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Myths & Misinformation

We were working with a client that was paying just over 6% to process credit cards. At the initial meeting, the client suggested they were very happy with their system, and that the service from the company had been just fine.

As we proceeded to explain how they were grossly overpaying for the service, it suddenly dawned on them that, you know, maybe the service hadn’t been as good as they thought.

After our presentation, the client spoke with their local banker who told them that the quote we had given them was not truthful because the lowest possible number for processing with Visa/Mastercard was 3.78%.

This actually happened, and it happens A LOT.

The Misinformation that is out there regarding Merchant Services was the first thing that astonished us.

Visa & Mastercard charge roughly 1.35% to the ISO or Processor. The Processer then sets their profit margin and “marks up” the cost to the end user.

This is called Wholesale Processing. Most often, wholesale processors resell their services to retail banks or other companies for resale, who then mark up the cost adding their profit margin.

As we see, sometimes, that drives the cost up to 6% if you’ve got a greedy ISO.

The truth is, at the wholesale level, you can buy processing for as low as 1.5 to 1.6% with an average for end users at about 1.8%. That’s a FAR cry from 6%, or from 3.78% that the retail banker spoke of.

Square, for example, buys wholesale processing and resells it for about 2.6% and then they add a 10 cent per swipe fee.

All of this adds up to a pile of money each month/year that a business has to pay. In turn, the merchant adds that cost to their cost of doing business, and that drives their pricing on their products.

While our business is very competitive, we know that at the core, we can beat anyone on pricing because we buy our processing DIRECT from Visa/Mastercard, not a third party, or worse, a fourth party.

In our next adventure, we’ll talk about how to deflect ALL of your processing costs with a product called Cash Discounting.

Thanks for joining us.

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