Understanding Merchant Account Providers

The majority of the companies selling merchant services are resellers, independent sales agents, or referral agents who act as agents for large payment processors. According to The Nilson Report, the top 7 payment providers processed over 90% of the Visa and MasterCard credit and debit sales in 2007.

These large processors such as First Data, Elavon, Chase Paymentech, Heartland and others dominate the U.S. market through their own sales organizations and a network of resellers, bank partners, and referral relationships with various associations and organizations.

There are approximately 2,000 registered resellers in the United States. All of these resellers are paid based on a compensation model that is similar. They add a profit to the base costs that Visa and Mastercard charge. The pricing levels on rates, fees and other costs can vary greatly from one processor to the next and one customer to the next. These resellers are called ISOs (Independent Sales Organizations) or MSPs (Member Service Providers or Merchant Service Providers) and are typically registered with one of the “Big 7” to sell merchant services under the ISO’s or MSP’s name. Many of these ISO's have several brokers and referring companies beneath them as well.

Based on having 2,000 resellers in the U.S. and most of these resellers employing teams of commission based sales representatives, businesses across the United States are bombarded with credit card processing offers and cold calls on a daily basis.

These resellers calling businesses every day can take on varying degrees of involvement in their merchant services portfolios. Some resellers perform sales, underwriting, customer service, terminal deployment and support, and manage a degree of liability if the merchant goes out of business. Some resellers also provide valuable services that may not be found at a large payment processor – such as support of proprietary software systems. Most resellers, however, are simply sales offices or brokers with all the back-end functions being handled by the sponsoring processor.

Also, there are somewhere around 15,000 banks of all different sizes in the U.S. Most of the large banks exited the merchant services business over the last 15-20 years, and simply refer all of their clients to their processing partner. In fact, less than 1% of the banks manage merchant services internally. They have a referral or resale agreement with a third party. For instance, Citibank and SunTrust refer all of their merchant business to First Data, and Wachovia and KeyBank refer all of their merchant business to Elavon. In return, the banks get a small percentage of the payment processing profits. Banks in essence act as exclusive sales distribution arms for large payment processors and are not typically involved in the sales, service, or support of merchant services.

Faced with a dizzying array of pricing models and under constant bombardment by credit card processing salespeople, many businesses dread the thought of “analyzing their credit card processing costs”. Navigating through high pressure sales tactics and different interpretations of data, many businesses spend weeks or months evaluating these costs trying to sift through all the information that is being presented to them.

Financial Mitigation Services (FMS) is NOT a credit card processor, a reseller or a broker. FMS is an independent third party firm that specializes in credit card processing cost reduction for our clients. FMS has inside knowledge and relationships with all of the “Big 7” processing companies and we stay up to date on emerging pricing trends that can help our clients. Our primary goal is to uncover unnecessary fees, overcharges and errors in our clients’ processing costs and recover these dollars for our clients.

Give Financial Mitigation Services a call today at 1-800-797-5642 or visit our website at www.FinancialMitigationServices.com to learn about our Free Analysis of your processing costs.

Credit Card Processors and Profit Margins

Excerpts from one of the nation's largest credit card processor's Second Quarter 2009 earnings call:

2009 2nd Quarter REVENUES
"Transaction processing volume continues to reflect economic weakness. Same store sales were negative for the fifth consecutive quarter this quarter down a record 9.7%."

2009 2nd Quarter MARGINS
"Although revenue growth slowed in the quarter, margins rose sequentially to 14.7%."

Doesn't the above story tell it all? If you are relying on your credit card processing company to analyze your statements and recommend the best possible pricing plan for your business, you may be making a costly mistake. Call Financial Mitigation Services today at 800-797-5642 and have our team of expert analysts review your credit card processing fees.

Visa/Mastercard Rate Adjustments

Visa and Mastercard charge the credit card processing companies for each Visa and Mastercard credit or debit transaction. The credit card processing companies then pass on these charges to the business owner with a markup. The amount that they mark-up is completeley up to each processor.

There are now over 150 different combinations of Interchange Rates and/or transaction fees that are determined based on a variety of factors for each transaction:

- Business Industry Type
- Card Type (Standard, Rewards, Debit, etc.)
- Time between authorization and settlement
- How the card info was entered (swiped or hand keyed)

Typically, in the months of April and October, both Visa and Mastercard publish new Interchange Rates for the processing companies. Some of the rates in the 150 plus categories are adjusted upwards, some are adjusted downwards and some remain the same. Depending on how the individual processing company treats these new rates can impact the business owner tremendously in their credit card processing costs.

