Thank you again for the great turn out last month, on January 8 for our e-commerce Meetup. Our next Meetup is almost here and we wanted to provide a review of the last one.
Tom Waters from BAMS (Bank Associates Merchant Services) presented what his company can offer to merchants by explaining how credit card processing works and the fees that are associated with different transaction. Tom took a historical take and walked us through concepts and laws that changed the credit card landscape over the years. And the good news is brought down fees drastically over time.
Some highlights from the talk include (and I apologize if these only include the ones we remember, but please post comments and questions below, or contact us):
1. Rates have been broken down into a great matrix of different scenarios. Most people are familiar with AmEx vs. Visa/MasterCard rates, as well as debit cards vs. credit card, corporate or rewards cards, and how the rates differ. However, most people still believe there are only 4-5 rates, or they are given 4 rates by their merchant processor or bank.
Fact is that there is a specific interexchange rate for almost every transaction, which can factors in in-person vs. over the phone, card type, issuer, etc.
Often times the low rates are not passed on by the merchant processor, but pulled together into 3-4 groups.
2. Organizations such as Paypal, Square, even American Express are not banks and thus do not need to adhere to the numerous regulations of banks. This can have a lot of advantages for these organizations, which they can pass on to merchants and customers. Even Groupon launched a service called Groupon Payments to provide savings to its merchants.
What it all means to you?
3. You should not enter into a contract that binds you to a processor, and insist on early termination rights. You may also want to consider these non-bank institutions. Often times they can be very competitive with low transaction volume, while a dedicated merchant processor becomes less expensive with greater volume. BAMS for example charges a small processing fee on top of the interexchange rate, which results in very competitive pricing.
Value-added Services by BAMS
BAMS can help merchants with charge back monitoring and handling. BAMS also offers its IRIS (IRIS – Integrated Reporting is Simple) platform, which can help gain quick oversight of your business and identify problems.
Please add comments to this post and feel free to ask any questions about merchant processing. Tom is extremely knowledgeable and we at Hara Partners would love to provide any answers for you.