The Pellucid Perspective - August 2019 - 5

Credit
Card

With all these potential changes in the Tee
Sheet/POS landscape on the horizon; many
courses may look to switch platforms.
The rumored mega-deal would combine
platforms that are predominately "barter"
and some recent research indicates an
increasing number of courses are seeking
to end or reduce their reliance on "barter."

stations and other select businesses; golf courses are generally
lumped in "Retail" with base Visa interchange rates of 1.43% 1.51% + $0.10 per transaction with 1.65% + $0.10 for "rewards"
cards. Debit card rates are much lower and depend on the issuing bank due to some federal legislation. However, mobile payments have a much higher rate ranging from 1.80% to 2.40% +
a transaction fee. In short, the rates for Square and Stripe have
an additional cost if used by a golf course that still maintains a
high percentage of traditional "card present" retail counter transactions. For example, a $30 transaction using Square would cost
about $0.83 compared to a popular "interchange plus" program
that would cost $0.69 representing an increased cost of 20%. This
"spread" may not look like much, but a typical golf course processing $400,000 a year with 10% "mobile" and 90% card present counter transactions will pay about $2,200 more a year using
Square for all their transactions.
This example also serves as a basis for comparing credit card
processor programs in general. Again, there are literally thousands
of options and the comparison can be very complex. However,
because of the big variations in pricing and new options appearing all the time, every golf course should look at their processing programs regularly. You will often find a big difference in the
range of payment alternatives - some merchant processors can't
offer a full range of services. This is true for "mobile" transactions
and things like "recurring" payments.
Because these comparisons are affected by overall processing volume and average transaction size that vary for every golf
course; you are going to need some assistance. We routinely study
transaction volume and average size as part of our Customer
Franchise Analysis process. We've seen annual transaction volume as high as almost 100,000 (about 15,000 is more typical) and
virtually all have average transaction values higher than $25 (with
$45 - $50 being more typical). The card "mix" at every course will
be different, and which program may be best will vary, especially
if there is high debit card use.
With all these potential changes in the Tee Sheet/POS landscape on the horizon; many courses may look to switch platforms. The rumored mega-deal would combine platforms that
are predominately "barter" and some recent research indicates
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an increasing number of courses are seeking to end or reduce
their reliance on "barter." Pellucid participates in the IGDB golf
course directory project which includes tracking technology use
by vendor. We will have some more complete data shortly, but
the preliminary findings confirm that there has been a significant
transition between platforms over the last few years. We expect
that transitional activity to continue and even increase as a result
of these vendor consolidations.
Adding participation in credit card processing as at least a
partial alternative to barter type payments presents another option for golf courses that may reduce their technology acquisition
costs in the future. We encourage all golf courses to review their
current credit card merchant fee structure - but we also recommend looking at new options carefully. For example, even though
adding "mobile" and recurring payments may increase processing rates; those features may provide additional customer convenience and add to your revenues. A $10,000 increase in beverage
cart sales or season pass sales due to having those more convenient payment options should more than cover the $2,200 cost of
higher rate processing outlined earlier.
We have often suggested an alternative to "barter" where a golf
course could put a Tee Time a day "special" prominently displayed
on their website and promoted at 50% off and use the proceeds to
pay cash for their technology needs. We know that Club Prophet
has an application to make that suggestion possible. And based
on our data on "barter" redemptions, most courses would see a
savings.
Fore Reservations quietly offered a similar payment arrangement that directed greens fee revenue directly to Fore until their
services were paid for. Due to technological advances in payment
segmentation; we would not be surprised to see similar arrangements appear for other technology services.
This is going to be a very interesting period to watch things
unfold. Some of these transitions reflect the difficulties of doing
business in a constricting market; but there are also some new
technology offerings that will actually help golf courses improve
both customer service and revenues. The real challenge will be to
end up like Indiana Jones in the Last Crusade - when the old
Knight told him he had "chosen wisely".
n
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The Pellucid Perspective - August 2019

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