Fees are a fuel that makes payment infrastructure work. It is the cost of service of every participant in the transaction processing.
Most of our clients work with multiple payment providers, and paying all the online payment processing fees across all the vendors ends up being pretty resource-draining. Of course, you can’t wholly avoid paying fees, but you surely can try minimising the amount you have to pay. In this article, we’ll tell you how to do it.
But before we start sniffing out the ways to save on fees, let’s drill down to online payment processing fees basics.
What are payment processing fees?
Payment processing fees are the costs that merchants bear as they process payments from their customers. Businesses incur fees when accepting both online payments and in-store credit card payments. There are many factors affecting the size of a payment processing fee, including, but not limited to, the payment method involved (if it’s a card, then card type), transaction risk assessment, and payment provider’s pricing model.
Types of payment fees
You are being charged a fixed fee and a percentage of every transaction. Moreover, many providers charge a flat fee for their service regularly — monthly or annually, and these are not the lowest payment processing fees. But, not all the amount you pay lines PSP’s pockets.
The payment fee is a complex critter. There are dozens of fees that can be categorised by different parameters. So let’s keep it simple and boil down the fee you pay to three components:
- Interchange. It is set by payment networks, like Mastercard or Visa. It is paid by the merchant’s bank (acquiring bank) to the customer’s bank (issuing bank), helping it cover the cost of servicing a customer and related risks. That’s why the amount varies considering multiple parameters, like risk level, card type, merchant’s field of activity, etc. They apply to every single transaction. Payment networks revise the interchange size every April and October.
- Assessment fee. The amount depends on the card network and type and is collected by payment processors and paid to the payment networks for assessing transaction batches. Unlike interchange, assessment fees apply to total monthly sales.
- Provider markup. Your payment provider’s services cost comprises acquiring fee, processing fee, gateway fee, or whatever-else fee — usually, the first two account for the largest share of what you pay. But, unfortunately, there’s nothing you can do about it. The great news is that you still can try negotiating the third one with your payment providers or getting special solutions to save up.
7 ways to minimise payment fees
1. Increase your turnover. The higher your transaction volume, the lower the average cost. Many PSPs offer custom pricing and exclusive discounts for high-value or high-volume sales merchants. Each payment service provider sets its own monthly turnover requirements merchants have to meet to get the lowest payment processing fee.
2. Run a low-risk business. That’s not something you can opt for if you run a company that is considered high-risk, but if you’re not, chances are your PSP can charge you lower fees. Low-risk businesses operating in just one country and using a single currency are most likely to get a discount.
3. Eliminate chargebacks. Payment providers want to secure themselves from businesses having issues with customers. That’s why they usually charge merchants with a high chargeback ratio more for their services. Eliminating chargebacks is a must for your business itself, but it also makes you more attractive for a PSP. Try to resolve customers’ requests peacefully and promptly. Ensure your client service is good enough, and your return & refund policies are straightforward.
4. Set a minimum amount threshold for card transactions. This tip would fit not every business model, but if your customers mostly tend to make small transactions, you may consider requiring a minimum amount for card transactions to offset processing fees. Note that local legislation may contain specific requirements for credit card limits.
5. Revise your terminal & account settings. Take a look at all the features connected to your payment terminals. Do you actually use all of them? Some of them may cost you additional money, so it’s better to disable everything you’re not going to use. The same is true for your accounts at payment providers. Refer to their pricing plan quotes to know what exactly you’re paying for and analyse if you need all of it.
6. Work with multiple providers. You’ll have to make numerous integrations and bear the costs of payment gateways, but this move would most likely end up being beneficial and cost-effective. In addition, it increases your chances to get lower fees.
7. Opt for smart processing. This magical feature helps make the most out of working with multiple payment service providers. It is a real money-saver for high-volume merchants. Corefy smart processing engine allows you to route each transaction most cheaply and efficiently, depending on its currency, method, bank, amount, etc. Moreover, it helps distribute your cash flows across providers the way you need. It also drives your conversion and saves your sales, rerouting transactions to another vendor if something goes wrong on the provider’s side. All in all, once you try intelligent processing tools, you’ll wonder how you ever lived without them.
How Corefy can help
Serving companies that work with multiple payment providers, Corefy empowers them to save on payment processing fees without lowering conversion rates. Smart payment routing technology is what makes it possible.
Any company leveraging multiple PSPs can automatically send each transaction to the provider that offers the best price. The ability to find the lowest-cost way for each transaction saves our clients up to 30% in payment fees. Besides, our Account Managers use their years of industry expertise to help our clients create custom payment routing schemes, allowing them to find the balance between economy and effectiveness.
If that sounds appealing, contact us. We can offer you a live demo, answer your questions, help you get on board, and start saving on PSP fees with Corefy.