WHERE’S MY
MONEY!
HOW BIG BANKS, CARD BRANDS, AND PAYMENT PROCESSORS COLLECT FEES.
Inform yourself on the cost and fees that come from banks,
card brands, and payment processors. With the next steps to
avoide and counter them.
INTRODUCTION
As an owner, operator, or executive of a business, there
are a number of costs that grab your attention, such as:
Payroll - COGS - Inventory - Building Lease
These categories should attract your focus. Not only do
they impact the bottom line, but you have control over
them and the ability to make decisions that will
impact them.
The cost of payment acceptance has been growing
steadily for the last ten years; however, very little
attention is paid to this line item on the P&L. Anyone
who reads the financial statements will realize that this
cost is very significant, usually at or above the cost of
property leases and other fixed costs.
So, why does this particular cost receive
minimal attention from both the owners
and financial experts?
There is a misconception that
these costs cannot be significantly
reduced. After the process of • SO COMPLEX, that
negotiation with a payment many payment
processor and acceptance of processors
terms, this expense category is
forgotten until the next round depend on this
of negotiations. If the payment complexity to hide
processor has their way, you never rate increases.
think about it again and allow the
agreement to auto-renew.
• SO COMPLEX, that
Payment processing costs can many businesses
be controlled, manipulated, and do not understand
reduced in real time as a result
of monitoring and operational
how to optimize
decisions. This can be done costs through
without changing payment operations.
processors or renegotiating the
agreement. Payment acceptance
is a complex topic.
In this short eBook, let’s dive into
the 3-STEP PROCESS necessary
to review and impact your cost of
payment acceptance.
Step #1:
Divide and
Conquer
Before progress can be made, you must change your view
of credit card processing as a single line item to
three line items:
Interchange or Bank Fees
-
Card Brand Fees (Visa, MasterCard, etc.)
-
Processor Fees or “Mark Up”
Each of these three categories is unique and should be
approached in a different way. Let’s quickly review these
three terms at a high level.
Interchange or Bank Fees
When you accept a card transaction, the bank that issued that
card collects “Interchange Fees”. This is, by far, the highest cost of
payment acceptance. The U.S. average cost of interchange is just
under 2% of the transaction, but this number varies widely by
business type. The interchange rates are actually set by Visa and
MasterCard, but the bank that issued the card collects them.
Card Brand Fees
This is the category with the least possibility for cost reduction.
The average cost is around 0.2% of each transaction. This money
is kept by the card brands in exchange for accessing their
network. Although there are certainly variables that impact this
cost (especially if you run international transactions), as a general
rule, there is rarely a realistic operational change which will
significantly reduce this cost.
Payment Processor Fees
or “Mark Up”
While you may believe these fees cannot be altered outside
contract negotiations, there are two important facts of which
you may not be aware.
“ Even if you
Most payment processors implement
are on flat rate
price increases during the term of processing, you
the agreement. These increases can need to fully
be significant and hidden in various understand
tables on the statement. Only a
complete, line-by-line analysis of your
the estimated
statement will show these increases interchange and
and separate the payment processing card brand fees
fees from the true cost. for your business
type in order to
evaluate your
current pricing
and the mark up
you are paying
over true cost. ”
Step #2 : Analyze and
Understand
For years, this step has seemed complex and time consuming
at best, and insurmountable at worst. Businesses receive a
payment processing statement each month with pages of
transaction data in a format that resembles a foreign language.
Worse, just about the time you think you understand, the
processor changes the language on the statement or hides a
new cost somewhere you did not expect it.
As AI has taken off and become practical,
companies like ours are using AI and human
experts to analyze these payment processing
statements and keep up to date with the changes
implemented by payment processors. The
technology underlying this process has been
trained with over 50,000 payment processing
statements. This technology can easily divide
the types of costs mentioned above, check for
accuracy, and identify mark-up. This information
is then lined up to industry standard rates, to show
a side-by-side comparison. This document will
show exactly what you are paying relative to the
rates to which you agreed.
Next, our team looks at both the card brand fees and
interchange fees to identify any mark-up that may
exist there. Payment processors commonly hide fees
in these tables where they are unexpected. Because
interchange and card brand fees are so complex, a
human would never recognize a small increase on
each of these items. A computer, however, is able to
compare each line item with its true cost.
Finally, our system recommends
optimization to the interchange
cost. We find items that
are not optimized and then
recommend specific operational
changes that may reduce your
interchange cost by 0.10% to
0.30%, depending on your client
mix. These changes usually
involve tweaks to technology
settings, and they often involve
working with your payment
processor to process the
transactions with the correct
data passing through to the
banks and card brands.
Step #3:
Evaluate
and Explore
Once you have all the data in black and white, it is time
to evaluate your options. Unfortunately, renegotiating
rates with a processor who has already proven they will
increase those rates without notice, can be
a losing battle.
If you find that you have been
subjected to arbitrary increases
or hidden costs, it may be time to
explore other options. Fortunately, the
payments industry is changing and
evolving with technology integration
at the core.
There has never been a better time to reconsider your
customer journey and create a seamless checkout
experience through technology solutions that are
tightly integrated together with payment processing.
“ Our company is here to help!
Our team of experts provides
each potential client with a
detailed analysis of their current
costs and provides various
options for you to explore
as you assess your current
rates and the opportunities to
streamline your business and
reduce your costs. “
Conclusion
Hopefully this short eBook Has informed you on the cost
and fees that come along your way. Now is the time
to talk to experts about your specific situation to
explore what is available!
