Why You Should Never Meet With Another Payment Processor

Why You Should Never Meet With Another Payment Processor

Today, I sat with a business owner as we met with a credit card processing company that sold them $600 worth of equipment on a 48-month lease for $400 per month.

The business owner had been having problems with the credit card swipes on their Revel POS system and they took a call from a local company claiming to be the best credit card processor in the world. Unfortunately, when the business owner met with the credit card services agent, the agent made everything sound amazing and got him to sign to get new equipment.

A week later when the equipment arrives, the merchant realizes that the FD-130 credit card terminals don’t integrate with his Revel POS system and that he unknowingly signed a lease for equipment that doesn’t work with his system.

As I sat there across the table from the company that trains agents how to scam merchants, I realized why business owners like you should never meet with another credit card processing company.

IT’S COMPLICATED

The first reason is the industry is far too complex for a business owner to understand how to make a quality decision on which provider is going to be best for their business. This is why merchants switch processors year after year and never quite find what they are looking for. In addition to it being difficult to understand, payment processing agents, even the least educated ones, can be very persuasive and promise significant savings without caring if the merchant sees the results they promised. By the time the merchant gets their merchant statement, they realize the savings never materialized.

You would think that this problem would be solved with POS systems like Revel, Toast, and Clover offering their own payment processing solution, but it hasn’t.

IT’S NOT REGULATED

The second reason you should never meet with another payment processor is because there are no consumer protection laws that protect you from being scammed by a credit card processor. This means if you sign the wrong agreement, the laws in your state, or the Attorney General will likely do nothing about it.

When I worked in the insurance industry, I had to pass a background check that included a financial review and credit report. The merchant services industry is not scrutinized or regulated in the same way which is why there are so many dishonest business practices prevalent in the industry.

IT’S YOUR SUCCESS AT STAKE

With an industry being complex, and unregulated you don’t want to give your most important financial information to the wrong company. This can wreak havoc on your business and can cost you a significant amount of money and frustration. As a small business owner, or business of any size, it’s never in your best interest to lease a $200 credit card terminal for 48 months regardless of how sweet the rates sounds. That’s a routine bait and switch deal that has been going on in the merchant services industry for years. You don’t have time for that!

WHAT TO DO INSTEAD

After meeting with hundreds of merchants and listening to what frustrates them about merchant services, we have created a service that allows them to never meet with another payment processor and it’s called Concierge.

For a monthly fee, we manage and monitor the merchant services for business owners so they don’t have to deal with evaluating bids and reading through their merchant statements every month.

If you’re tired of having to evaluate your payment processing, being in the dark about your rates, or not knowing who to call when you have question, give us a call or start a conversation with us.

The Top 5 Myths Of Merchant Services

The Top 5 Myths Of Merchant Services

As a business owner, dealing with credit card processing can be challenging, especially when you decide to search for a new credit card processor.

When you start your search, you want to understand how the industry works so you don’t choose the wrong provider for the wrong reasons.

Credit card processing agents aren’t all experts, and some will intentionally deceive you to win your business.

Here are 5 of the top myths of merchant services you’ll likely hear from agents in the payments industry:

“We Lower Your Price By Being A Direct Processor”

90% of the fees you pay every month aren’t controlled by the payment processors, they are set by Visa, MasterCard, Discover, and American Express. The only fee your provider has control over is the profit they earn from transaction, percentage, and monthly fees. These fees vary from provider to provider and being a direct processor doesn’t mean less fees are passed to you as a business owner. In fact, many direct processing agents are employees and have less control over the proposals they design for their business customers.

“We Negotiate Better Rates From Visa & MasterCard”

No processor gets special rates or discounts from Visa, MasterCard, Discover, and American Express. The 90% of your bill that is set by Visa, MasterCard, Discover, and American Express doesn’t vary from provider to provider. All payment processors are required to pay the same fees to the banks that issue credit & debit cards. These fees are referred to as Interchange.

“We Have The Best Payment Security”

The strongest security standards are currently referred to as P2PE, a form of encryption that encrypts your transactions when your credit or debit card is swiped, keyed, or dipped. You can determine if your current company provides PCI-Validated solutions on the PCI Security Standard Council’s website.

“We Do Your PCI Compliance For You”

PCI Compliance consists of 12 requirements that include your annual questionnaire, network testing, and a security awareness program to name a few. Unless the processor has taken on the responsibility of educating your entire staff on payment security guidelines, configuring your network, scanning the network, updating all the passwords for your office technology, and keeping an updated diagram of your network, they aren’t doing your PCI for you. The best way to reduce these PCI burdens is to use a PCI-Validated P2PE solution as previously mentioned.

