogether.
No credit card use
In fact, some service stations, such as the Worldron Esso near Cross Roads in St Andrew, have already given up on credit cards for petrol sales, because of the long-standing complaint about the bank fees.
"The dealers find it hard," said Andrew Roberts, Worldtron's assistant manager.
"It doesn't make any sense we even try because it is eating out too much of the profit."
Typically, banks charge service stations between 1.8 per cent and 2.3 per cent of the value of a transaction, depending on the type of credit card - the lower rate applying to cards owned by Jamaican banks, the higher one paid on those issued by international credit card companies.
But petrol station operators say that with their margins already razor-thin at under five per cent, these rates - although between 2.7 and 4.7 percentage points below the top rates applied by banks - all but remove any chance of profit.
The upshot: they could be forced to restrict credit card transactions or pass the costs on to consumers if banks don't cut the rates.
"When you transact business using credit cards and you are marking the product at four per cent and you give away 2.3 per cent for that transaction, with shrinkage between one and 1.5 per cent, you are not making anything off the (sale)," complained Errol Edwards, a service station operator, who is also the president of the Jamaica Gasolene Retailers Association (JGRA).
The shrinkage to which Edwards referred relates to the amount of petrol lost by service stations to evaporation during transportation and while in storage.
Indeed, this issue of transaction fees charged by the banks has long been contentious with petrol stations.
Requesting lower fees
Some stations decline credit cards all together or limit their use to the purchase of more expensive, higher octane petrol on which they get better margins. In some cases, stations add a surcharge, as high as five per cent on credit card transactions.
But such work-arounds are unsatisfactory in an economy where consumers are increasingly using plastic to pay their bills.
Service station operators would prefer that credit card companies lower their transaction fees.
In fact, the JGRA's Edwards says the National Commercial Bank (NCB), a major player in the market that issues its own as well as those of international com-panies, has signalled a willingness to lower its transaction rates.
Deliberating details
But by how much is not yet clear. Both sides are still haggling over the details.
NCB, which controls most of the portals used by Jamaican retailers to approve credit card payments, says the typical charge is between 4.5 and seven per cent per transaction.
NCB in a statement to the Financial Gleaner said that "all rates are negotiable based on business type, sales volumes, operational risk, and if there is an existing relationship with NCB".
High-risk transactions attract the highest charge. But NCB declined to say into what category the petrol trade falls, although the fees it charges on petrol station trans-actions are below its top rates.
For transactions with its proprietary Keycard, the bank takes 1.8 per cent, but asks 2.3 per cent for processing Visa and MasterCard transactions.
Scotiabank, the market's other big player, declined to disclose its rates, citing customer confiden-tiality. However, industry sources say the banks charge the same rate.
"The concern about credit card (fees) is a wide concern," said JGRA's Edwards. "It relates not only to the JGRA members, but marketing companies are also concerned about the charges."
Rory King, the proprietor of Rory King's Texaco on Constant Spring Road, St. Andrew, echoed the sentiment.
"It affects us a lot; it is more than half our mark-up," King said. "They should make some arrange-ment and lower the rates since we operate on such low margins."
With plastic gaining in popu-larity, Edwards said that retailers last year paid out $46 in card fees to the banks from every $2,000 of pump sales, but the fees now have more than doubled.
"Today, we are giving $92 and we are saying to them (the banks), you have to do something to this percentage," he said.
Gasolene dealers have approached the umbrella Jamaica Bankers' Association with their case, but were told to speak with the individual banks.
Andrew Roberts, the assistant manager of Worldron Esso near Cross Roads, St Andrew, said his station has simply stopped accepting credit cards because the associated costs were just too much.
"The dealers them find it hard, it don't make any sense we even try because it is eating out too much of the profit," Roberts said. He suggested that the banks implement a flat rate instead.
Rory King, the proprietor of Rory King's Texaco on Constant Spring Road, St Andrew, was similarly unhappy about the charges administered by the banks.
"They should make some arrangement and lower the rates since we operate on such low margins," he suggested.
At least one attempt was made to bring the Jamaica Bankers Association in as mediator, but the the umbrella organisation said the matter was outside its purview.
Patrick Hylton, the boss of NCB is the current president.
"The JBA does not get involved in determining neither the fees nor the interest rates charged by its members," read a section of a letter sent to Cool Petroleum, and obtained by the Financial Gleaner.
No comment
Cool, which commands the largest network of gas stations under the Shell and Cool brands, is pushing for the banks to lower their processing fee to one per cent and capped at $40.
When contacted, CEO of Cool Petroleum Joseph Issa - while acknowledging the concern about the charges administered by the banks - said he preferred to reserve comment until further discussions are conducted with the banks.
Additional reporting by Richard Deane
john.myers@gleanerjm.com
