Choosing a credit card processor is a daunting task for small business owners. The number of card classes and rates is designed to be overwhelming, and the pricing can be very confusing. In the past the sales pitch for selecting a merchant services company has centered on price comparison based on rates and fees. Merchant services companies took a copy of the current rates and almost always returned with a proposal reflecting the rates and fees were somehow reduced. The problem was the rates would be reduced on certain classes of cards to make the quote look better, but the reality of the quote was the classes may or may not match so the savings may or may not occur. This left consumers feeling mislead or cheated. Over the last 18 months many banks have joined the merchant services space, and the conversation has shifted from being a pure rate comparison to an overall service comparison of which rates and fees are one component. When shopping for merchant services a business should consider three aspects of the merchant services experience.
The first and most important consideration is how a business envisions collecting revenue from customers. Retail locations most often use a point of sale system, professional services usually use an invoicing system with time and expenses and an online merchant uses a shopping cart. Each method of collecting revenue presents a completely different customer experience and uses different hardware and software components to operate. The hardware and software being used to create invoices or receipts, track receivables, track inventory and receive payment should be selected based on the business needs and then look for merchant services that integrate with those components and preferably provide support. Ask these vendors if they recommend a particular processor for integration.
The next consideration should be customer service and support. Depending on the type of software and hardware being used local support may be more or less a concern. For instance, a retail location with a point of sale system cannot afford to be down for an extended length of time, and because they use hardware to scan cards it is important to have a quick response and turnaround time in case of failure. For businesses using a management software there may be a discount or support provided by the software vendor included if their merchant services are used. Always shop merchant services support between the company’s software vendors, bank and third party companies that come recommended.
Regulatory issues specific to the business is the third consideration. All businesses must be PCI compliant when accepting credit cards which can be expensive to properly implement. In addition to PCI compliance some industries, such as the legal and medical fields, have additional rules about protecting client data and privacy. All of these regulations need to be reviewed, understood and then discussed with the merchant services companies. While a merchant service company may provide better rates or lower fees they may not comply with industry specific regulations when it applies to chargeback policies or how the fees are taken during the transaction. When in doubt contact a trusted advisory board within the industry and ask questions because ignorance is not an excuse during an audit.
The three aspects of merchant services described above should be reviewed in addition to fees and rates when making a decision. Sometimes a merchant service that integrates seamlessly with software can reduce tedious data entry for businesses which more than offsets a slightly higher rate or fee. Local support can potentially reduce downtime when there is hardware failure with a point of sale system. Regulatory fines and audits can be very expensive when transactions are flagged depending on a specific industry. Proper planning and research should be what drives the conversation for a business shopping for merchant services rather than rate shopping because a reduced rate or fee may end up costing far more in the loss of automation, downtime or fines.