Merchant services affect the majority of companies — more than 90 percent of online purchases use credit cards.
“If you’re not sure if merchant services is the right fit for your company, think about what your competitors are doing. If you don’t accept cards today, then prospective customers may be going to other businesses,” says Jan Mitrovich, manager for Treasury Management and Merchant Services at California Bank & Trust.
Smart Business spoke with Mitrovich about how to understand merchant processing services and costs, and when to talk to your banker about new solutions.
How do you know if your company is using merchant services correctly?
Every company should consider where it’s doing business and how it’s transacting with customers. Examine whether you are effectively leveraging all your channels for sales opportunities. You may have a storefront that does terminal credit card processing. However, other payment options, including Web-based and e-commerce, may be worth considering.
How much of you sales efforts need to be in the field, such as industry shows? A mobile solution can extend your customer outreach while providing convenience to your customers.
The merchant services environment is continually changing. There are varying degrees of complexity, from processing basic transactions through a card reader, to merchants that need multiple payment channels, gift and loyalty card programs, check verification services and more. Your merchant partner can help you better understand your options and select the right solutions for your business.
What’s important to know when getting a merchant account?
The processing transaction fee can turn off businesses, but they must consider the value proposition of expanding their customer base by accepting more transactions.
Depending upon the transaction type and how it is processed, fees will vary, which gets confusing. Merchant processors also don’t always present the statement information and pricing in the same fashion. It’s common for business owners to think a quoted rate is the all-in cost.
Be aware of hidden fees. For example, only some organizations do pass through pricing for the interchange fees. A discount rate doesn’t necessarily compare apples-to-apples, so a more important question is, ‘What is the cost of the service?’
You also need to understand and educate your employees on the associated responsibilities and risks as a merchant processor, such as protecting customers’ sensitive data. Validation of payment card industry compliance is an important step to ensure credit card data is being protected. Data breach coverage can protect merchants from the cost associated with a data breach, which can easily run $35,000 or more.
What additional factors help determine which provider is the best fit?
One differentiator is customer service. Banks typically have a higher level of customer service, like 24/7 call support, than independent sales organizations.
You also need to consider whether to lease or buy equipment. The industry is moving toward chip-enabled cards that will require companies to change equipment during the next few years. Take the time to understand your options and pricing structure, as well as if any equipment is proprietary.
Finally, cut-off times for transactions and settlements can be a game changer. Settlement time frames differ, anywhere from next day to 30 days, depending upon the vendor. If you want to improve cash flow, in some cases, you can process transactions up to midnight with next-day availability of those funds.
How should you review current services?
Take the time to review your merchant statements and pricing. If your business model or activity levels have changed, talk with your merchant representative. New services or tools may be available that can create processing efficiencies for your business. For example, card-present transactions are generally lower risk and thus cost less to process, while manually keyed transactions cost more. You could make internal changes to reduce the volume of keyed entry transactions or possibly process transactions through a lower-cost channel. ●
Jan Mitrovich is manager of Treasury Management and Merchant Services at California Bank & Trust.
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