By Jeff Fortney
Parts 1 and 2 of this series on do's and don'ts for your bottom line were published in The Green Sheet on March 8 and April 12, respectively. This article concludes the series.
Assess fees for actions taken beyond normal processing steps.
What are the normal processing steps? Insert the card and run a transaction. You may consider batching a normal processing step, too. AVS, a step that gives merchants a lower interchange rate and some risk protection, is not. There is no reason not to charge for AVS.
Online reporting isn't a normal processing step either. It's helpful if a merchant uses online reporting, but most rarely look at it and (even worse) look for their answers there. Charge for it.
Many ISOs have told me that to get an account they included something for free, yet a review of their pricing showed they didn't offset the lost revenue. In effect, they were paying the merchant to process with them. Do not give anything for free unless it's offset with higher rates elsewhere.
Never assume the market won't bear a fee. Wait for the merchant to push back before waiving a fee.
"Assume" means to suppose something to be the case—with no proof. The key is proof. Making assumptions in payment processing can be costly. Too often I've heard someone say a merchant won't accept a batch fee or other fee. When asked why, they respond that they just assume it.
When making that assumption you're really saying you wouldn't want that fee charged if you were the customer. But you don't know what merchants are and are not opposed to paying. Include every fee you would normally charge on the application. Let the merchant push back. Then, if a service incurs no expense for you, or if you have offset loss of the associated fee elsewhere, you can choose to waive it. But let them know the concession is painful, or every fee will come into question.
If collecting a fee is challenging, make the payment process easy, or convey that waiving it is a true concession.
People will pay for items if we make it easy for them to do so. Previously, for example, if merchants needed equipment you'd sell it to them, and they'd write a check. But what if they lack capital? Instead of giving them the equipment, suggest they pay with a credit card. We are in the credit card business, aren't we?
Other one-time fees could be paid in similar fashion. Just be sure to research available options and be clear when you disclose what they are. Another example is purchasing a POS system, which can cost from $1,200 to $5,000. Many merchants lease equipment when the purchase price is high. Leasing (when done correctly and ethically) has a place and can provide tax benefits to some merchants.
A merchant account must provide minimum value. Do not work for free; be prepared to walk away.
This seemingly obvious rule is often misunderstood. To clarify, ask yourself what "value" means in payment processing. If you did not answer "an acceptable monetary return," you are wrong.
Consider merchants who say they'll refer you to a lot of people if you lower your price. It appears the merchant will give you a list of prospects, call them and encourage them to sign with you. However, the value in this is evident only after the prospect signs with you. If you give the merchant a benefit for actions in advance, there is no incentive for them to follow through. Instead, advise merchants you'll gladly reward them for all referrals that sign with you. Only provide a reward when income lost is offset by new revenues.
Remember, there are benefits in walking away. Selling payment processing costs you time and effort. If a merchant account won't generate the minimum you need to justify your investment, why sign them? It's better to part as friends. Never work for free.
Jeff Fortney is vice president ISO relations for Signature Payments. A long-time payments industry executive and mentor, Jeff is focused on strengthening and developing partnerships and evaluating new business opportunities. He can be reached at 214-458-1379
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