B2B Merchants Often Overpay for Card Processing Without Knowing It
B2B merchants often overpay for processing for a number of reasons. However, one of the main reasons is they choose a merchant account providers or salesperson that doesn’t have the needed expertise for the B2B industry.
Two merchant account providers offer a B2B merchant Interchange Plus pricing with the same rates and fees. What could possibly be the maximum difference in annual cost between provider A and B – $50, $100, $200? I recently worked with a B2B merchant that was paying over $30,000 more per year because they chose processor A. The merchant didn’t realize it because the higher processing cost had nothing to do with a provider’s rates and fees. It had everything to do with the provider not understanding the B2B marketplace and not being willing to put forth some effort to educate and set up the merchant correctly.
Providers and salespeople are not all equal
Credit card processing is a commodity. However, industry knowledge and good service is never a commodity no matter the industry. A brick & mortar retail merchant recently asked my help to find the right provider plus a salesperson who would truly service their vast needs. I know I match the merchant’s needs with the right provider and salesperson and I’m confident the merchant will never switch providers again.
That said, I would never invite that same salesperson to participate in a bid for a B2B client. I would also limit the provider to certain B2B and ecommerce clients. The salesperson is one of the most honest hard-working salesperson in the industry and he really cares about his merchants. However, he doesn’t have the needed expertise for the B2B marketplace. The provider is also very honest and very good in most industries. However, certain ecommerce and B2B merchants are not their best fit.
Understand that there really is a difference when it comes to providers and salespeople. Some providers and salespeople are bottom-feeders. These are the companies that seek out ignorant merchants, tell them that their terminal is illegal because it cannot process an EMV chip card. They lease the merchant a $250 terminal at say $99 a month for 4 years because it’s “EMV capable” which by the way doesn’t mean it can actually process an EMV transaction. These same providers and salespeople would also never pass up an opportunity to bid for your ecommerce and B2B business even though it is definitely not their expertise.
Some providers are actually honest and try to provide the appropriate service. However, their expertise may be limited in certain industries as well. Also, provider size isn’t the determining factor. The previously mentioned merchant that was overpaying by more than $30,000 had chosen a publically traded provider.
Why was the merchant overpaying by $30,000 per year?
Their provider and the salesperson who sold the service did not understand B2B. They didn’t work with the merchant to ensure that certain information accompanied each transaction in order to receive the appropriate B2B interchange rate. It’s known in the industry as “Level II” and “Level III” data. As a result, the merchant was charged interchange rates that were far higher than they should have been. Even worse, once the provider was informed of the issue, they really didn’t care.
If you have read my articles over the last couple years, you know that I am a proponent of Interchange Plus pricing. However, I’ve also made it clear that Interchange Plus pricing doesn’t automatically mean that you are priced fairly or you are paying only the amount you should be paying. It simply means the merchant has the potential to be priced fairly and pay the correct amount.
Interchange Plus pricing means that the interchange rates and pass-through fees (the wholesale rates and fees to the provider) are simply passed through to the merchant. The provider then adds their mark up, for example 0.10% + 10 cents over these wholesale rates and fees. This is the way the provider makes money in addition to any ancillary fees they charge. However, also understand that a provider will make their mark-up no matter if the merchant is being charged the appropriate interchange rate or not. That was the other issue with the provider originally chosen by the merchant. When confronted with the high interchange issue, they didn’t want to spend their time helping the merchant because they were going to make their mark-up no matter what the merchant paid in interchange.
Summary
B2B merchants overpay for more reasons than mentioned in this article. However, ecommerce and especially B2B merchant need to understand that not all providers and salespeople are qualified to bid for their business. The lowest rates and fees can result in a higher cost if the wrong provider or salesperson is chosen.
B2B merchants need to make sure they are receiving Level II or Level III interchange rates where appropriate. The salesperson and provider need to walk through the steps needed to qualify for the Level II/III rates as well as what the provider is willing to do to ensure the merchant will be charged the appropriate interchange rates. The provider also needs to show existing merchants statements with Level II/III interchange prior to the merchant choosing them to prove they understand B2B and have existing B2B merchants properly set up.
