The Value of KNOWING. Why It’s Especially Important to Understand What You Pay to Process Credit & Debit Card Transactions

The say that Knowledge = Power. This is doubly so when dealing with what you pay to process credit & debit card transactions. So, whether you are looking to get a new card machine, do e-commerce or upgrade your EPOS/cash register, here’s what you need to know.

We talk to many business owners every day about what they pay to process credit & debit card transactions. It is very clear that those who don’t employ a dedicated procurement or IT professional do not understand the fee structure of most Card Processing, or “Acquiring” Banks and companies.

I do not propose to explain the structure here, but what I will present is the extent to which it will severely impact your ability to negotiate card processing charges with any supplier if you do not understand them. It may also undermine your ability to get the best solution for your requirement.

If you want to have the matter explained to you, clearly and without jargon, please contact us through the contact form or download our PDF on the subject here.

Bundled Services & “Blended” Rates

Pros – clear, simple, and transparent value-added services that are easy to use for customers and simple for businesses to set-up.

Cons – you pay more than you could or should to process card payments. Significantly more.

Providers of “aggregated” card processing services incorporate other services. For example, the ability to take an online payment or provide Click & Collect/EPOS (cash register) services.

They will probably provide you a single rate to process ALL card transactions. Whether the card used is AMEX, credit/debit etc. They are also likely NOT to charge at all if you do not process any transactions in any given month.

Although this may come over as nice and simple, even attractive if you do a low volume, it is still likely that this “blended” rate is high. Anything over 1.25% for a combined or blended rate will earn a hefty margin for the provider.

Key Learning Point – if you were unaware of Aggregators or Blended Card Processing rates, it would be difficult for you to negotiate the cost of card processing down. Most aggregators WILL negotiate on the cost of card processing, especially if you have sought pricing from other providers. This is because “Acquirers” or “ISO’s” will offer a far superior rate to process debit cards over credit cards, for example.

Acquiring Banks and ISO’s

Pro’s – card processing rates that are way lower than aggregators.

Cons – complicated to integrate better, more innovative ways for your customers to pay by card.

These businesses will offer you very different rates for processing credit cards vs debit cards vs corporate cards. Overall, they will be more competitive than aggregators (see above). But they will vary wildly dependent upon who you talk to and how often you review your rates.

They also tend to provide card processing only, without incorporating other value-added services. Especially face-to-face point of sale services like Pay at Table, EPOS, or cash registers. Many will offer e-Commerce and telephone payments, however.

However, the big difference to aggregators is that it may be complicated to integrate the other services that you really need, to benefit from the more competitive rates that your higher value/volume of transactions warrants. This is because in many cases, to get the right solution for your business, you will need to engage with a separate third party. This can make building the right solution for your business complex.

Again though, it is important for you to understand their charging structure as they may well charge you more on one type of card that you take a lot of, to bolster their overall margin. In order to negotiate properly, you need to understand every element of their charging structure

Key Learning Point – review your charges regularly. Understand that there is margin to be made for Acquirers and ISO’s alike on EVERY element of their charging structure. A little bit of effort on your behalf could save you a lot of money

Understanding Is Only the First Step

Once you understand the charging structure, you are then able to start negotiating. After that, you can research what other services are out there that will integrate with your improved card processing rates.

But BEWARE, your Acquirer may have sold you an out-of-date PDQ machine that cannot run the kind of services that you need to run your business effectively.

Or you may just not have the time to do all of this.

If that is the case, talk to an independent third party, many of whom will be happy to break down your complex charging structure so you can take control, pay less, and get better card processing services for you… AND your customers

Key Learning Point – if you are too busy, ask an independent to review your current billing, explain it in depth and do a comparison with alternative providers. Once that is done…



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