Practical Ecommerce

American Express OptBlue: Negotiating Processing Rates

In “American Express OptBlue Program May Reduce Processing Cost,” my article in July, I explained how the new OptBlue program could reduce processing rates for ecommerce merchants, as it allows merchant account providers to set the rates and fees merchants pay for American Express in a similar way that the providers set the rates and fees for Visa, MasterCard, and Discover. My article in August, “American Express OptBlue: Understanding Processing Rates,” addressed how American Express charges merchant account providers.

This is the final installment in my OptBlue series. This article includes a checklist that merchants can use when discussing OptBlue with the provider, to ensure fees and rates are clear, and fair.

OptBlue Example

I’ve addressed the OptBlue program because I believe that a high percentage of small merchants can benefit from it — if their fees are priced correctly. For example, below is actual data from a merchant’s recent statement.

OptBlue can reduce AmEx processing costs for many merchants. These are actual OpBlue fees and charges from a merchant's statement.

OptBlue can reduce AmEx processing costs for many merchants. These are actual OpBlue fees and charges from a merchant’s statement.

This merchant was set up correctly. It is being charged the same Discount Fee (0.20% + 0 cents) on AmEx as it is on the other card brands. It is not being charged an “Amex Access Fee” because it does not apply to this merchant (be careful as some providers may charge an access fee even if it is not warranted). The “Amex Network Fee” and “Amex Tier 1 Rate” — as listed above — are priced correctly at the provider’s actual cost.

It now costs this merchant less when customers pay with an American Express card than with Reward and Corporate/Business cards from Visa and MasterCard . When comparing the AmeEx processing cost to Visa and MasterCard, it’s best to compare AmEx versus Reward and Corporate/Business cards. This is because a customer who wants to pay with an AmEx card would probably otherwise pay with a Reward or Corporate/Business card from Visa or MasterCard (versus a basic credit card or debit card) if AmEx was not accepted.

Certainly, not all merchant types will pay less for American Express, even if they are correctly priced.

American Express has done a good job of implementing a straightforward pricing structure that is far less complicated than those implemented by Visa, MasterCard, and Discover. However, I’ve already seen providers take advantage of the simplicity by inventing fees that are not part of the AmEx OptBlue program or by inflating the rates to their own sales agents.

Download AmEx Pricing Checklist

Therefore, I have provided the attached PDF checklist for merchants so they can make an informed decision on participating in the OptBlue program. A provider that cannot complete this form properly or includes extraneous fees is likely not the correct one for any of your processing needs. Always ask the salesperson to show an example of a statement with the OptBlue pricing so you can compare it to the information on the checklist. Lastly, always check the information on the completed checklist with the actual statement you receive from the provider — should you choose its service.

Below is information from another recent statement. In this case, the provider is charging more than what it appears for AmEx processing. The provider charges a discount rate of 0.40% + 20 cents — too high, by the way, in my view — for all card brands. In fact, the provider is not charging the same discount rate for AmEx as for the other card brands. The AmEx “Network Fee,” “Access Fee,” “Key Enter Fee,” and “T2 [Tier 2] Rate” are all correctly priced. But the provider is charging an “Amex Sys Processing Fee,” which is not an AmEx fee at all; it is actually an additional provider fee. This fee nearly doubles the provider’s actual discount rate for AmEx transactions. This is the type of fee that should be listed in the “Additional Fees” section on the checklist.

These actual AmEx rates and fees are from a merchant's processing statement. "Amex Sys Processing Fee" is not from American Express, but simply an additional fee from the merchant account provider.

These actual AmEx rates and fees are from a merchant’s processing statement. “Amex Sys Processing Fee” is not from American Express, but simply an additional fee from the merchant account provider.

Summary

  • The American Express OptBlue program is simple and well designed for merchants.
  • The program should lower the processing cost for a high percentage of existing AmEx retail and ecommerce merchants.
  • The program should allow merchants that do not currently accept AmEx to accept it at a competitive cost to the other card brands.
  • Despite the above, there will be providers and salespeople who will overcharge or mislead merchants, like they do with the other card brands.
  • A provider that misleads or overcharges for OptBlue is likely not the correct choice for any of your processing needs.
Phil Hinke

Phil Hinke

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  1. Kurt Schneider March 9, 2015 Reply

    Very interesting article. We are a “card not present” online vendor and wanted to know about the rate premiums for this type of merchant.

    Also – once a merchant exceeds the OptBlue volume threshold, where does he go from there? Are there similar programs for higher volume merchants?

    And finally, I couldn’t access the PDF.

    • Kerry Murdock March 9, 2015 Reply

      We apologize for the broken link, Kurt. It is now fixed. Thank you for letting us know.

      Kerry M.
      PEC

  2. vedvizag March 16, 2015 Reply

    Great article. It would be great if we can mandate providers to explicitly show which is network’s cost and which is their mark-up. Otherwise providers will try to use American express as scapegoat while it is provider’s greed that is costing merchants.