“We Will Let You Process Payments For 0%”

Due to a legislation passed in 2013, you now have the right, in most states, to add a fee to credit card transactions. If you are an education or government institution, you can add a fee to a debit or a credit card. While this can get you 0% if you’re an education or government agency, it’s technically illegal for a business in any other category. It also doesn’t address the potential loss of business or negative sentiment you may experience when to add a 4% fee to your customers’ purchase.

How We Help

Northwest Advisory Group is a merchant service provider that helps businesses eliminate the stress related to managing payment processing. We accomplish that by understanding the needs of our clients and recommending payment solutions that help them reduce costs, save time, and increase revenue.

If you’re interested in learning more about the myths of merchant services, let’s start a conversation.

Bank Merchant Services: Is It Right For Your Business?

Bank Merchant Services: Is It Right For Your Business?

When most business owners start their business, one of the first things they do after getting their business license is open a bank account for their business.

It’s an exciting time!

This is also a time when business owners are evaluating the financial products they may need as they grow their business.

Business owners along their journey in entrepreneurship may need an SBA Loan, Line of Credit, and most likely, merchant services so they can accept payment from their customers.

Since most banks have a good size network of business owners in their local community, it is important for them to offer critical financial products that a business may need to assist in attracting new business clients, while also adding an additional profit center for their institution.

This is where bank merchant services fit into their portfolio of products.

Only a couple banks actually own a payment processing platform, so what they do is act as a referral partner for an actual credit card processor.

Through this partnership with one of the dozen North American payment processors, they get paid a recurring referral fee to refer their business clients to the payment processor.

Are Bank Merchant Services Better For Your Business?

It really depends, most merchants we’ve transitioned away from the bank merchant services have been surprised at how expensive their bank relationship was in comparison to the bank independent offers we were able to secure for them.

This is usually because banks often mislead merchants by presenting their services in bundles or requiring businesses to use their merchant services in order to get loans, when in fact, the bank merchant services really have no impact on the actual economics of the loans being offered.

This isn’t all banks, there are many very honest and ethical banks that help their business owner clients secure competitive pricing on all of the financial products they offer.

Why Your Best Deal May Not Be At The Bank

Credit card processors approach banks an offer them better compensation, better products, and better service than their current processing partner. This causes banks to switch in search of greener pastures; much like us business owners do when evaluating our payment processing situation.

Here are 4 reasons why your best deal may not be with the bank merchant services:

  • Single Provider: When the bank signs the partnership agreement with a credit card processor, it is usually an exclusive agreement that requires them to refer business to that credit card processor. How competitive will a credit card processor be if they know there is no competition? Because of the nature of the business relationship, the processor generally charges a little more to make up for the referral fees paid to the bank.
  • Wrong Provider: All payment processors aren’t a great fit for all industries. If your bank is tied to Processor A, but Processor B specializes in working with businesses in your industry, then you are at a disadvantage by working with your banks’ chosen credit card processor. Having the right processor for your industry not only will help you secure the most efficient credit card processing rates, but will also help you find the most effective business tools for processing payments for your clients.
  • Dishonest Provider: All payment processors aren’t necessarily ethical. We often hear banks complain about their payment processing relationship because of how the processor hikes the credit card processing rates on their business clients, making it difficult for the bank to retain clients. If your banks’ payment processor isn’t being honest with them, they may not be honest with you either.
  • No Advocate: When you sign up with the bank merchant services, you rarely have an account manager that is responsible for managing your bank merchant services account. This makes it difficult for you to resolve challenges with your account, and also allows the bank payment processing partner to increase your fees without notifying your bank.

Securing the best merchant account for your business requires having access to all the payment platforms available to you.  At the Northwest Advisory Group, we give you access to the platforms and tools you need to be efficient and effective with handling payments in your business while also helping you manage your payment processing relationship.

If you’re using the bank merchant services and you’re wondering if it is right for your business, we’d love to have a conversation with you.

Let’s talk!

You Don’t Need Another Payment Processor

You Don’t Need Another Payment Processor

I know it sounds odd that I would say that, but it’s the truth.

There are 10-15 payment processing platforms in the United States that deposit money.

