How to Negotiate with Merchant Service Providers?

Merchantserviceprovidersarethird-partycompaniesthatofferpayment processingservicestobusinesses.Theyplayacriticalroleinfacilitatingthe exchangeoffundsbetweenacustomer’sbankaccountandamerchant’saccount. Theservicesprovidedbymerchantserviceprovidersincludeprocessingcredit anddebitcardtransactions,managingpaymentgateways,andensuringsecure datastorage.

Ifyou’reabusinessowner,negotiatingwithmerchantserviceproviderscanbe challenging,especiallyifyou’renotfamiliarwiththetechnicalaspectsof paymentprocessing.Inthisarticle,we’lldiscusssomestrategiesyoucanusefor negotiatingwithmerchantserviceproviders.

Understanding the Merchant Services Industry

Beforeyoustartnegotiatingwithmerchantserviceprovider,it’sessentialto understandtheindustry’sbasics.Thiswillhelpyouavoidconfusionandensure thatyounegotiateadealthatworksforyourbusiness.Merchantservice providersoperateinacomplexandcompetitivemarket.Theyoffervarious paymentprocessingsolutions,eachwithdifferentpricingstructures,fees,and features.

There are three primary players in the merchant services industry:

• PaymentProcessors:Thesecompaniesareresponsibleforprocessing andsettlingtransactions.TheyworkwithcardnetworkslikeVisa,

Mastercard,andDiscovertoensurethatpaymentsareauthorizedand processedquickly.

• PaymentGateways:Paymentgatewaysactasabridgebetweenthe paymentprocessorandthemerchant’swebsiteorpointofsalesystem. Theyenablethesecuretransmissionofpaymentinformationbetween thecustomerandthepaymentprocessor.

• IndependentSalesOrganizations(ISOs):ISOsarethird-partycompanies thatsellandservicepaymentprocessingsolutionsonbehalfofpayment processors.Theyactasintermediariesbetweenthemerchantandthe paymentprocessor,handlingtaskssuchasunderwriting,account management,andcustomersupport.

Understanding the Fees and Pricing Structures

Merchantserviceprovidersuseavarietyofpricingstructures,fees,andadd-ons togeneraterevenue.It’scrucialtounderstandthesefeesandstructuresto ensurethathelpyoufornegotiatingwithmerchantserviceproviders.The followingaresomeofthecommonfeesandpricingstructures:

• InterchangeFees:Thesearefeeschargedbythecardnetworksfor processingtransactions.Theytypicallyrangefrom1.5%to3.5%ofthe transactionamount.

• ProcessorMarkup:Thisisthefeechargedbythepaymentprocessorfor theirservices.Themarkupvariesdependingontheproviderandcan rangefrom0.15%to0.5%ofthetransactionamount.

• PaymentGatewayFees:Thesearefeeschargedbythepaymentgateway providerfortheirservices.Theycanrangefrom$0.10to$0.50per transaction.

• MonthlyFees:Manymerchantserviceproviderschargeamonthlyfee fortheirservices.Thisfeecanrangefrom$10to$50permonth.

• ChargebackFees:Thesearefeeschargedwhenacustomerdisputesa transaction,andthemerchantisrequiredtorefundthepayment. Chargebackfeescanrangefrom$20to$50perincident.

• EarlyTerminationFees:Manymerchantserviceprovidersrequire merchantstosignacontractforasetperiod,typicallyonetothree years.Ifamerchantterminatesthecontractearly,theymaybecharged aterminationfee,whichcanrangefrom$150to$500.

Strategies for negotiating with merchant service providers;

KnowYourBusiness’sNeeds:Beforeyoustartnegotiatingwithmerchantservice provider,it’sessentialtoknowyourbusiness’spaymentprocessingneeds.You needtoidentifyyouraveragetransactionvolume,thetypesofpaymentmethods youwanttoaccept,andyourbudgetforpaymentprocessingfees.Armedwith thisinformation,you’llbeinabetterpositiontonegotiateadealthatworksfor yourbusiness.

1. Shop Around:

It’salwaysagoodideatoshoparoundandcompareoffersfromdifferent merchantserviceproviders.Thiswillgiveyouabetterunderstandingofthe pricingstructures,fees,andfeaturesofferedbydifferentproviders.Youcanuse onlinecomparisontoolstogetquotesfrommultipleprovidersandcompare themside-by-sidehelpsyoufornegotiatingwithmerchantserviceproviders.

2. Negotiate Fees and Rates:

Onceyou’veidentifiedamerchantserviceproviderthatmeetsyourbusiness needs,it’stimetonegotiatefeesandrates.Youcannegotiatelowerratesandfees byleveragingyourbusiness’stransactionvolume,longevity,and creditworthiness.Youcanalsonegotiateawaiverorreductionofsomefees,such asthemonthlyfeeorearlyterminationfee.It’sessentialtobeassertiveinyour negotiationsbutalsoreasonableandrealistic.

3. Review the Contract:

Beforesigningacontractwithamerchantserviceprovider,it’scrucialtoreview thetermsandconditionscarefully.Makesureyouunderstandthefees,rates,and anyotherconditionsthatmayaffectyourbusiness.Youshouldalsolookoutfor anyhiddenfeesorclausesthatmaybedetrimentaltoyourbusiness.Ifyou’re unsureaboutanyoftheterms,seeklegaladvicebeforesigningthecontract.

4. Consider the Payment Gateway:

Paymentgatewaysplayacrucialroleinthepaymentprocessingecosystem.They enablesecuretransmissionofpaymentinformationbetweenthecustomerand thepaymentprocessor.Whennegotiatingwithmerchantserviceprovider,it’s essentialtoconsiderthepaymentgatewaytheyoffer.

Youshouldensurethatthepaymentgatewayisreliable,secure,andcompatible withyourbusiness’swebsiteorpoint-of-salesystem.Youshouldalsoconsider thepaymentgatewayfees,astheycanaddupquickly,especiallyforbusinesses withahightransactionvolume.

5. Look for Value-Added Services:

Merchantserviceprovidersofferavarietyofvalue-addedservices,suchasfraud prevention,chargebackmanagement,andreportingtools.Theseservicescan helpstreamlineyourbusinessoperationsandenhancecustomerexperience. Whennegotiatingwithamerchantserviceprovider,it’sessentialtoinquire aboutthevalue-addedservicestheyofferandtheirpricing.Youshouldevaluate theseservicesbasedontheirrelevancetoyourbusinessandtheirimpacton yourbottomline.

6. Be Prepared to Walk Away:

Ifyou’renotsatisfiedwiththetermsofferedbyamerchantserviceprovider,be preparedtowalkaway.Therearemanyprovidersinthemarket,andyou’re likelytofindonethatmeetsyourneedsandbudget.Don’tbepressuredinto signingacontractthatdoesn’tworkforyourbusiness.

Bottom line

Negotiatingwithmerchantserviceproviderscanbechallenging,butit’sessential toensurethatyourbusinessgetsthebestdeal.Byunderstandingtheindustry’s basics,fees,andpricingstructures,you’llbeinabetterpositiontonegotiate effectively.

It’scrucialtoknowyourbusiness’sneeds,shoparound,negotiatefeesandrates, reviewthecontract,considerthepaymentgateway,lookforvalue-added services,andbepreparedtowalkawayifnecessary.Withthesestrategies,you cannegotiateapaymentprocessingdealthatworksforyourbusinessandhelps youachieveyourgoals.