State lottery’s re­tail­ers wary of debit fees

Cards’ use le­gal in Au­gust

Northwest Arkansas Democrat-Gazette - - NORTHWEST ARKANSAS - MICHAEL R. WICKLINE

Some Arkansas Schol­ar­ship Lottery re­tail­ers are still un­sure whether they will ac­cept debit cards on ticket pur­chases when the law al­low­ing the cards’ use takes ef­fect Aug. 1.

They fear that the cost of ac­cept­ing debit-card pur­chases will out­weigh the small com­mis­sions they get for sell­ing the tick­ets.

Yun Lee, owner of the Kwik Chek III store along Geyer Springs Road in Lit­tle Rock, said last week that he wants to make sure his store at least breaks even if he ac­cepts debit-card lottery pur­chases. But he doesn’t think debit cards will make “a big dif­fer­ence” on his sales.

In the fis­cal year that ended in June, Kwik Chek III ranked fifth-high­est in net lottery sales among the more than 1,900 re­tail­ers statewide, ac­cord­ing to the lottery. The store’s net lottery sales to­taled more than $981,000 in fis­cal 2017.

Lee said “very few peo­ple” have asked to use their debit cards for the lottery in the past.

Other re­tail­ers said they won’t ac­cept debit cards be­cause they’ll lose money or will ac­cept them only with larger pur­chases.

The law al­low­ing debit-card use, Act 876 of 2017, also al­lows re­tail­ers to ac­cept other “non­cash, non­credit meth­ods of pay­ment,” such as Ap­ple Pay and Google Wal­let. Credit cards and checks are still pro­hib­ited, lottery Direc­tor Bishop Woosley said in a let­ter to the re­tail­ers.

But the law makes re­tail­ers who ac­cept these pay­ment meth­ods re­spon­si­ble for any costs, fees or charge­backs that go with those trans­ac­tions.

Lottery re­tail­ers are paid a “base com­mis­sion” of 5 per­cent on sales of scratchoff tick­ets and of tick­ets for

draw games such as Power­ball, Mega Mil­lions, Cash 3, Cash 4 and the Nat­u­ral State Jack­pot.

The re­tail­ers also re­ceive a “cash­ing com­mis­sion” of 1 per­cent for each dol­lar in prizes re­deemed by cus­tomers. Re­tail­ers are re­quired to re­deem prizes up to $500.

Re­tail­ers also get a “sell­ing com­mis­sion” of 1 per­cent of a prize amount of $10,000 or more on each ticket val­i­dated and paid to a player. The sell­ing com­mis­sion is lim­ited to $50,000.

They also may re­ceive a com­mis­sion up to 10 per­cent on “spe­cial games” au­tho­rized by Woosley un­der the lottery’s rules.

Ben Hooks, owner of the G&B Liquor store in Stuttgart, said the debit-card fees charged to his store by card com­pa­nies are high, rang­ing from about 30 cents to 60 cents per trans­ac­tion, which would take away from the com­mis­sions from the lottery.

He prob­a­bly will re­quire a cus­tomer to make a min­i­mum pur­chase of $100 to ac­cept a debit card to buy lottery tick­ets, he said.

“On any type of $5, $10 or $20 pur­chase, we are not go­ing to ac­cept them,” he said in a tele­phone in­ter­view.

“It is kind of go­ing to be a mystery trial. We are go­ing to see how it works out.”

G&B Liquor ranked sev­enth among ticket re­tail­ers last fis­cal year with more than $937,000 in net sales, ac­cord­ing to the lottery.

In a let­ter to out­lets dated July 13, Woosley noted that re­cent re­tail stud­ies show more than 25 per­cent of pur­chases are made with debit cards. A Na­tional As­so­ci­a­tion of Con­ve­nience Stores re­port said 34 per­cent of con­ve­nience store shop­pers pay with cash, he wrote.

“Fur­ther, the Hoosier [In­di­ana] Lottery re­cently com­pared the year-over-year vol­ume per out­let of chains that ac­cepted debit cards for lottery pur­chases ver­sus those that did not, and found an 8.6 per­cent in­crease for those ac­cept­ing debit cards,” Woosley wrote in his let­ter.

Dur­ing this year’s leg­isla­tive ses­sion, the law’s spon­sor, Sen. Trent Garner, R-El Do­rado, told law­mak­ers that two large re­tail groups, Murphy Oil USA and Kum & Go, sup­ported his bill.

