BY YVES EPHRAIM

Earlier this week, I weighed in on the dispute between the independent gas station owners and the

government

, and proposed that a deal be structured around granting $0.50 of the $2.00 per gallon increase to the gas stations owners.

I even suggested that this could be a temporary measure based on the oil price per barrel falling back to a predetermined level.

Here is a link to my last post:

https://www.facebook.com/photo/?fbid=29604018012520433&set=a.488149571200664

My proposal was strictly influenced by the need to provide a speedy win-win with the gas station owners.

A speedy resolution is necessary in order to lessen the gas station owners’ losses, which if allowed to accrue over months could risk pump attendant layoffs.

It has already been established that the mere increase in gas prices automatically increases the merchant fees with card purchases. The losses are real!

Since my last post the Government of Antigua and Barbuda announced that it intends to approach local banks with a proposal to lower their merchant fees to 1%.

As good as this sounds, this path is fraught with all sorts of landmines.

For example:

1. Can the banks’ systems allow them to simultaneously charge different merchant fee rates? Perhaps by industry or by customer? And if so, would this be an insignificant cost to implement?

2. If the banks do give the gas stations owners a lower rate, why should they not extend this rate to other industries similarly affected. Would this open a can of worms? Once this precedent is set, there is no telling where this will stop.

3. The process itself is likely to take a long time.

Mind you, I would welcome a lowering of the fees myself but I am being pragmatic.

The cost of doing business in Antigua and Barbuda is extremely high and I am aware that the merchant fee also takes into account charge backs and fraud losses.

It is noteworthy that local banks do not keep all of the 3.5% or 4.0% merchant fee they charge.

To deliver the card services there are other hidden players that help to make swiping your card possible.

Local banks have to share the merchant fees with its payment processor (ie, 4CS) and the card network service provider (ie, Visa/MasterCard). These other two service providers are at the heart of the card payment system.

I am not completely sure how the fee is apportioned among the three parties but I have good reason to believe that Visa alone takes around 1.15%.

Moreover, it is likely that the Caribbean Credit Card Corporation (4CS) which processes the transactions will expect at least 1% of the fees.

As you can see, before we even consider the local merchant banks’ portion, we see that 2.15% is already the lowest limit.

Off the bat, a proposal to expect the banks to agree to a merchant fee of 1%, even on a temporary basis, is dead on arrival, in my opinion.

I may be wrong, but my suspicion is that no bank will agree to dropping the rates to less than 3.0% and that is still high for the gas station owners.

Any negotiation with the banks is going to take some time. Before the bank can even consider the government’s proposal, the banks management will have to prepare income simulations to gauge their own loss of revenue. Then those reports have to be considered by their boards who must approve them.

All this takes time. And every day that passes means accumulated losses for the gas station owners.

Now that gas is currently selling for $16.50, every day that goes by without a real settlement puts growing pressure on gas station owners to take drastic action.

I believe that my original proposal of giving the gas stations $0.50 out of the $2.00 increase as a temporary measure could bring relief as early as tomorrow.

Let us strive for a win-win.

The government, as a 51% shareholder in WIOC is still going to win when it collects its dividends.

This article was originally published by Antigua News Room. Read the original article here: OPINION: It Is Not Complicated.