The good news is that there are ways to lower your processing rates for ecommerce transactions. All it takes is a bit of industry know-how when it comes to security best practices, provider selection, and account set-up.
Here are four ways you can lower your rates on ecommerce transactions and keep more of your hard-earned money in your bank account.
Run AVS on Every Transaction
Address Verification System (AVS) is a common best practice for any card-not-present transaction. It’s the simple process of asking the customer for his or her billing address and matching it to bank records. It costs only $0.01 per transaction to run AVS, and it’s money well spent. AVS is a unique security tool because using it actually lowers your processing rates.
Interchange is the wholesale cost of running a transaction, and it increases with transaction risk or credit card rewards. By implementing AVS to mitigate risk, the interchange rate falls. In a comparison of two keyed-in transactions, interchange increased by up to 64 percent when AVS was not collected.
Card Verification Value (CVV) is another common security protocol that ensures that the customer is in possession of the physical card; however, implementing CVV does not result in decreased rates.
Streamline Your Providers
As previously mentioned, you need a merchant account provider and a payment gateway to accept online payments. Why? A merchant account works as an intermediary account between your business’s bank account and the merchant account provider for all deposits and debits. A payment gateway facilitates the transfer of information from a payment portal to a processor, enabling efficient transaction processing.
Most payment providers are either merchant account providers or payment gateways. However, some all-in-one options exist. The benefits of streamlining your providers are twofold. First, consolidating your patchwork of providers eliminates an entire bill you receive monthly. Now, we all like getting fewer bills, but the real benefit is that one bill makes it much easier to for you to understand your effective processing rate. If you don’t streamline, you’ll have two providers charging you for the same batch of transactions each month.
Second, support is much easier to navigate with a single, inclusive provider that can answer all of your technical and payment-related questions.
Demand Ethical Billing
It’s important to be careful when selecting a merchant account provider. Some merchant statements can be designed to cover up hidden fees and padded rates. By knowing what to look for, however, you can become a better advocate for your business.
If you spot any of the following fees, it’s worth a call to your provider to negotiate your merchant service fees and request the removal of unwarranted fees. The following fees do not cover service costs and only serve to pad your provider’s bank account.
- Inflated AVS: AVS should never exceed $0.01 per transaction, but this fee is often marked up to between $0.05 and $0.10 per transaction.
- PCI Fee: This fee can be assessed monthly, quarterly or annually depending on the provider. However, your provider should aid you in your Payment Card Industry (PCI) compliance, rather than penalize you.
- Self-Assessment Questionnaire Fee: Similar to the PCI compliance fee, this fee is charged when businesses don’t submit a self-assessment questionnaire verifying their compliance. This is an optional self-assessment, so no fee should be charged.
- Non-Qualified Interchange: This is a fake fee that borrows the terminology of one rate plan and applies it to another.
- Padded Dues and Assessments: Dues and assessments are charged by the card brands (Visa, MasterCard, Discover and Amex) and are passed down to you. These rates are currently set at between 0.11% and 0.13% for Visa, MasterCard and Discover, and 0.15% for Amex. Anything higher reflects an unfair markup.
All of these fees are easy enough to spot with an untrained eye but may indicate that other, more difficult-to-spot markups — such as padded interchange or hidden volume fees — could be lurking in your statements as well. A candid conversation with your provider will help you determine whether your provider is forthright or whether it’s time to look for a new one.
Confirm Your Set-up
If you’re on tiered pricing, there’s another aspect of your merchant account set-up to verify. A mail order telephone order (MOTO) account is preferable for businesses that predominantly accept card-not-present transactions. In contrast, businesses with more card-present transactions should be on a retail tiered account.
Why is proper set-up important? For retail businesses, the drawback of being on a MOTO plan is that the check qualified tier is missing. This is the lowest cost transaction type for debit cards. Likewise, ecommerce businesses on retail pricing will find all their transactions downgraded to a higher rate tier due to them being keyed in instead of swiped or inserted with a chip. This is an easy aspect of merchant account set-up to verify, and both retail and ecommerce businesses benefit from proper configuration.
By taking the time to evaluate your merchant statements, considering all-in-one providers, verifying your account set-up and always using security best practices when accepting payments, you’ll be in a good position to lock in the best processing rates for your ecommerce business.
