Pricing has always been a tricky area for businesses to navigate, as profit margins and customer satisfaction must be maintained. Dual pricing is a strategy that has emerged as a way to provide customers with transparency in pricing and incentivize payment by cash or debit card. By displaying both card and cash prices, dual pricing ensures that consumers can compare prices easily before making their final purchase decision. In this blog, we’ll explore the benefits of dual pricing for businesses and consumers.
1. Increased Transparency
Once a customer swipes their card, the merchant’s terminal communicates with the payment processor to obtain authorization. The payment processor sends the authorization request to the issuing bank, which reviews the customer’s account for sufficient funds and puts a hold on the amount of the transaction. If the issuing bank approves the transaction, an authorization code is generated that the payment processor sends back to the merchant’s terminal.
2. Better Cash Flow
Once the authorization is approved, the merchant can proceed with capturing the funds. This involves transmitting the transaction details and authorization code to the payment processor, which then forwards them to the acquiring bank. The acquiring bank reconciles the transaction and deposits the approved funds into the merchant’s account, less any fees.
3. Incentivizes Payment by Cash
Settlement is the process of transferring funds between the acquiring bank and the issuing bank. The acquiring bank sends a settlement request to the issuing bank, which verifies the transaction details and approves the transfer of funds. This process can take up to several days to complete, depending on the types of cards involved and the amount of the transactions.
4. Improves Accuracy
Funding is the final stage of the credit card transaction process. Once the funds have been settled and deposited into the merchant’s account, they can be accessed and used to pay for business expenses. The speed at which funds are deposited depends on the merchant’s payment processor, with some offering same-day deposits and others taking up to one or two business days to process.
5. Enhances Customer Decision Making
Chargebacks occur when a customer disputes a transaction with their issuing bank, typically due to fraudulent or unauthorized activity. In such cases, the issuing bank investigates the matter and, if it finds the customer’s claims to be legitimate, reverses the transaction and debits the merchant’s account for the amount of the original transaction.
Dual pricing presents a win-win situation for both businesses and consumers. Merchants can save on transaction fees and encourage cash payments, while customers can make more informed decisions. As the benefits discussed in this blog are significant, it is no surprise that this pricing model is an increasingly popular choice for businesses of all sizes. By implementing dual pricing, merchants can foster greater trust with their customers, and customers benefit from cost savings and transparency.