But An­drew Net­tles, man­ager of the To­bacco Mart on Mil­i­tary Road in Ben­ton, said the store won’t ac­cept debit cards for the lottery be­cause of the fees charged by the card com­pa­nies.

For ex­am­ple, lottery pur­chases by 18 peo­ple us­ing debit cards would have wiped out the store’s com­mis­sions from sales on one re­cent day, as­sum­ing that the store didn’t charge a fee on lottery debit pur­chases, he said. About 350 peo­ple visit the store each day, he said.

“Un­less our com­peti­tors do it, I don’t think [ac­cept­ing debit cards] is go­ing to help us at all,” Net­tles said.

“It’s just go­ing to make things harder.”

But Jamie Clark, man­ager of the “No. 1 seller in the state,” Y&E Su­per­stop in Bryant, said she as­sumes the store will ac­cept lottery play­ers’ debit cards.

“We sell so much, and we get a lot of trav­el­ers” stop­ping at the con­ve­nience store and gas sta­tion along In­ter­state 30, she said in an in­ter­view at the store.

“I have a lot of peo­ple who pull out their cards” to pay be­cause they buy lottery tick­ets in other states with debit cards, she said. “… We lose that sale un­for­tu­nately.”

Thirty-nine states cur­rently al­low debt-card lottery pur­chases, Woosley said.

Lot­ter­ies in Louisiana, Mis­souri and Texas al­low re­tail­ers to ac­cept debit cards, but Ok­la­homa and Ten­nessee don’t. Mis­sis­sippi doesn’t have a state lottery.

Woosley said last week that he didn’t fac­tor debit-card pur­chases in his pro­jec­tions for rev­enue and net pro­ceeds for fis­cal 2018 be­cause he wasn’t sure how many re­tail­ers would par­tic­i­pate.

He also said he ex­pects about a third of the lottery’s 1,900-plus re­tail­ers won’t ac­cept debit cards.

Texarkana, Texas-based E-Z Mart Stores Inc. — with 85 re­tail­ers, the largest cor­po­rate seller of lottery tick­ets — “will not be ac­cept­ing debit cards as a new method of pay­ment op­tion for lottery sales,” chief ex­ec­u­tive Sonja Yates Hub­bard said Fri­day.

“For our com­pany, the de­ci­sion was easy be­cause the cost of a ba­sic trans­ac­tion ex­ceeds the com­mis­sion gen­er­ated,” she said.

“Debit fees are a fixed 21 cents (plus a small per­cent­age) per trans­ac­tion, but lottery com­mis­sions to re­tail­ers are only 5 cents on a $1 ticket. That math just doesn’t work. Un­less that cus­tomer is now mo­ti­vated to spend $6 in­stead of $1, then we net lose money,” Hub­bard said in a writ­ten state­ment.

Teresa Dick­er­son, spokesman for third-largest lottery re­tailer, Kroger Co. (51 out­lets), said Fri­day in a writ­ten state­ment that “hon­estly, we have not de­cided yet, but we will make a de­ci­sion be­fore Au­gust 1.”

A spokesman for Murphy USA said Satur­day that she didn’t have in­for­ma­tion im­me­di­ately avail­able about the com­pany’s plans re­gard­ing whether to ac­cept debit cards for lottery pur­chases.

Kum & Go, which has 48 out­lets, plans to ac­cept debit-card lottery pur­chases in Arkansas, said Justin Allen, a lob­by­ist for the com­pany. Kum & Go ac­cepts such pur­chases in at least nine other states, he noted.

“They ex­pect to see an uptick in sales based on what they have seen in other states,” he said.

Peo­ple buy more items than a $1 lottery ticket on trips to Kum & Go stores, and the ad­di­tional pur­chases more than make up for the card com­pa­nies’ trans­ac­tion fees, Allen said.

A Kum & Go store that sells lottery tick­ets is near Base­line and Chicot roads in Lit­tle Rock and across the in­ter­sec­tion from the Free­way Mart man­aged by Bongil Ko.

The Free­way Mart sold more than $1.5 mil­lion in lottery tick­ets last fis­cal year to rank sec­ond in the state, ac­cord­ing to the lottery.

Ko said he plans to ac­cept debit cards for tick­ets be­cause he wor­ries about los­ing sales to his com­peti­tors if he doesn’t, de­spite the high fees.

“I don’t have a choice.”

“I have a lot of peo­ple who pull out their cards” to pay be­cause they buy lottery tick­ets in other states with debit cards, she said. “… We lose that sale un­for­tu­nately.” — Jamie Clark, man­ager of the Y&E Su­per­stop in Bryant

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