With the global rise in ecommerce, business owners have more choices than ever on who they want to work with for their credit card processing needs. With solutions like Stripe, PayPal, First Data and Square dominating the landscape, most merchants don’t realize there are actually other options with better pricing and support out there at their fingertips.
Did you know that over 80% of businesses today could reduce the credit card processing rates they’re currently paying with just a single phone call? Question is, who to call. Most people when setting up their credit card processing went with whatever was easiest at the time. If they were setting up a Shopify store they likely went with Shopify Pay. If they were setting up a corner store they likely went with the bank giving them the loan. If they were lucky enough to know a quality player in the space, they could have gone with a company like DCMT who would have searched all the available options for them to connect them with the lowest possible processing rates right out of the gate.
The trick with merchant processing in general is that the banks like any business want to charge you as much as possible. For this reason the initial pricing they offer to new merchants and even long time customers is definitely not the best pricing they’ll give. It’s only when you bring in another bank competing for the same business that you really see them sharpen their pencils. What’s more, if you actually have someone on your side that knows the game, they can play multiple banks against each other that specifically board your type of business and ultimately get you a lower rate than any of them would have given you to begin with.
The percentage fee component of processing rates that banks charge are only one small piece of the overall fee packages. There are transaction fees, refund fees, chargeback fees, gateway fees etc… On top of that you have to look at the contract term, early cancelation fees and much more. Having a team who understands the space help you through this process can be hugely beneficial.
Another major component to look at when choosing a processing partner is the products you sell now and the ones you plan on adding in the future. Many sellers are not aware that certain banks and processing solutions have outright bans on certain verticals. DCMT recently picked up a client who had been selling products through Shopify and using Shopify payments. The client started off in the makeup business and then decided their target audience would also be interested in supplements as an upsell to their existing line.
Unbeknownst to them, they didn’t realize that Shopify Payments was actually just a white-labelled version of Stripe and that Stripe has an outright ban on all supplements. Even though their products were Health Canada registered and FDA approved, they received a notice saying their processing was being shut down and had just 2 weeks to find an alternate processor and get a new account up and live. DCMT having experience working with advertiser in the supplement space were able to quickly match them to an alternate bank that was not only fine with the product line they were selling but actually reduced their rates at the same time.
This brings up an important point; it’s often a good idea to have a backup processing solution just in case anything goes wrong with your primary solution. In addition, what many merchants do not know is that acquiring banks don’t always have the same approval rates. Issuing banks are the banks that give the customer a credit card and acquiring banks are the banks that ultimately process the transaction for the merchant. The issuing bank receives the request for the transaction from the acquiring bank, which is passed to them electronically through the gateway being used. The issuing bank then decides to approve the transaction based on a number of criteria. Did the customer have enough room left on their credit card to pay for it? Is the category the merchant is classified under one the bank accepts (some banks won’t accept gambling transactions for example)? Does the BIN the transaction is being processed on have a good reputation?
This is an overly simplistic explanation but these are just some of the pieces that go into your overall approval rating. It literally makes the difference in determining what percent of your overall transactions are approved or declined and ultimately how much money is in your pocket at the end of the day.
Some merchants also believe that since they were initially locked into a contract it means they can’t switch. It’s better to think of it more like a cell phone contract, while there are penalties for cancelling it, if you get a much better deal on the other side it’s worth it. Some banks will even buy out your contract for you just to get your business.
In summary, whether you’re a new merchant looking for processing to get started or a merchant that has been running for years. It’s worth shopping around to get the best rates possible. While there are lots of brokers out there, we recommend working with a company like DCMT due to their knowledge and personal experience processing transactions. Having a background in large scale ecommerce operations has given them an in depth understanding of all the major things to look for when choosing a processing partner.
Comments
Log in or sign up to join the conversation.