Vito Pagano founded IMG Merchant Services Auditing in 2009 when he recognized that many businesses do not understand merchant service fees, and as a result, are unaware they are often overcharged each month. To his venture, he brought years of banking experience serving as vice president for the commercial and larger corporate division of a major multinational financial services corporation. Pagano and his team of independent auditors serve clients ranging from medium-sized to Fortune 500 companies that process several billion dollars in credit card payments annually. Here he discusses credit card processing costs and steps business owners should take to avoid overpaying for these services.
(Photo courtesy of Victor Pagano)
For new businesses, what is the best way to find a merchant services provider?
When meeting with different credit card processors, find a company that wants to take the time to learn about your specific business model, needs, wants and desires. Also, it is very important to partner with a processor that understands your growth strategy in order to adapt to any future changes.
In addition to cost, what questions should the small business owner ask when selecting a provider?
Who are the clients of the merchant? For example, is your company processing B2B transactions or B2C transactions? What POS (point of sale) technology is in place today, and what are its capabilities and limitations? Are you swiping mostly credit cards, or are you a card not present merchant (CNP)? In addition to merchant services, what are your other banking needs, such as treasury management, investments and loans? A bank can offer other financial solutions, whereas an ISO (independent sales organization) offers electronic payments only and does not offer treasury solutions.
Are merchant service fees negotiable?
Depending upon your industry, annual volume and average transaction amounts, merchants can negotiate a discount rate. However, network costs from Visa and MasterCard are universal and charged to all merchants and cannot be negotiated. Also, there are industry incentives and threshold discounts which most merchants can benefit from, but do not.
How often should a business review its card processing agreements?
Merchants should meet with the client manager of their bank and have an overall portfolio meeting to confirm they are receiving best-in-class treatment every six months. However, some large national banks outsource the credit card processing to different clearing houses. Depending upon what bank you work with, when having an overall portfolio meeting, merchant services may not be brought up as they are handled by the joint venture partnership of the bank and not a bank executive.
This article was written by Gillian Burdett for Small Business Pulse