While we all expect an advanced system to require an upfront
investment, it is less commonly known that substantial ongoing fees are often
part of the package. In one recent analysis that I prepared for a local
restaurant owner, fees totaled over $7,000 per year! With that said, I hope to
offer insights that will help you avoid, or remedy, these hidden fees so that
you can reduce your expenses and free up your capital.
What are the hidden POS fees you might be paying?
To get to the bottom of this we need to first take a look at
your credit card processing program. Many processing companies have adopted a
business model that replaces a direct sales force with a network of POS dealers.
These dealers sell POS systems and credit card processing as a package,
offering various upfront incentives like a free round of gift cards and/or
discounted technical support. As a part of this agreement, the processing
company pays the dealer up to 50% of the monthly revenue earned on your account.
While this business model does provide some general benefits, it is not a
merchant-centric model where satisfying your needs is the key motivating
factor. Instead, this model promotes a processor monopoly where lack of
competition drives your prices higher and the service level lower.
While everyone expects processors to be able to make a
reasonable return on their services, the POS dealer/processor relationship can
often drive the prices up by over 100% what you would be paying if there was
competition for your business. This is due to the revenue sharing agreement
(often up to 50% of the processor's profits) which the POS dealer benefits so
greatly from. Typically, this revenue sharing model will result in $1,000's per
year in higher costs for you, the merchant.
Also, you can be made to feel trapped into your processing
relationship, even if the customer service, deposit schedule, or any number of
other factors are not to your liking. Taken to the extreme, to discourage
customers from shopping for a better rate—and potentially eliminating the
sweetheart deal the POS Dealers are enjoying—many dealers will claim that the
POS system is only compatible with their processing vendor, when in fact any
number of processors can integrate with that POS system with ease.
What can you do?
Whether you are shopping for a new system or have an
existing POS, your associated credit card processing program deserves to be
evaluated. Navigating and understanding all of the fees on your merchant
statement can be difficult, and your options may not seem clear. We would be
happy to review your program, detail out opportunities to reduce your expenses
and discuss all aspects of your business to help you make an informed decision. Contact US for more info.
