Item 20 - Debit and Credit Card Merchant Payment Processing Services

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Award Renewal Agreement with TSYS, DBA Global Payments November 16, 2021 Page 2 2 2 2 9 City expenditures. TSYS has agreed to maintain the reduced rate for the term of the agreement. The rapid growth and popularity of debit and credit card payments made by residents and businesses; in Fiscal Year 2020-21 there were over 41,000 debit and credit card payment transactions at City facilities (up approximately 5,000 transactions over FY 2019-20), which totaled over $5.6 million (up approximately $535,000 over FY 2019-20) in collections of City taxes, permits, fees, fines, and other charges due for City services. Additionally, on June 21, 2016, the City Council approved a maximum credit card transaction limit in the amount of $5,000 dollars for debit and credit card transactions taking place at City facilities in order to reduce the merchant payment processing charges for large dollar debit and credit card transactions, which are costlier than smaller dollar transactions. The City incurs a variety of fees for each transaction, the most variable and largest of which is an Interchange fee set by payment networks like MasterCard and Visa. The amounts vary from card type to card type, based on criteria established by the issuer. For example, a 3.5% merchant payment processing fee for a $100,000 transaction costs the City $3,500, while a 3.5% percent fee for a $1,000 transaction costs the City $35. Payment of high merchant processing fees for accepting large dollar value debit and credit card transactions is contrary to the City’s financial interest and is not in the spirit of the City’s moratorium on debit and credit card merchant processing fees, which is intended to be a convenience for City residents and small businesses. Consequently, to improve the security of debit and credit card payment transactions for Santa Ana residents and to minimize the risk of a credit card information data breach, City Council will be presented in a future Council Meeting with a recommendation to approve a City- wide upgrade to iNovah cashiering software and payment terminal hardware to EMV Chip & PIN contactless payment terminals and PCI DSS compliance to protect credit card payment data. TSYS is the fifth largest third-party merchant processor in North America. TSYS has historically provided an excellent customer experience in connection with the City’s merchant processing needs. Because of TSYS’ long time business relationship with the City beginning as TransFirst, LLC in March 2014, they possess institutional knowledge of the City’s current payment processing systems. Regretfully, over a number months the City and TSYS (now merged with Global Payments) have attempted to negotiate contractual terms for an extended renewal contract, but ultimately could not come to a mutually satisfactory agreement with regards to certain key contractual provisions beyond June 30, 2022. Nevertheless, TSYS has agreed to maintain a reduced merchant processing rate for the City’s in-person credit and debit card transactions, and thus a short-term renewal agreement will allow Treasury Services sufficient time to transition and consolidate cashiering payment capabilities with a different provider.