Even financially savvy businesspeople may have trouble navigating the complexities of merchant processing. Between the varying fees, equipment costs and the time it takes to acquire funds, every merchant processor is different.
Though it can be confusing, this is actually good for your business if you play your cards right. All of these factors can be negotiated, so if you don’t have the time or inclination to negotiate with banks and processors, you’re in luck. There are firms that can negotiate on your behalf. When it comes to credit card processing, the rule of thumb is to think small. A small consulting firm can save you money and provide better service than larger, big-business providers.
Here’s how:
1. Knowledge & Access — Consulting firms know the market and can navigate it on your behalf. Look for a firm that has access to multiple processors, as opposed to being affiliated with one processor or bank. Consultants with access to a variety of processors will work to negotiate fees based on factors such as volume processed, whether the business is new or established, credit history, industry and transaction method (online, in person, by phone/mobile, etc.). With access to multiple processors, these consultants can compare their varying services and force them to compete for your business.
2. Eliminating Expenses — Consultants can keep you out of contracts and help you eliminate unnecessary expenses. Processors know they can turn a larger profit on small merchants by requiring contracts and attaching setup fees, annual fees and equipment leases to their services. These terms are also negotiable. A consultant’s industry knowledge and bargaining power will help you avoid these additional costs. You benefit by saving money, and larger processors like to work with smaller consultants who will take great care of your business.
3. Monitoring Rates — A consultant can monitor industry fluctuations in fees and rates to ensure yours stay competitive. And if the size or scope of your business changes, consultants can help you renegotiate your agreement terms or find another processor that better suits your needs.
4. Low-Margin Cost of Service — The margins that consultants earn typically are very small — no different than what their competitors who represent banks or big-name credit card processors will earn. Unless your business processes millions of dollars per month or has more than 100 locations, you will save by using a small consultant that is more concerned with winning and keeping your business rather than gouging you on pricing because of a big name and the challenges involved in understanding the industry. Some larger processors will use these factors to lock you into a long-term agreement, making it unlikely that you can terminate their services if or when you realized you’re being overcharged.
5. Personalized Customer Service — Consultants supplement the customer service that processors and banks offer. Because merchant processing involves such a large volume of transactions, bigger banks and processors are unable to provide personalized service. In most cases, they rely on independent sales offices (ISO) and member service providers (MSP) to handle their accounts. The problem with these organizations is a high turnover rate; the number of representatives and depth of their industry knowledge is inconsistent. The result is longer hold times and more call transfers for merchant customers. Though consultants do not replace the ISOs and MSPs, they can circumnavigate roadblocks by connecting their customers with the right people.
If you own a small business — like a decorated apparel shop — think twice before using a big bank for your credit card processing needs. By leveraging the knowledge and bargaining power of a small consultant, you’ll gain access to better service and savings that can make a big difference for your profit margin. And remember, when you support small consultancies, you also are supporting small businesses like your own.
Darrah Brustein is co-founder of Equitable Payments, an Atlanta- and Austin, Texas-based merchant services brokerage and is a networking and business development expert. She worked in the wholesale apparel business before transitioning into credit card processing. For more information or to comment on this article, email Darrah at darrah@equitablepayments.com.
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