Thursday, April 18, 2013

Recommended Solutions

One Size Does Not Fit All

One of the most important things for merchants to remember is that what works best for one business may not be a good fit for another. This applies in almost every area of business, and the processing set up for a business is no different. Except in one way: every merchant wants the cheapest solution that will serve their needs.

The problem is, what saves one merchant money may not save another merchant who does business very differently. Having the lowest transaction fees is terrific until it means that all transactions are going to have to be stored for later because a merchant is trying to save on mobile processing fees, only to discover that more charges are downgraded and other charges are simply not approved... In fact, there are dozens of considerations to be made before ensuring that the merchant has the best program set up.

Some generalizations remain true

It is always in the best interest of a merchant to save money. The rates and fees set by Visa, MasterCard, Discover, American Express, et al,  are varied by card type and transaction type, and even have built in adjustments by industry. There are ways in which the processing companies have worked to save merchants on some types of charges while profiting off other types of charges. This was the birth of "Tiered" pricing.

A good "Tiered" deal may actually save a merchant money over an Interchange-based plan. This may be the case when the Mid- and Non-Qualified markups are not excessively high and the Qualified rate itself is low, because many cards may be processed at very little profit or even at a loss for the processing company, versus the consistent markup on every charge as processed via an Interchange-plus agreement. These kinds of "Tiered" plans are pretty rare, however, and many merchants find that their "Tiered" rates are raised periodically to compensate for the increase in Interchange costs for a few card types every six months or so. This is also assuming that the Interchange-plus plan is based on the typical "book rates" from most processors (likely 50 basis points over cost).

I generally believe that Interchange-based plans are the most fair-minded and often the most cost-effective. There is no undue rounding up on rates, no downgrading. And there is usually no additional transaction fee to go along with the downgrades, either. A merchant pays the cost of processing with a nominal surcharge on the total and a reasonable fee per transaction. This "cuts the fat" and makes the costs much more equitable most of the time. Still, this sort of plan sometimes looks complicated and does not work best for every merchant, so the pros and cons must be examined.

Recommended Solutions

I like to put my merchant clients into a narrow range of solutions whenever possible. For some, they have an existing POS system that needs to be reprogrammed and it is as simple as discovering what processing company will interface best with the POS system and then setting an account up with the proper parameters and lowest available cost. I'll use the First Data network for most POS systems, because I can provide that through a third party at much less than First Data usually charges merchants who have accounts directly set up through their processing wing. Plus, I'll do it with no long-term contracts and without cancellation fees. I can also process over the Global Payments network, or through a gateway like For most high volume businesses, this sort of solution is perfect for them. They have the hardware already, I'll simply provide them with better numbers. I'm not precisely in the POS business, but I have the ability to set up several types of systems and can provide a limited range of them as well.

POS Systems

I am a fan of ShopKeep and I am able to provide service for this (as well as assist in the setup for clients in the Los Angeles/Pasadena area). It's a solid and evolving system and I think fairly priced. Plus, since I can provide the processing service for this system as well, it comes to a good long-term deal for the merchant. 

I am also considering representing the Harbortouch product line, so if anyone is interested in that please let me know. It strikes me as a versatile option with a particularly low cost of entry, though it does tie the merchant into a long commitment for processing. After that period, however, the POS system belongs to the merchant. Presuming that the merchant has picked the right product, it can be an incredibly cost-effective deal.

And you probably know that I am a huge fan of PhoneSwipe. (Ignore the rates usually listed on that page, because they are targeted at clients on a "Tiered" monthly plan, which I would rarely use for a PhoneSwipe client.) PhoneSwipe is not exactly a full-featured POS system, but it is the best mobile variation I have seen, with robust inventory and reporting options. The good news is that the developers are working on a more specialized upgrade that puts it more in league with standard POS capabilities and cloud connectivity between devices. There will also be more specialized pricing options available in the near future including single-rate plans and free tablet placement for monthly agreements. In the meantime, it is my prefered option for small businesses that need mobility (like coffee carts or artisans who sell through trade shows or craft fairs), and I generally recommend the "Pay As You Go" option with a 2.69% swipe rate and no additional fees or obligations.

