In today’s economic climate, small and medium-sized businesses are facing a myriad of challenges, including supply chain issues, staffing shortages and rising costs due to inflation. The pressure to offer an exceptional customer experience while reining in costs is real. However, there are small adjustments merchants can make to existing business processes that drive value for their business. Every expense analyzed for efficiency and brought under management drives money straight to the bottom line.
ISO and ISVs can help merchants uncover opportunities to save money by offering payment optimization solutions that lower or offset transaction costs. A processing partner that has a suite of solutions backed by a dedicated team of payment optimization specialists will differentiate your software offering in the market, build trust with your customers, demonstrate value and ultimately win and retain more business.
The cost of payment acceptance has risen a whopping 70% since 2010[i]. The increase is due to several factors including:
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- Proliferation of rewards cards
- Rise of commercial cards
- Shift to digital card-not-present (CNP) payments
- Interchange rate increases
- Card brand network fees and assessments
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For many businesses, credit card acceptance costs are often the second highest cost behind payroll [ii].
Payment optimization encompasses a variety of solutions and programs that reduce or offset credit, debit, and commercial card acceptance fees for payments made in person, online, via mobile device or over the phone. Let’s look at how you can optimize payments for your merchants.
Optimize authorizations
Payment optimization is complex. Business owners may understand the potential for cost savings but lack the internal expertise and resources to implement programs. Approval rates, cash flow and productivity are all impacted when cards on file for recurring payments expire. Additionally, maximizing savings on commercial cards requires sending 25 data points from invoices with each transaction. Finally, while PIN validation lowers transaction costs, expecting customers to properly select PIN debit limits potential savings for merchants.
Find a payment provider that offers a mix of solutions to help increase authorizations and lower processing costs. The right partner has technology in place that enhances data and transaction routing, so merchants automatically qualify for the lowest possible rates. Account updater solutions increase authorizations and improve cash flow by keeping card details up to date. Automatically including Level 2 & 3 payment data on 100 percent of qualified B2B transactions saves customers time and money. With cost-effective PIN debit routing, merchants eliminate manual prompts, mitigate the risk of certain types of fraud and provide a better cardholder experience.
Implementing credit card surcharge
Fee programs that are compliant with card brand rules can help offset acceptance costs—typically from 1% – 4%—by transferring processing costs to the cardholder. There are strict enrollment requirements and customers must be able to avoid the fees by opting out or switching to an alternative payment method. Further, some states have laws that forbid or limit participation practices such as surcharging. Implementing fee programs in adherence to state laws and card brand guidelines can be confusing for your customers and doing it incorrectly can hurt the merchant’s reputation and provide a sub-optimal cardholder experience.
Work with a payment provider that offers a range of programs – from credit card surcharge and service fees to Dynamic Currency Conversion. The right partner should provide guidance and best practices that maximize savings while keeping merchants compliant based on industry segment, acceptance channel and peer benchmarking. They work with merchants to ensure the right balance between savings and the customer experience.
Tapping into experience and put cost savings to work
Software providers can deepen merchant relationships and build trust by offering customers access to an experienced team of payment optimization consultants. You can help drive value to your customers by providing a detailed transaction analysis and selecting the solutions that optimize payments. A provider like Elavon cuts through industry jargon to calculate savings and provide recommendations so merchants can decide what makes sense for their business. Ready to learn more? Contact us today for more information.
[i] The Nilson Report
[ii] Deloitte, “2020 Enterprise transformation and cost reduction survey,” 2020
