With Rate Increases Looming, a Processor Aims to Wean Auto Shops off of Credit Cards

With credit card acceptance rates expected to rise next spring, payments-technology firms are starting to launch services for merchants that they say will soften the blow. The latest comes in the automobile-repair industry with an announcement Tuesday by Facepay Inc. of general availability of a service aimed at replacing credit card payments with direct bank transfers from customers’ accounts.

Mountain View, Calif.-based Facepay, whose merchant base is largely concentrated among auto-shop owners, says its technology can ease the transition of customers away from credit cards. Instead, the bank transfers will save the shops anywhere from 5% to 10% of profits that otherwise would have gone to interchange, Facepay estimates. Information was not immediately available regarding how many shops are on Facepay’s platform.

The move also comes as shop owners are recovering from the impact of the Covid-19 pandemic, Facepay says. “Auto shops have never made more and never paid more fees than they have this year,” says Todd Westerlund, chief revenue officer at Facepay, in a statement. “The pandemic and supply-chain aftermarket impact are incredible. Next year, they will pay even more fees because of the [credit card] rate increases and the time to prepare is now. It will erode all profits.”

Visa Inc. and Mastercard Inc. in March postponed until April 2022 interchange-rate adjustments they had originally intended to introduce this spring. The adjustments, which included both higher and some lower rates, depending on business category, would have yielded some $889 million in net new revenue for issuers, according to estimates from CMSPi, a retail-payments consultancy.

Facepay says its technology can ease customer sign-up for the bank-transfer service with a dashboard to invite customers to use the service and measure results. It works with a shop’s existing software and doesn’t replace current processors, the company adds.

The 6-year-old company says it works with “hundreds” of auto shops and sees an average repair order of $943. Its subscription model charges a fixed fee of $99 per month, which it claims allows its clients to save some $20,000 a year in profit, on average, by avoiding credit card interchange.