The most commonly used platforms are Elavon, First Data, WorldPay, Vantiv, Chase Paymentech, Global Payments, Heartland, TSYS, EVO, and Clearent. Over 90% of all payments processed in North America are processed on these platforms, which means, there’s a 90% chance you’re using one of these providers currently.

There’s also a 90% chance you will be solicited for credit card processing in the next 7 days by a provider.

How do I know that?

Because there are thousands of resellers selling credit card processing for these platforms and their reselling partners.

These companies hire hundreds of credit card processing agents every year and retain about 10% of their team annually, which is why the customer service always falls apart.

Why It Always Falls Apart

The reason it always falls apart with your merchant account is this:

  • You Don’t Have An Interview Process:

Would you hire an employee without first having a job description and a formal interview with a list of questions? Likely not! Why do we only ask a couple questions when it comes to selecting a merchant account provider then? Having an interview process will help you weed out agents that wouldn’t be a good fit for your business. It will also help you secure a provider based on what is critical for your business as it relates to price, technology, and customer service.

  • Savings Is Your Only Goal:

Payment processors have intentionally deployed deceptive billing practices so they can overcharge merchants after promising them significant savings in their proposals. Choosing a provider based solely on how much money they claim they can save you is deadly and causes merchants to waste a significant amount of money on credit card processing. We recently helped a merchant that had wasted over $60,000 by working with a processor that promised low rates but buried fees in their statements.

We find that the merchants that sign with the company promising the lowest rates often get taken advantage of with equipment leases, high termination fees, and poor customer service.

  • You Have A Credit Card Rep Instead Of An Advisor:

A credit card representative that works for a payment processor has a job to do, and that is to get you to sign a contract with their company. When you sign a contract with a credit card processor, what’s their penalty when they underperform? They don’t have a penalty which is why we don’t recommend you sign one.

A contract signed in their favor is what allows payment processors to treat you so poorly while they make money on your account.

These processors are also great at teaching their representatives how to sell the services, but not how the industry works, which costs you more money as a business owner.

Most of my coworkers and managers at the processor I worked at didn’t know how to read a credit card processing statement. Can you imagine that? Yet they will walk into your business and promise you savings!

You Need A Relationship.

You need a relationship that is positioned to do what is right for your business. One that understands the industry, the technology, the various payment platforms, and how to manage your payment processing expenses.

If the relationship is right, the processing rates and technology will be right.

The right relationship will empower you to focus on running your business instead of trying to sort through all the capabilities of the various credit card processing platforms.

The right relationship will position your company to receive the most favorable payment processing terms and technology while removing the failure points in customer service.

That is what the Northwest Advisory Group was established to do.

We have partnerships with most of the payment processing platforms available in North America and leverage our experience and relationships to extend the best solutions to our clients.

If you’re looking for the right relationship, let’s talk!

Stripe, Square, and PayPal Users Are Doing This To Save Serious Money

Stripe, Square, and PayPal Users Are Doing This To Save Serious Money

If you’re like most business owners using Square, PayPal, or Stripe to accept credit cards, you are likely looking for ways to grow your business while also controlling your expenses. Accepting credit cards is one of the top 5 expenses a business has regardless of the credit card processor they choose.

Overspending on credit card processing can prevent you from being able to properly invest in technology and marketing solutions that will help you grow your business.

The Advantages & Disadvantages of Stripe, Square, and PayPal

Square, Stripe, and PayPal are great credit card processing solutions. The advantage of using one of these systems is very straightforward. Their modern sleek interfaces make them easy to use, their streamlined underwriting allows you to launch within minutes, and a flat 2.9% +.30 per transaction make them easier to understand. This can be great for a new business owner that doesn’t to take a chance on working with the wrong credit card processor or if they don’t plan on sales exceeding $5,000 per month.

The downsides of working with one of these platforms are glaring for businesses exceeding $5,000 per month in sales. For businesses exceeding $5,000 in sales monthly, they will likely overspend to the tune of hundreds, if not thousands, of dollars per month depending on their size. They will pay a premium to accept credit & debit cards while still not maintaining control of their customer data or have live customer support.

A Real Example: eCommerce Merchant Using Traditional Processor w/Authorize.net

We recently set up an eCommerce merchant account for a local retailer using Shopify and wanted to share the results we are helping them get when it comes to controlling their payment processing expenses. As you can see below, this merchant had sales of $35,936.99 with total fees of $865.57. They also paid $41.56 for Authorize.net, so their true total cost of acceptance for the month was $907.13, bringing their effective rate to 2.52%.

