Debit Networks Mimicking The Fixed Acquirer Network Fee (FANF), Here’s how

Sep 23, 2015

It is no longer a secret that some of the country’s major PIN-debit networks have over the past couple of years quietly incorporated so-called participation fees that are assessed for every merchant location along the network.

The progenitor of the fees, according to a veteran market observer, is Visa’s FANF, first instituted in 2012. The Fixed Acquirer Network Fee (FANF) was part of Visa’s strategy after the payment institution’s main PIN-debit network lost close to half of its total market share following the Durbin Amendment which diverted traffic to other networks.

From the very first day it was established, FANF has been a cause of confusion among merchants who pay the bills. Apparently, FANF taught some debit networks a new trick. The networks have moved quickly to create their own systems that mimic the FANF.

According to pricing documents available on websites of independent sales companies, debit networks with annual participation payments include processor First Data Corp.’s Star. First Data is a long-time servant in the payment industry and currently boasts many thousands of customers. In August, the processor announced that it would be increasing it fee per location from the current $6 to $12.

Two other processors, Vantiv Inc.’s Jeanie Network and Discover Financial Service’s Pulse, both raised their per-location fees towards the end of 2013 from $6 to $9. Even the Fidelity National Information Services Inc.’s owned NYCE network has a new $7 annual fee.

Digital Transactions tried to reach each of the four networks to get an insight into why they were changing their fee structures but all of them either failed to reply to the emails sent or declined to comment on the fees.

Similar to inter-charge and other network fees, participation fees are technically assessed to the acquirer. Therefore, the person who ends up with the bill is usually the merchant client. It is not very clear where the idea of participation fees originated, but evidence suggests that they first appeared in 2013, not long after Visa’s FANF came into being.

Observers in the industry blame the whole trend on Visa saying that once networks discovered the trick, they were always going to come up with a similar plan. “They all looked at Visa’s FANF and thought it was an attractive pricing umbrella,” says Eric Grover of Minden, a Nevada based company. “They couldn’t price at the FANF level but they at least got an idea,” he continues.

For affected merchants who fear that the extortion fees might drive them into bad credit without their knowledge, you can start by opening a bad credit merchant account.

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