Mobile wallets and mobile point of sale systems have tried many tactics to win over merchants by cutting costs. Some vendors have been extremely inventive in how they push cheaper payment options. (Image: ShutterStock)
LevelUp took an aggressive stance against interchange with a pricing model named Interchange Zero. It had to back off from that model because merchants did not like its limitations, but the company is taking another swipe at interchange fees with a pro-debit push. If it can lower its own costs by switching consumers away from credit cards, LevelUp plans to lower its fees accordingly.
Koupah charges transaction fees, but also promises merchants a way to offset those fees with advertising revenue. The program requires consumers to opt in, and when they do, Koupah uses their data to target its ads.
PayStand's payment platform, designed for online and mobile commerce, supports Dwolla and Bitcoin as alternatives to credit cards. Merchants pay 2.99% plus 30 cents for credit card payments, 25 cents for Dwolla and no fee for Bitcoin. PayStand also urges merchants to pass along their transaction fees to consumers – giving consumers a reason to pick the cheaper options.
Gyft lets consumers buy digital gift cards for mega-merchants with credit cards, PayPal and Bitcoin. It offers consumers more rewards for using the less costly payment methods. Consumers get 1% back for using a credit card, 2% for using PayPal and 3% for using Bitcoin. (Image: ShutterStock)
OpenTable doesn't try to get rid of interchange, but it doesn't add to it either. Merchants who use the restaurant reservation provider's mobile payment system pay only the interchange fees for each transaction. (Image: ShutterStock)
Square took aim at interchange with a flat-fee option, but merchants who signed up for were limited to accepting $400 per transaction and $250,000 per year. Square eventually discontinued this option, sticking to its tried-and-true 2.75% per-swipe fee.
Polish Banks
Six banks in Poland designed a mobile wallet that draws funds from linked bank accounts, making it a less expensive alternative to credit cards. The banks — Alior Bank, Bank Millennium, Bank Zachodni WBK, BRE Bank, ING Bank Slaski and PKO Bank Polski —account for 70% of Poland's electronic banking market. (Image: ShutterStock)
The Durbin Amendment
Mobile wallets are often compared to decoupled debit cards because they use the same model of drawing funds from linked bank accounts using the ACH network. In the U.S., the Durbin amendment sliced debit fees, making them less burdensome for merchants – and thus making merchants less likely to seek an alternative. Mobile wallets may have to slash their prices to stay competitive. (Image: ThinkStock)