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Hy-Vee Gains In-House Command of Transaction Processing

Hy-Vee, is an employee-owned grocery and drugstore chain with over 200 stores in seven Midwestern U.S. states. They live by a simple but powerful precept: the customer is always right.

Unlike most retail enterprises, Hy-Vee is a highly decentralized corporation. Local store managers can tailor inventory, pricing, merchandising, displays and services to best serve their particular markets and deal with their individual competition.

Solution Sheet
Female completing transaction at grocery store

The Challenge

Hy-Vee’s challenge was to reduce reliance upon a single, third-party processor. Their goal was to implement a responsive, in-house electronic payments switch for routing debit, credit and electronic benefits transfer (EBT) transactions, as well as for in-house authorization and processing of check and gift card transactions.


The Solution

Hy-Vee chose ACI’s enterprise suite of payments software solutions to acquire, authenticate, route, switch and authorize financial transactions across multiple channels. Learn more about our full suite of UP Merchant Payments Solutions.

The Results

According to Mike Skokan, Hy-Vee has realized several benefits since implementing ACI’s Retail Commerce Server solutions. The company is no longer dependent on a single processor and in-house processing with the Retail Commerce Server solutions allows Hy-Vee to be fully in command of its business.

Learn more about: UP Merchant Payments for Grocers and Supermarkets

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"With electronic payment volume rising at double-digit rates every year, flexibility in payment options is critical to our cost-containment strategy."

MICHAEL SKOKAN EXECUTIVE V.P., CFO, TREASURER, HY-VEE



Least-Cost Transaction Routing

According to Skokan, ACI's merchant solution has allowed Hy-Vee to control its own destiny in terms of how and where transactions are processed. Prior to implementing the ACI solution, Hy-Vee was connected to a local switch that handled all processing tasks; each store sent its transactions directly to this third-party processor. By contrast, all transactions now feed into a central location in the ACI solution-based infrastructure. “This approach lets us choose the most cost-effective method for routing each transaction,” Skokan said. “The ability to bring our processing in-house with ACI software for grocery store merchants has helped us significantly reduce our processing costs.”

ACI's customer loyalty software has also allowed Hy-Vee to manage its own gift card program. Previously, the company relied on a third party to host the gift card system. Every time a card was issued, or when a purchase transaction was posted against a card, Hy-Vee had to interface with this external database. “Now, with the gift card system housed within Hy-Vee, we can grow the volume with virtually no incremental cost,” Skokan said. “In fact, the more we leverage our investment, the cheaper it makes each transaction that goes through it. ACI merchant solution software really helps us control and manage our costs.”


Minimizing Fraud

Hy-Vee also uses ACI automated check management software as part of its check authorization and collection system. Every time a customer goes into a Hy-Vee store and writes a check, it is run against the ACI solution-based check database to see if the customer has any bad items on file. This helps the company reduce fraud-related costs.

The “store-and-forward” capability of Hy-Vee’s ACI solution also plays a role in keeping fraud at bay. In the past, any system outage opened the door to fraudulent card use. Because the transaction could not be processed electronically, a clerk had to note credit card information manually, then key it in once the system came back on line. There was always a risk that the transaction might not go through.

With the ability to perform store-and-forward operations, a card can be swiped even if the system is down; the information is retained until the link is re-established. There is still a risk that a card may not be valid, since authorization does not take place in real time, but the customer doesn’t know that the system is down, reducing the likelihood of deliberate fraud.

85% OF CANADIAN POS TRANSACTIONS ARE PROCESSED THROUGH AN ACI PAYMENTS SOLUTION

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Critical Attributes

The ability to customize ACI payments software is critical to Hy-Vee. “Given the decentralized nature of our business, we need the ability to meet the unique needs of each store director,” Skokan said. “The flexibility of the ACI solution, and the ability of ACI to make custom changes for us, are features we absolutely require.”

Hy-Vee values other attributes, as well. “The ACI solution is extremely stable,” Skokan said. “Availability is a missioncritical function for a merchant, especially a food retailer. You’ve got to have your payment system up and running 24 hours a day. And the gift card system is similar — customers rightfully expect to have immediate access to the value stored on these cards, whenever they want to use them. The ACI solution provides this essential reliability.”

ACI measures up well as a strategic partner. “I think ACI is a function of the people who are a part of that business,” Skokan said. “The folks we’ve worked with at ACI have always been straightforward and honest with us — something you look for in any business-critical partnership. We can count on ACI to be there when we need them, and to help us find innovative and effective solutions to our business challenges.”

In summary, Skokan points to the breadth and adaptability of the solution that helps drive Hy-Vee’s success in the marketplace. “If you’re looking for software that can encompass everything from electronic payments and check authorization to gift cards and an e-commerce site, ACI software is an excellent choice,” he said.

“The real benefit of having the ACI solution is that you truly can control your own destiny when it comes to electronic payments. You can expand the solution to take care of business needs that don’t necessarily exist today, but that will come in the future. Hy-Vee operates in a highly competitive industry, and the ACI solution has contributed to our success— and will continue to.”


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