FMI EPS GROUP DIGS INTO TRANSACTION COSTS

ADAM BLAIR

WASHINGTON -- The Electronic Payment Systems committee of the Food Marketing Institute here has completed its first round of meetings with key players in the financial industry, and is seeking follow-up meetings to more specifically address retailers' concerns about rising EPS costs.

"We're applying the same concept to the cost of tender as was done with Efficient Consumer Response, which involved suppliers and retailers sitting down to look at their costs," Larry Turner, vice president and treasurer at Kroger Co., Cincinnati, told SN. "We're seeing redundancies and attempting to get them out of the system."

The EPS committee, which began work in February, has met with "almost all the players in the financial arenas," said Turner, who chairs the committee. These include the major credit-card associations, card-issuing banks, debit-issuing networks, check processors, "and even the banks [retailers] deposit their cash with."

These initial meetings served to "outline our premise," said Turner. "Retailers see our future costs rising, because the lowest-cost forms of tender are declining and the highest are increasing.

An FMI study commissioned by the EPS committee, "A Retailer's Guide to Electronic Payment Systems Costs," used data gathered from retailer surveys conducted in 1994 and 1997. Credit and debit transactions combined had risen to more than 13% of the total transaction value at supermarkets accepting EPS in 1997, compared with a little more than 5% in 1994, the study said.

Checks decreased from 49% to 45% of total transactions during this period, and cash transactions fell from 36% in 1994 to less than 30% in 1997.

The cost of accepting credit cards was the highest of all transaction types in both 1994 and 1997, and increased 33% during that period. The cost of accepting cash also rose, but only by 16.5%, according to the study, which was released in February.

On-line debit, which requires a personal identification number, was the only tender type that decreased in cost, moving down 3.2% between 1994 and 1997.

Turner believes concerted action by the supermarket industry can help ease some of the burdens of accepting electronic payments. "The interchange fee paid to the credit-card associations is based on a number of factors, including fraud," he explained. "If the potential for fraud is high, that cost is passed along.

Besides Kroger, the EPS committee has representatives from Winn-Dixie Stores, Jacksonville, Fla.; Wegmans Food Markets, Rochester, N.Y.; Publix Super Markets, Lakeland, Fla.; A&P, Montvale, N.J.; Supervalu, Minneapolis, as well as several other high-profile retailers and wholesalers.