Processing: Why it Costs So Much to Get Your Money
- Posted on: May 18 2017
It seems like magic. The customer visits your site, shops, hits Submit and you get paid. But, in fact, a lot happens behind the scenes. The better you understand this, the better you’ll be able to choose a payment service provider (processor).
Getting through the Gateway
After the customer hits submit, the information on the payment form hits what’s called a “gateway.” As we explain in this blog, the gateway is the door to all the services that allow you to collect online payments.
Gateway fees may be relatively small, but they apply to every transaction, no matter the size. So be sure to include them in your pricing structure, or work with a vendor who can work with you to minimize this fee.
Risk Management, Especially when the Card’s not Present
Risk management is especially critical for card-not-present businesses, where there’s no way to know for sure that the person who filled out the form is who they said they are.
Simple tools like Address Verification System (AVS) and Card Verification Value (CVV), which we explain in this blog, are a start.
Other tools like Pinpoint Secure will use IP address, device, location information and more to score the risk. Some suspicious transactions may be sent for automated or manual reviews before the charge can be sent for processing.
The more risk management tools you deploy, the more it costs. Pinpoint works closely with merchants to find the most profitable cost-benefit balance for your unique business. And to adjust it as your needs change.
Card Processing and Interchange Fees
Once the transaction passes risk management, your processor alerts the network (Visa, MasterCard, etc.). The network contacts the card issuer (the customer’s credit card company) and they send the money to the acquirer, the bank that accepts payments on your behalf.
This is where Interchange fees come in. This is what your acquiring bank pays to the network and card issuing bank to cover handling costs, fraud, bad debt and other risks involved in accepting payment. In many cases, it’s the single biggest cost in collecting payments.
Working with a Processor Who Works with You
Because of the risks, it’s often hard to find a payment processor or acquiring bank who’ll work with card-not-present businesses. And there are others who’ll low-ball the bid, without telling you the hidden costs.
At Pinpoint, we’re straight shooters. We can put together a package to represent you and get you the best deal for your business.