The Three Most Important Things To Consider When Choosing A Credit Card Processor
During his lifetime, Isaac Newton developed the theory of gravity and the laws of physics, discovered calculus and created the reflecting telescope. It’s safe to say he was one of the most brilliant minds to ever live. That said, if he were alive today, would he have been able to successfully navigate the world of credit card processing?
If your business has gone through the process of evaluating payments providers in the past, perhaps you found that amusing. Jokes aside, finding the right company to allow your business to securely accept payments from customers in the most effective and cost-efficient manner is incredibly complicated. The industry changes constantly and requires a great deal of expertise from the credit card processing company to optimize your merchant account properly, and its providers don’t make it easy on you.
In the late 1990s and early 2000s when credit card processing companies began allowing independent sales organizations (ISOs) to market and sell their services, it was a race for ISOs to bring their product to market. When the market got crowded with competition, payments companies set themselves apart with free credit card machines, often claiming they had some sort of “direct” relationship that cuts out the middle man (spoiler alert: they didn’t) and advertising teaser rates that would increase shortly thereafter. All too often, businesses were signing agreements that ended up locking them in for an extended period of time with high termination fees. Not to mention, the support staff on the other end of the 800-number was often understaffed, so getting to the bottom of an issue proved challenging.
Sound familiar? It may even hit close to home, as unfortunately many payments companies still operate in the stone ages, selling old technology and using outdated sales tactics to attain clients.
Some of my company’s clients report having as much as 90% of their sales coming from credit cards. This is a big change from when I started in the payments industry 16 years ago. Back then, I was still convincing many businesses on why they should start accepting credit cards. My intuition tells me that the percentage of credit cards used will only continue to climb. If such a high percentage of your business’s income is managed by one vendor, shouldn’t you use a company that is easy to reach and supports you with valuable services that help you grow? With that in mind, there are really only three things that you should be analyzing when choosing a processor:
1. Technology that makes your business work more and allows you to work less.
Your payment system should work with your business, not against it. It should connect the moving parts of your business, integrating key pieces like payroll, accounting and real-time online reporting. Technology has allowed payments companies to create tailor-made options for businesses. Some processing software can even tell you key details about where your customers live and how your business ranks against its closest competitors.
2. Services and support that make you thrive.
Every business should become payment card industry (PCI) compliant. Your processor should assist you with the intricacies of this annual certification for your particular business setup as opposed to waiting around until you are penalized with non-compliance fees. If you get a chargeback or disputed transaction, they should be available to coach you through best practices to positively affect the outcome. If you order a new point-of-sale system, they should send a qualified technician to securely set up the system and ensure transactions are lightning fast. And finally, you should have a direct line to the top, a cellphone number of someone who has a vested interest in your relationship and can help where others may not be able. Your business’s livelihood deserves to be taken seriously.
3. The total costs in comparison to the value provided.
Every credit card processor works off the same cost. It’s called interchange, and it’s set by the card associations (Visa, MasterCard, American Express, Discover, etc.) who pass the fees to payment processors. (Full disclosure: My company is a registered ISO/MSP, which allows it to represent the card associations and provide their services to U.S.-based businesses.) In addition, no business, regardless of size, receives a discount on interchange fees. For example, the credit card processor for Starbucks pays the same fees on a debit card transaction that a small cafe would down the street. Notice I said the Starbucks processor pays the fees? That’s because your business’s credit card processor pays all of your costs before billing you for them, which allows them to determine the markup that is passed along to you. There are many ways this can be done, but I suggest businesses choose a simple, straightforward price structure with limited variables. This way, you’ll know exactly what you are paying per transaction and can easily track pricing adjustments on your merchant statement.
Isaac Newton was once quoted as saying, “Truth is ever to be found in simplicity, and not in the multiplicity and confusion of things.” Don’t let these things confuse you. Simplify the process of finding the right payments partner by focusing only on what truly matters.