Securing the best service and pricing on your merchant card acquiring
Changes in the payments industry are coming thick and fast and have been well documented in the press of late. This is no different in the area of credit and debit card payments where recent changes will greatly impact on costs that merchants (retailers, hotels, airlines, etc) pay to payments providers when accepting card payments from their customers.
As a result of a recent ruling by the European Court of Justice, it may be more beneficial for merchants to have card transactions acquired (processed) in another country to avail of cheaper processing (interchange) fees. A rate ceiling on cross-border acquiring has forced Visa and MasterCard to allow routing and processing of transactions cross-border to be less expensive than domestic processing in some cases.
In response to the changes in cross-border processing, Visa and MasterCard are revising the way interchange rates are applied. Instead of charging on a per transaction basis, debit transactions are going to be charged based on a percentage of transaction value (turnover). This means that processing rates will need to be adjusted to account for this change.
So how do merchants stay on top of (and take advantage of) these industry changes in order to secure the most competitive service and pricing? One solution is to undergo an RFP process for merchant acquiring services which typically takes place once every two or three years.
Coordinating an RFP process for merchant card acquiring can be a very arduous process for merchants. Due to a lack of transparency on pricing, finance managers struggle to accurately evaluate proposals and are typically left scratching their heads as to which provider offers the best value. Furthermore, without the capability to benchmark pricing, how can a merchant say with any degree of certainty that a specific proposal is indeed competitive?
Running an effective RFP for merchant card acquiring involves building a detailed profile of the merchant’s card acquiring (transaction) activity and preparing a concise overview of their future business and technology requirements. Producing a comprehensive profile of card activity will incentivise providers to submit strong proposals based around competitive pricing. Providers will also want to ensure that merchants are kept abreast of the latest changes in payments technology to help them to improve their business processes.
Another, and more practical, solution is for merchants to manage their card acquiring costs on an ongoing basis. Bankhawk Analytics have developed a powerful merchant analytics cloud platform to help merchants to manage their merchant acquiring services on a monthly or quarterly basis. Many leading retailers, hotels and other merchants are using Bankhawk Analytics to minimise their acquiring costs. The platform provides detailed analytics that enable merchants to get a precise understanding of how their costs are structured and what they can do to minimise these costs. It also ensures that merchants are familiar with the latest pricing trends, highlighting opportunities to take advantage of all the changes in the market. Bankhawk’s platform also provides powerful benchmarking allowing merchants to determine how competitive their pricing is and facilitating discussions with their providers to drive additional value (cost savings?).
In my next blog I will talk about the specific steps involved in managing an effective RFP process for your merchant acquiring services.
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