Had this merchant been using Stripe, Square, or PayPal for their online payment processing, they would’ve paid 2.9% +.30 cents per transaction. Let’s dive deeper to see what the outcome would have been. Below you will see the true breakdown of how many transactions they processed for each card type (Visa, MasterCard, American Express, Discover, etc.).

When we compare this merchant to Stripe, Square, and PayPal pricing we see that they would’ve paid 2.9% on net sales of $35,936.99, which would have cost them $1,042.17. There would have also been a $.30 charge per transaction which would have cost them an additional $99.60, bringing their total cost to $1,141.77, an effective rate of 3.18%!

Using Square, PayPal, or Stripe would’ve cost this merchant an additional .66% or an additional $237.18 per month. The reason these platforms are more expensive for e-commerce merchants is that debit cards often cost the business less than 1%. Per the image above, this merchant accepts more debit cards than American Express credit cards and almost as much as MasterCard credit cards.

Why Debit Cards Are So Much Less Expensive

In this article, I talk about the impact of the Durbin Legislation on the cost of accepting debit cards and why businesses haven’t been able to capitalize on this major advantage. In the image below you can see the true cost of accepting debit cards and where Square, PayPal, and Stripe profit most on most of their merchants. With most debit cards having a true cost of .0005% and .22 cents per swipe, these providers earn a mark-up of 2.65% + .08 cents when you factor in other costs that must be paid to debit card issuers like Wells Fargo, US Bank, Chase, and other banks and card brands. The total interchange (fees paid to the debit card issuer) for $4,695.49 was only $17.73 or .38%. Even when the fees paid to Visa and the payment processor are factored in, their total costs for accepting Visa debit cards total $26.97 or .0057%. This is where the majority of Square, PayPal, and Stripe users can save a considerable amount of money. Being able to accept debit cards in your business for almost a half of one percent and being able to recapture one-half percent of your sales annually can help you redirect that additional capital to important areas in your business needed to grow.

Debit cards are inexpensive to process for two main reasons, the first reason is there is no risk in accepting debit cards. If the money is available, the transaction is approved. The other reason is there are no rewards attached to a debit card to incentive consumer use. Because there are no rewards attached, the interchange fees are very low. It is only expensive in an environment where your average sale is less than $15. This is where Square has traditionally lost money on its users which has caused them to add a transaction fee to their new POS solutions.

What You Can Do

Securing the right type of merchant account will allow you to streamline your credit card processing costs and will allow you to leverage your profitability to dominate other merchants that are using these payment providers.

The Square, Stripe, and PayPal merchants that are saving serious money on their credit card processing are switching to payment providers that pass through the true lower cost of accepting debit cards to them so they can run a more efficient business.

If you’d like to evaluate whether you’re using the right solution for your business, don’t hesitate to contact us on our website or request a custom quote. We may be able to save you some SERIOUS money!

Good To Great: Switching Your Payment Processing Game Up

Good To Great: Switching Your Payment Processing Game Up

If you’re like most business owners, switching payment processing is a headache for you. In fact, you probably have told people, “I’m only switching if you can save me a bunch of money!”. While saving money is important, there are a few reasons I’ve seen business owners switch, even when there wasn’t much money left to save.

Relationship

This is one of the most common reasons I see businesses switching payment processing providers. Having a positive relationship with the account manager is critical when trying to get things done and can save you a great deal of time. It’s also critical when it comes to making sure your rates remain competitive. If you don’t have a quality relationship, there’s no one there to update your pricing as your business grows. There’s also no one there to helping you implement new systems as your needs change.

Technology

The second reason we see business owners switching payment processing providers is to update the technology they are using in their business. This might be adding new ways for customers to pay, whether that be online, gift cards, or even via ACH. We are also seeing businesses switch to speed up their deposits, enabling them to shorten the time it takes to fund their payroll account.

Security

One of the final reasons we see business owners switching payment processing providers is to make sure they have the best security to prevent a data breach in their business. This involves making sure their PCI Compliance requirements remain current, while also implementing EMV chip technology and PCI Validated data encryption on their transactions. Having a strong data security plan in place is critical for businesses wanting to steer clear of the high costs associated with enduring a credit card data breach.

If you’re considering the idea of switching payment processing providers, but you’re not sure where to start; start with downloading our free mini-book on the credit card processing industry or request a quote from us on our website.

We are here to help!