Some processors take full advantage of these rate adjustments to raise prices on all interchange categories across the board rather than just the categories that have been impacted. Some processing companies even increase the prices on Interchange categories that have been decreased by Visa and Mastercard.

Typically, businesses are informed of this by a simple notation on the previous month's statement or a letter that is included with the statement packet. The note may say something like: "Visa and Mastercard increases to Interchange Rates will go into effect October 1, 2009. Effective October 1, 2009, you will see an increase of 0.004% or X basis points on your pricing."

The note makes it appear that Visa or Mastercard are the entities increasing rates on all transactions and that the processor is powerless to stop this action. Rather than a slight increase in some categories and a slight decrease in others, many businesses receive an increase in credit card transaction costs across the board. The actual costs that the processor pays Visa or Mastercard may have remained the same or even gone down, yet the client's costs are increased.

Do business owners, CFO's, Controllers or others at an office have the time to continuously evaluate credit card transaction costs to the degree that is necessary? Is any business owner able to stay informed on exactly what Visa and Mastercard are doing in the pricing arena, or are they simply relying on their processor to inform them? Our research suggests that a great majority of businesses simply rely on their own processor or competing processors for this information.

The bankcard processing industry is on pace to be a $100 billion dollar industry in the United States soon. The cost of processing bankcards impacts your bottom line. There are ways to decrease these costs without going through the pain and hassle of switching prociders. Simply gaining the knowledge necessary can save your company thousands of dollars.

Financial Mitigation Services employs a team of expert analysts to review ALL of your processing costs on a monthly basis. We initially perform a detailed audit of every factor that impacts your credit card processing costs. Then we will formulate a plan for your business to recover excess fees and possible overcharges.

Give us a call today. You may be able to put thousands of dollars back into your business without changing your processor, without changing any of your procedures and without spending alot of time to accomplish this.

Call Financial Mitigation Services today at 1-800-797-5642

FMS Merchant Services, Credit Card Processing Consulting

Each FMS Cost Reduction Recovery engagement includes an in-depth analysis of hundreds of unique cost categories that impact your credit card processing fees. Using comparative data from businesses nationwide, our analysis targets the optimal costs in each of these categories and then we help our clients implement the proper fee levels for each of these cost categories. We have developed a process of specific steps to take that are guaranteed to lower merchant account fees for our clients.
Call Financial Mitigation Services today at 1-800-797-5642

Businesses Across USA are paying too much to process credit cards

In 2007, businesses in the U.S. paid over $60 billion dollars for the privilege of processing credit cards. This is a staggering 133% increase since 2001. Not only are more people and business clients using credit cards and bank cards to purchase items, the average cost per transaction is steadily rising. Just in 2008 alone, the two major credit card companies each enacted significant increases to business owners.

What does the typical business do about this? Many go out and solicit quotes. Many have competing processing companies "analyze" their statements to see if they have a good rate. Some call their current vendors and ask for a lower price. What all of these methods of cost control lack is the necessary knowledge to truly know what a competitive cost is. Sure, you can compare with your buddies that own businesses, but they often are in a completely different business model and the rates they receive have no bearing on your business.

Most credit card processing statements are filled with a dazzling array of fees, cost categories and charges. For a great majority of business owners, the reasons behind these charges are not readily known. The typical business owner, CFO or Controller does not have the time to understand one of the most convoluted billing structures ever devised. Credit card processing is one of the most complicated and least understood invoices that any business ever pays.

The beauty of the credit card processing business is that no one ever has to "pay" for the charges that are assessed them. Business owners nationwide trust their processors so much that they allow the processors to pull the money direct from your bank account before they send you an invoice. What if there is a mistake? Will you catch it? What if certain categories of charges were wrongly categorized into the wrong billing rate, costing your business thousands of dollars? Would you know? Is your rate for a specific type of rewards card competitive? Is the fees you are paying for each transaction the same, better or worse than your competitor?

Despite having a convoluted billing structure, the merchant account processing business is fairly simple. The credit card processors simply take the rate that they have to pay the major credit card companies and then add a profit to themselves. Do you know how much profit your credit card processor is making on your business each month? Do you want to know?

In most transactions that you undertake within your business, you have a general idea of what the profit margins are for your vendor. In the credit card processing industry, that knowledge is known by very few businesses.

The facts above are the reason that Financial Mitigation Services (FMS) is in business. Financial Mitigation Services helps business clients across the country uncover excess fees and overcharges on their credit card processing costs.

FMS is not a credit card processor. We are an independent expert with over 20 years of executive level experience in the credit card processing industry. We help our clients put specifc plans in place with their current processor to achieve the lowest possible costs in this industry.

Do you know how if your business is paying excess fees or overcharges that are not necessary? Call FMS to find out - 1-800-797-5642