3 Ways to save money on payment processing
Jan 16, 2020
In today’s world, it is critical that merchants can accept card payments. Merchants are often misled by confusing pricing structures, but there are ways to protect your business from surprising and unexpected costs.
New businesses are often shocked to learn how much they lose on each transaction, and small businesses are usually hit the hardest. No business needs to accept unreasonable fees from intimidating processors, so here are some tips to make sure you’re getting the best deal for your payment processing.
1: Understanding Pricing Structures
Due to deceptive marketing practices and the complicated nature of the Credit Card ecosystem, most merchants don’t realize the cost of payment processing.. For starters, many merchants think they must use their bank for payment processing services when in fact an ISO (independent sales organization) is often a better option.
Types of Fees:
It helps to think of the costs in two categories, “MSP (merchant service provider) fees” and “interchange fees”.
The MSP fee can be a percentage of each transaction and/or a cost per transaction that the ISO (or merchant bank) charges for providing the processing services.
The interchange fees can also be a percentage of each transaction and a cost per transaction, but this rate is set by the card brands and the issuing banks. This cannot be lowered by service providers and is totally unavoidable.
What to Watch Out For
Service providers usually present the two fee categories as a bundle called a “discount rate” and merchants don’t explicitly see the margin that their processor is adding. This pricing structure is essentially a ‘teaser’ rate model, whereby most of the cards that they accept are hit with what is known as a “non-qualified discount rate” that drives their all-in cost much higher than what was advertised. This is definitely a pricing model that you should be cautious about working with.
Sales reps can use a merchant’s confusion to their advantage by charging high fees to their unknowledgeable clients. This can easily happen, especially since the merchant statements are usually convoluted and difficult to read. Keep an eye out for marked-up fees disguised as “non-qualified rates”, “assessment fees”, “interchange differential fees”, or “compliance fees”.
The other thing to look out for is a change in your pricing, especially when you are working with the big banks. You likely will have a rep change and may not notice small price adjustments over time.
A Better Option for You
Another pricing model, “interchange plus”, is a more clear and straightforward method. This model separates the types of costs so the merchant can see exactly what their service provider is charging them. This transparency also usually results in lower rates for the merchant and a more trusting relationship between them and their service provider.
It is important to thoroughly understand what a payment processor is charging before entering into an agreement. Never be afraid to ask questions, a reliable sales rep should openly explain all charges.
2: Fraud Prevention
An important security standard, PCI DSS (Payment Card Industry Data Security Standard), sets out requirements for businesses to protect themselves and their customers from fraud. There are twelve PCI requirements to follow, most of which are simple to do and good for your business. Examples include, protecting saved cardholder data and regularly testing security systems.
Benefits of PCI
In the event of a data breach, PCI compliance will entitle you to protect up to $100,000. This is a huge benefit because on top of the breach, fines, and litigation can amount to detrimental costs that could put you out of business.
Customers trust businesses to handle their information, and breaking this trust can ruin a brand’s reputation. There is an unspoken agreement that sellers will not exploit consumers’ data, but PCI compliance solidifies this agreement, thus building trust.
Without PCI compliance, businesses are not only more susceptible to fraud, but also may be subjected to non-compliance fees from processors.
3: Work with the Experts
At Payment Experts, we will break down your current fees to help you spot unnecessarily high charges. Our reps know how to recognize where fees have been hidden or inflated on your merchant statement. By identifying these fees, we can find ways to save you money!
Steering Clear of Fraud
The first step in fraud prevention is choosing a reliable and trustworthy processor. Make sure to find out what products and services they offer to combat fraud. At Payment Experts, we will take you through the PCI compliance process and work with you to implement preventative fraud measures.
Time is Money
At Payment Experts, our reps are available 24/7 to assist you with any processing problems you encounter. We will take care of long technical support calls for you, making sure you don’t waste any important business hours. At Payment Experts, we are ready to build a long-lasting relationship with our clients and provide service and expertise you just won’t find anywhere else.