October is here, leaves are falling and temperatures are dropping... BUT your fees are rising! Payment processors are at it again, this is the time of year that they are adding new junk fees and increasing your rates.
Every April and October payment processors decide to change or add additional fees, and its carefully calculated to coincide with the biannual Interchange adjustments announcements by Visa and MasterCard, which conveniently happen in April and October. Many processors see this as a prime opportunity to blame Visa and MC for a rate increase, when 99% of the rates associated with Interchange have fluctuated by +/- 0.01%. The last notably large increase or decrease was back in 2011, this was when the "Durbin Amendment" went into effect and drastically reduced the the fees associated with accepting check/debit cards issued by major banks, these rates went from 1.25% to below 0.10%. Many processors did not pass this discount through, until competition forced them to, leading to massive profits to their bottom lines.
Rate increases are not the ONLY thing that we see this time of year, there is also an onslaught of made up/scare tactic/warranty/junk fees added to small business merchant accounts. A brief history of the junk fees I have seen over the last 13 years is listed below.
- Breach Protection Fee - these fees started to pop up around 2010, after data breaches became the new norm in the payments space (fee varied from $9.99/month to $39.99/month)
- PCI Validation Fee - this has been around for years, if you didn't complete a PCI questionnaire, you are assessed this fee, its nothing but a "slap on the wrist fee" (fee varies from $14.99/month to $29.99/month)
- Regulatory Fee - with the rollout of the Durbin Amend we discussed before, processors felt they had a chance to charge for the new regulations. (fee varied from $5/month to $15/month)
- PCI Third Party Fees - these are billed by the processor to pay for services like Data Guardian, TrustWave, Security Metrics and many others, while there is a cost for these services they are marked up heavily by the processor for additional profits. (fees vary from $5/month to $25/month or billed annually for a few hundred dollars)
This list could go on for a long time, but all of these fees are still around today, just look at your statement for anything resembling them.
One of the newer fees we are seeing right now revolves around EMV (chip cards). We have obtained statements from many processors with fees like "Non EMV Acceptance", "Non EMV Enabled", "Non EMV Compliance". The actual fees that are being charged vary from a fixed annual fee upwards of $300 to charging a percentage on your sales volume each month. Lets do some math on both of these scenarios using a hypothetical processor's portfolio of merchants.
Example: XYZ Processing, has 400,000 merchants and processes $500 billion annually for those merchants.
Let's say that maybe 10% of their customers cannot accept EMV cards for whatever reason, maybe their POS doesn't have the ability or their sales person has not sold them a new payment device.
- Fixed annual fee ($300)... 40,000 merchants (400k x 10%) multiplied by $300 = $12,000,000 added to the processor's bottom line annually.
- % on volume... $50 billion (10% of $500 billion) multiplied by 0.08% (pricing we have seen) = $40,000,000 added to the processor's bottom line annually.
In both above listed scenarios the profits to the processor are huge, and that's not fair to the small business owners they serve. Instead of penalizing a small business, why not assist them by sending them a $300 terminal (since they're already billing it in scenario #1)?
Billing practices like this are all too commonplace in the "merchant service" world, we don't stand behind it and fight against these bogus charges to local small businesses. Stop letting your processor dictate what they charge to you, just because fees sound "official", doesn't mean they do any good for your business.
Know your competition.
-Article Provided by James Engimann, Business Development VPS