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Managing the Costs of Payment Acceptance - A Guide for Retailers |
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By Greg Schaub, New Business Development |
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Whether your business is a single location selling to consumers or a large, multi-channel business-to-business
operation, chances are your company accepts credit and debit cards for payment. Allowing customers to pay with plastic is no
longer an option, it's a requirement in the modern world. No messy change or dollar bills to fumble with, and printed receipts
are infinitely more conducive to expense accounts and budgeting. Just whip out the card, make a swipe, and the transaction is
over almost as quickly as it began. It's like magic.
But for businesses that accept credit and debit cards, the other requirement is the cost associated with each transaction: the
fees owed to both the card associations (i.e. MasterCard and Visa) and the payment processor carrying the transaction.
Depending on the type of business you own, your annual sales volume and a number of other factors, those fees can vary. But
there are some ways to control the costs of payment acceptance.
First and foremost, there are some basic best practices recommendations that we advise each of our merchant customers to follow.
The basics
Every transaction processed for your business is categorized. To qualify for the lowest rate, the transaction itself must meet
certain guidelines that have been set by the card associations. Without going into the details of each one, here are some good
rules of thumb to make sure you get the lowest possible rate:
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Always swipe the card, if possible (and be aware if your employees are keying in transactions manually
due to lack of training or equipment failures) |
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When keying a transaction, employ the use of address verification |
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Settle your batch every day to get lowest rates |
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Reconcile every day, to make sure all your transactions were transmitted to the host, and that you
are in balance |
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Reconcile again when you get your statement, to compare what you think you sold to what you were
actually funded |
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If you offer prepaid cards and/or gift cards, it's important to reconcile these reports as well.
Being out of balance can be an indication of theft or fraud |
Stay on top of your business
If you are out of balance, often the problem can be traced to simple, easily rectifiable issues: your employees need a training
session on using the hardware, batching out, etc., or your software needs to be tweaked slightly to accommodate your transaction
needs. Nevertheless, we can't overemphasize the importance of keeping abreast of your unique business patterns, from how
transactions are entered to the amount of your average ticket amounts are, to being aware of the times of day when sales tend
to spike. The simple truth is that if you stay conscious of these things, you will know when the alarm bells should begin ringing
when something is amiss - if an employee is improperly trained and processing incorrectly, if you have an excessive amount of
transactions, or ticket volumes, at unusual times, etc.
Employ reporting tools
Numerous Internet-based reporting tools are at your disposal today. They are not only powerful and comprehensive, but they can
also help you avoid many costly - and unnecessary - transaction fees. For instance, Chase Paymentech Solutions offers merchants a
tool called Instant Alerts that allows merchants to track transactions based on customizable information. Want to be notified every
time an extra large transaction amount crosses the system? How about multiple consecutive card number uses (sometimes a sign of
fraud)? Or a chargeback that is about to expire? Losses due to these incidents can be avoided if you are tracking them and
proactively working to resolve them. Make your reporting tools work for you.
Avoid outsourcing to numerous vendors
Consider all the methods of payment acceptance that your business requires. Your processor likely supports all forms of credit
and debit payments, but what about gift cards? Or corporate purchasing cards? What about wireless terminals? Are you planning
to add an e-commerce site? A catalog? Whatever payment acceptance needs your business plan calls for, remember to partner with
the processor that can offer the most. The simple truth is that multiple vendors often translate into multiple pieces of
hardware, software programs and bills. Outsourcing to numerous vendors is always more costly, and confusing, so avoid it whenever
possible.
To dial, or not to dial?
Take an assessment of your business - five years ago, you may have operated one or two locations. Today, perhaps, you're a
multi-location organization spread across a large geographic area. In the next two years, you may add an e-commerce site, or
begin franchising. If your business future holds tremendous growth plans, you will need the technology to support that.
In today's world of advanced communications, the good news is, you have lots of connectivity options, and many of them are more
affordable today than ever before - even Internet connectivity.
New products now make it possible even for merchants with relatively low sales volumes to have the kind of connectivity that
is fast making dial-up a less attractive choice. Even for a relatively small merchant, Internet connectivity via a digital
subscriber line (DSL) is quite practical, and can actually save money by eliminating phone lines.
Do faster transactions translate to higher sales volume? If you are able to service more customers, yes. And if those customers
tend to return to your business because of the convenience of shopping there, yes again.
Choose the right connectivity
That's why it's important to work with your processor to determine the most cost-effective communication method for your
business type and size. For example, Chase Paymentech offers merchants everything from dial-up and DSL to frame relay and satellite
communications (VSAT). Each is right for particular kinds of merchants. None are right for all merchants.
How old is your terminal?
While there are costs involved in acquiring new equipment, if you haven't upgraded your terminal and/or software in the last
three years, it may be time to consider doing so. Today's newer terminals, such as VeriFone's Omni 3750, can support multiple
payment types and reporting features and offer faster connectivity. Is it worth it to you to offer your customers faster
transactions, to acquire dynamic reporting tools and to get rid of unnecessary hardware?
When you do acquire a new POS system, take a close look at what it can do today, and what its capabilities are tomorrow. Can
it grow with your business? Can you add gift card processing? If the POS system can't grow with your business, find one that
will.
Look closely at your statements
You get a statement every month detailing the types of payments processed, as well as the associated fees. Do you understand
your statement? Do you understand the different fee structures and the reasoning for each? This can be a very complicated
undertaking - even intimidating - and yet it is one of the most crucial. Knowing what is on your statement can make you aware
of problems, inconsistencies, etc. If something does not make sense, call your processor and have them explain it to you. That's
your right as a customer, and it's their job as your processor.
Examine your payments options
Processing fees vary according to the type of payment you are accepting. Are you accepting the types of payment that will afford
you the lowest rate? For example, PIN-based debit is a more secure transaction that is less costly than signature debit or
credit transactions. Gift cards, likewise, do not carry the interchange costs of credit cards and can be a tremendous revenue
enhancer.
Finally, your processor has a responsibility to you to assist, both through technology and consultation, in managing those fees.
When choosing a processor, pay close attention to value-adds that can help you in the long run. The secret is in finding a
processor that understands your business, and that will gladly partner with you to help manage the costs of payment acceptance.
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