Every day, there’s a merchant out there in the world doing their best to negotiate for a new payment processing system, and it’s not their fault. Being a business owner is flat out hard, and dealing with all the vendors, employees, and customers while trying to turn a profit is no small feat. Then tack on the task of trying to understand what they are paying for credit card processing and many just want to throw in the towel.
When it comes to credit card processing, business owners typically print out their merchant statements and hand them over to a few credit card processing agents, who likely don’t know how to read them either, to see how much they can save them. This is the process they use every time they start looking for a new payment processing system and they typically end up with the same results time after time.
This process is broken, and here’s why.
- Most payment processing agents don’t understand their own proposals.
When I worked for the 5th largest payment processor in the country, I didn’t attend my first training on how fees are calculated from Visa and MasterCard until I was 6 months into the job. I had co-workers who had gotten hired months before I and it was also their first training. Meeting with any credit card processing rep off the street doesn’t work. A rep that doesn’t understand interchange fees, the different pricing models, the difference between point-to-point encryption and end-to-end encryption, can’t provide you with the guarantees that you want to hear before switching to a new processor. They also can’t guarantee that you’re going to save the money you were hoping to save.
- It’s difficult to negotiate with limited information.
I always cringe when a business owner tells me they recently renegotiated their rates for their payment processing system. I say that because it’s impossible for a business to negotiate their rates. Visa and MasterCard have been taken to court on several occasions because of this challenge. In current news, Kroger has disabled Visa in a wasted effort to influence Visa to lower their credit card fees.
It’s also challenging because you can only negotiate the fees you know about.
The only portion of your bill that is negotiable is the profit your payment processor earns to provide the service and there can be as many as 40 different fees they add to your statement to ensure they get paid. The reality is, unless you have the time to monitor these different fees, you will likely see your rates go back up a few months after you switch payment processors.
- Deceptive billing practices and arbitrary rate increases.
The final reason negotiating your merchant services doesn’t work is, payment processors will just change the deal on you. This includes the point of sale companies that require you to use their merchant services. These financial institutions know you don’t have time to read your merchant statements and know you need to hear positive commitments before you sign your banking information over to them. They know that once you sign the agreement, especially if it’s tied to a point of sale system, you’re locked in and it’s harder to leave and start over with another payment processing system.
That’s why within their agreements are clauses that enable them to add fees to your merchant processing statement without requiring you to sign a new agreement. They just add it to your merchant statement communications and enroll you in the new fees regardless of the impact on your business.
I recently met with a company that is paying $125 per month for PCI compliance and they didn’t even know they’d been paying for it for several months. The sad part about it is, the fee is completely bogus. The merchant, if we hadn’t brought it to their attention was going to waste $1500 per year on a fee that doesn’t exist and wasn’t on the agreement they “negotiated” for.
Payment processors, when no one is watching, will do what is best for them and their shareholders. That is why you keep having to switch your payment processing system to get a better deal. Merchants that continue to jump from processor to processor chasing the golden rate are doing it wrong. It’s also counterintuitive to them getting what they really want, a payment system that is streamlined and efficient. It’s one of the reasons we have streamlined our partnerships and migrated closer to the platforms that are innovating new technologies for the future. Saving money is great, saving time is even better.
What Merchants Should Do
The only way for merchants to protect their business from the deceptive billing practices of point of sale and payment processing companies is to outsource the management of their payment processing system. This enables merchants to eliminate the challenge of shopping for a new provider, a new point of sale, or new payment technologies on their own with their own limited industry experience on limited time.
Outsourcing to a company like the Northwest Advisory Group provides business owners with an insider that can help them source the right technology while also protecting their margins from arbitrary rate increases and deceptive business practices many continue to experience when dealing with their payment processing system.
If you’re tired of trying to stay on top of your payment processing system all on your own, we’d love to start the conversation with you.
You can also learn more about our concierge service to see how we are helping businesses solve this problem.