September 3, 2007 – Credit card opportunity coming for OEMs
August 30, 2007
Filed under Features
The company that runs a popular dealer credit card processing program has arranged an agreement with MasterCard that figures to interest OEMs and distributors alike.
Boaz Payment Systems, a partner of the Motorcycle Industry Council (MIC), has worked with MasterCard to provide credit cards that industry companies can fully customize.
The arrangement provides the industry a way to use an electronic gift card in a way that has been previously difficult, if not altogether impossible to do, said Matt Tanzy, a managing director at Boaz Payment Systems.
“It’s a way to help OEMs and aftermarket companies get their brand in the wallets of their dealers and their customers,” Tanzy said, noting the agreement is “brand spanking new.”
So new that powersports OEMs and distributors have yet to sign up for the opportunity, although that is expected to change soon.
Tanzy said the MasterCard plan will allow industry companies to use electronic gift cards that other large retailers, like Starbucks, currently do.
Until now, manufacturers could not send their consumers an electronic gift card because unless the OEM went to every dealership and programmed their credit card machines to accept the cards, the dealers’ cash registers would read the electronic gift cards as unrecognizable.
But the customized MasterCard credit cards will be recognizable by all dealerships that currently accept credit cards.
“It’s a big thing now to be able to do this because it will open up the ability for OEMs and aftermarket companies to give money to customers and dealers,” Tanzy said.
Tanzy notes companies will not have to purchase a huge allotment of credit cards to get a fair price, a concession that MasterCard was willing to make in order to broaden its business in the powersports industry.
How could distributors and manufacturers use the credit cards? Potentially as a preloaded gift card, which could replace the older and slower money-back system of mail-in rebates, or as a credit card that the distributor or OEM could use multiple times to finance dealer or consumer programs. Such reloadable credit cards figure to be popular for OEMs and distributors and their contingency race programs.
The MasterCard program, which Tanzy plans to present to the MIC at a future meeting, is initially geared toward MIC members, but could be extended to dealers in the future.
“We’ll usually design and develop something for the MIC and its members, and as we gain momentum and it works, then we roll it out for the members’ dealers,” Tanzy said.
One such program that has been extended to dealers for quite some time is a credit card processing program that carries two benefits: It provides a lower overall processing fee for dealers, and it gives the industry more funds for land-access issues.
The credit card processing program, which started in 1997, has recently hit two milestone marks: 6,000 dealers are now using it and more than $1 billion is being processed annually. Those two marks have helped Boaz attain a lower processing rate of 1.22 percent. Tanzy said dealers that try to negotiate their own credit card processing rate through a local bank can expect to get a processing rate of no better than 1.68 percent. The volume of dealers and the business they generate allows Boaz Payment Systems to get the lower group buying rate, something the Roswell, Ga.,-based company also does for other national associations, including the jewelry and pool and spa industries.
Dealers that do not currently have the credit card processing system can switch without any cost or need to purchase new equipment, Tanzy said.
For each credit card transaction that is processed by Boaz Payment Systems, Visa and MasterCard have agreed to provide money back to the industry. Tanzy would not say what percent of each transaction will come back to the industry, but he did note this year’s total is expected to reach at least $100,000. That money is given to the MIC, which then uses it for land-access issues.
“This is not used for emission control legislation or Discover Today motorcycling awareness campaigns,” Tanzy said of the funds that come back to the industry. “This is purely for growing the industry through getting additional riding lands and more motorcycle-friendly legislation as it relates to off-road” access issues.
Just recently, Boaz Payment Systems was able to add Canadian dealers to the program, something the company has been working on for the past three years. Presently the funds that are generated from Canadian dealers also will go toward U.S. land-access issues.
The credit card processing system figures to only grow in size, as Boaz Payment Systems and the MIC signed a long-term agreement in March to continue the program.