One of the most important aspects of running a profitable business is working effectively with your payment processing provider. Whether you are looking for a new processor or want to improve the existing relationship, strong negotiation skills can help you get the most out of the relationship. As a business owner, it is prudent to take the time to negotiate payment processing fees to save money in the long run and to ensure that your payments are processed smoothly.
This blog post will give you tips on what to look into before negotiating with your payment processing provider.
3 Tips On What to Look Out For When Negotiating With Your Payment Processing Provider
1. Your Business’s Financial Needs
To negotiate better payment processing fees, it is essential to have a solid understanding of your business’s financial needs. This involves factors such as:
- Types of transactions you typically conduct
- Monthly volume of your credit card processing
- Payment methods most commonly used by your customers
The type of business you have also determines the complexity of the pricing quote you will be receiving from your payments’ provider..
For businesses deemed low-risk, this often translates into a more simple, straightforward process, as payment processors see less risk associated with providing their services to these businesses. However, if your business is considered high-risk, you may have to find a more niche, specialized provider to secure reliable payment processing services.
2. The Difference Between Interchange Pricing and Other Less Transparent Pricing
Understanding credit card processing fees can be one of the most time-consuming tasks for business owners looking to evaluate their payment processing. Many payment processors rely on non-transparent payment structures to keep their merchants in the dark when it comes to understanding how credit card processing fees work.
The key to saving money on credit card processing is understanding the interchange fee. The interchange fee is a deduction that the card-issuing bank takes for handling a credit transaction. Depending on what your business is and the card type you are processing, this transaction fee can fluctuate.
In a flat pricing structure, you pay a flat rate on all your transactions, even if the actual interchange rate varies with the different transactions. Depending on your business and the volume you are processing each month, this may mean that your business is paying more than it needs to for payment processing. Flat rate processing is far from transparent and in majority of cases could be costing you more money. In fact, typically, the only way interchange pricing doesn’t cost merchants less than flat rate is if a merchant’s average transaction size is extremely low.
In most cases, interchange pricing is the better option for most businesses as it allows merchants to take advantage of fluctuating interchange rates and keeps the payment processor’s margin transparent and as low as possible. Unless you’re not processing a significant amount of payments monthly, or unless your average transaction size is really small, interchange plus pricing is probably the best bet for your business.
3. Evaluate the Specific Needs of Your Business and the Ability of the Payment Processor to Accommodate
Choosing the right payment processor for your business entails finding one that can cater to your specific needs. Most traditional, high-volume processors do not have the capacity to cater to specific needs/industries and will only provide generalized support.
In many specialized industries (like the cannabis industry), customer issues often need to be addressed by individuals that understand the industry. Having access to knowledgeable and passionate representatives who deeply understand the industry will ensure that your experience with will be smooth and hassle-free.
The goal of negotiation is to come away with a mutually beneficial agreement. Your business is unique, and you should negotiate terms that work for you.
There is no “one size fits all” solution – make sure the agreement reflects your specific needs. Investigating the topics we outlined in this post can help you feel confident negotiating with your payment processor processor, securing the best rates for your business while receiving the necessary support and service.