By John San Filippo
Anyone who has ever pumped gas is familiar with dual pricing (i.e., one price for cash and another for credit). This model, designed to offset the fees merchants pay for credit card transactions, is becoming increasingly common in other businesses. Axe Pay, a credit card processing company, is at the forefront of this shift, offering a unique service that lets businesses pass card processing fees directly to the consumer.
Finopotamus spoke with Domenick Nati, Axe Pay’s vice president of business development to learn more about the program and how credit unions can get involved.
Dual Pricing Explained
According to Nati, dual pricing has seen significant growth, especially post-COVID, as businesses grapple with rising costs. “A lot of businesses are forced to raise prices just to keep up,” Nati explained. “Dual pricing is a way for you to add whatever you normally pay for card processing back into your bottom line without changing your prices.”
How does it work in practice? Nati provided an example: “If the bill is $50 at a restaurant, it would say $50 cash, and then for the credit card customers, it would say $51.99. So, no matter how they pay, the business gets their full $50. If they pay with a card, then that fee is paid for by the customer.” He emphasized that cash customers aren’t affected, and for those who prefer to use credit, the added cost is minimal.
Flexibility Is Key
Nati said that Axe Pay works with credit and debit. However, he noted that the system is flexible enough to accommodate special situations. “For example, if you’re a completely cashless business, we can work something out where we’ll treat your debit card transactions as cash and only include the upcharge for credit transactions. Everything is flexible.”
While switching to Axe Pay requires new merchant equipment, Nati added that Axe Pay pays the full cost of the equipment. It costs the merchant nothing to get started. “POS (point-of-sale) systems, registers, printers, kitchen display screens – whatever you need to get started, we provide that at our own expense,” he stated.
Money to Be Made
This added fee isn’t just a pass-through of the exact processing cost; it also represents Axe Pay’s profit margin. Nati drew a parallel to online convenience fees for utility bills. “That’s how we make profit,” he said. “It’s just like when you pay your utility bill online. There’s a convenience fee.” He acknowledged that these fees often exceed the actual cost, generating profit for the service provider. “It’s the same thing here.”
Beyond direct sales, Axe Pay has a robust referral program. “We did the research to see how we got new business,” noted Nati. “We realized that we spent a lot of money on hiring sales teams and call centers and doing cold calls. But what we found is that the most beneficial thing we’ve done is partner with people.” Referrers – including credit unions – receive a commission for the lifetime of the referred account. “We share the profits with the referrer for the life of the deal. Every month we will give you commission.” This long-term incentive has proven more effective than one-time referral bonuses, he added.
Nati sees particular potential for partnerships with credit unions and community banks, enabling them to offer a unique benefit to their business accountholders. He added that the Axe Pay service could give smaller institutions a competitive edge. The Lynchburg, Va.-based company’s target market is well-aligned with credit unions’ target market for business services. “We primarily serve regional businesses with multiple locations,” he said. “That’s kind of our sweet spot. It seems like a great fit for credit unions.”