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What You Don’t Know Can Cost You Big Time

Three Things to Watch Out For if Your Payment Processor Has Been Acquired

Consolidations among payment companies have been a theme in recent years. Three of the top 10 deals tracked by NY-based investment bank, Berkery Noyes Securities LLC involved payment processing firms. The value of these deals was a whopping $91 billion.

The payment landscape is getting much smaller and the players are getting much larger. What that means to you, if you’re a customer of a company in a mega-merger, remains to be seen. However, if the recent past is any indication, you may be in for a bumpy and pricey ride. Many of these companies have told Wall Street they are going to see increases in revenue and decreases in cost. Where is the new revenue coming from? Rate increases, perhaps?

We’ve had scores of conversations with merchants whose payment company had merged or been acquired this year. There were three key issues that consistently surfaced during those discussions.

1. Basis Points Jumped

There was no prior notification, just a sudden leap in basis points. One particular merchant we spoke with saw his basis points jump from 20 to 103 after his payment company merged with another. This was no insignificant increase as his transaction volume was over two million dollars. This has not been an isolated event.

What can you do?

My advice to merchants is to do a comparison of last year’s invoices versus current invoices. If you see a basis point change, your first instinct may be to contact your provider. Before you do that, though, ask yourself these two questions: “If they did not inform me of these changes, do they have my interests in mind? Can I still trust them?”

While you may be able to renegotiate a better rate for the moment, it typically puts you on a “rate rollercoaster.” And, those twists and turns are not a lot of fun. The better approach is to start your search for a different payment processing partner – one that is transparent with pricing and not looking to “lock you in.”

2. New Charges Started to Appear

Popular added-charges often include a “Non-Qual Sales Disc” charge and “Non-Compliance Fees.” I was speaking with a business-owner who told me that his payment provider had always downplayed the need for compliance to payment card industry security standards. So, for years, this merchant didn’t really worry about it. Fast forward to post mega-merger, and a new $125 non-compliance fee started to appear on his invoices. In the grand scheme of things, will that fee break the bank? No. But, it’s a matter of principle. “Don’t tell me something isn’t important, then charge me because I don’t do it” was pretty much this business-owner’s sentiment.

What can you do?

Again, monitoring changes in your invoices is key to mitigating these additional costs. If you are not compliant with PCI standards, then a non-compliance fee is not outside the realm of legitimacy. That said, compliance and security are important and should never have been downplayed in the first place. A true payments partner will help you become compliant rather than simply collect a fee from you every month.

If you see new or unclear fees, reach out to me. Wind River offers a complementary payment invoice analysis for companies, regardless of size. We’ll take a look, analyze them, and highlight areas you should address with your provider.

3. Customer Service Took a Nose Dive

It may only take a few months or it may take more than a year, but customers of consolidated companies often see a decline in their service levels. A couple of things may be driving this:

  1. The proverbial pond has become so large, that unless you’re a fish that is just as large, you and your issues drop pretty far down on the priority list. The “big guys” tend to give the most attention to customers that drive the most revenue. If that’s not you, you may be out of luck.
  2. People get laid off. Unless they are independently operated, companies in a mega-merger tend to not need two accounting departments, multiple customer service centers, duplicative legal personnel, etc. You may see your account representative suddenly disappear or their role may start to get restricted over time. Significantly limiting the power of account reps is common in these environments.
What can you do?

The answer depends on whether or not you’re locked into a contract with your provider. Often we see merchants that are not under contract but they’ve signed a lease for their credit terminals. Getting out of those leases can be quite difficult. In that situation, you may just need to ride it out and keep a close eye on when your lease expires or your contract is up for renewal.

If you’re not under contract, you may want to explore what other payment providers have to offer. Then, if and when you start to experience declines in service, increases in prices, or both, you will have already done your research.

Josh Haas - Wind RIver Payments
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