Mobile Processing

For mobile solutions, I will recommend PhoneSwipe, as mentioned above. It works great on as many or more phones and tablets than the other major providers. It has the lowest no-monthly-fee rates on the market. For most merchants doing less than $2,500 every month, it is simply the most cost-effective solution on the market, whether or not there is any need for the mobility. I have clients who use it simply because it is less expensive to use their mobile devices than to use a traditional terminal and associated plan. I have one client who specifically came to this product because she wanted to avoid the cost of a phone line at her business. Other clients utilize existing WiFi and enjoy the savings. It's a great all-around solution and also one of the easiest to set up, especially for brand new businesses. It is especially good for merchants with low average tickets.

The other  mobile solution I like is Payment Jack. (That link downloads a pdf brochure.) It's a clean, efficient and stable solution with a few perks of its own, including a web portal that doubles as a virtual terminal for key-entered transactions when the mobile device is not available (or broken). The rate structure is generally a highly competitive "Tiered" solution on a monthly plan, but coupled with the lowest PCI costs I've seen and the other low monthly fees, this presents a cost-effective solution for businesses that do a minimum of $1,800 per month with some months much higher. Generally, if a business averages over $600 in weekly sales, this solution is outstanding. While some of the functionality of PhoneSwipe is lacking, it still functions as a better option for some merchants, especially those whose average ticket is over $200, because the lower percentages will compensate for the other fees.

Counter Terminals

If a retailer simply needs a counter terminal or has a desire for a dedicated machine that plugs into a phone line or ethernet connection, these are incredibly easy to set up and, contrary to what many leasing companies would have you believe, not terribly expensive. In fact, there is no reason that a merchant should not be able to purchase a new (or adequately refurbished) terminal for as little as $200. Deals are out there for terminals under $100, though merchants should beware of buying used units that might be "locked" for reprogramming or are no longer supported by the security standards of the industry. For this reason, it is always smart to see what kind of a deal your sales agent can offer. It's a good test, as well, of the agent's integrity. If he or she tries to sign you into a lease right out of the gate, you should probably move along to another source.

Most countertop terminals do essentially the same thing regardless of brand or model. Some are easier to use. Some have extra nifty features (that most merchants will never use). If your business requires the ability to process gift or loyalty cards, make sure your terminal can handle those. If you have a few cases of printer paper lying about from a previous venture, maybe you can see if there is a model that uses that same paper. Otherwise, there are few moving parts in most terminals (outside of the printer, there really aren't any), so the units ought to last a long time provided nothing gets spilled on them or they are not crushed under a heavy boot.

Almost every processing company offers "free" terminal placement. This means that as long as the merchant is paying a certain minimum in processing fees every month, they get the terminal at no additional cost for the duration of their processing agreement. When they cancel, they must return the terminal (or pay the original retail cost of the machine per their agreement terms). This is an easy way to get a terminal and can be quite cost effective for most merchants because it is essentially free, provided that the rates are appropriately fair and they do enough business that the merchant isn't getting hit with additional costs to make up a "monthly minimum" requirement. Normally, this means that the merchant is required to pay at least $25 in processing fees (out of the percentage of sales or discount rates, not including statement fees or the like). Owning a terminal does free up the merchant for better negotiating on the rates, however, and the cost of purchase can often be made up within a few months when compared to other options. Some processing companies are getting more aggressive with their placement terms, however, and see this as a way to instill long-term loyalty rather than gouge merchants, so it may be a moot point. Working with a good, reputable agent will help you find the best solution.

Describe your needs to me and I'll do my best to guide you in the proper direction. The landscape may look intimidating out there, but the truth is that most merchant solutions can be established fairly easily and quickly. Some businesses require more paperwork than others, being as this is a highly regulated financial industry. But accounts can be established in as little as 24 hours for most retail style businesses, and literally be up and running with swiped cards only days after submitting the application and agreement.

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