Payment Processing Market Continues To Change

By Brian Albright, Business Solutions magazine

Find a merchant services partner that can help keep merchants informed and educated.

Customer education, service, and a continued focus on security and PCI (Payment Card Industry) compliance will be important for resellers in the payment processing space during the next year. The payment industry is in flux, with the impact of new regulations still reverberating throughout the market, and banks and credit card companies issuing new fees and more complex requirements. Merchants are looking for help in staying on top of all of these new developments, and VARs can play a critical role in helping their customers navigate the shifting payment landscape. 

Issues surrounding interchange rates and other fees have grown more complicated. Last year, the Durbin Amendment, part of the Dodd- Frank Wall Street Reform Act, went into effect, capping debit interchange fees. The result: merchant fees were lowered, to the tune of millions of dollars. However, processing companies were not required to pass that savings through to merchants; some did, some didn’t. “It’s more important now than ever to make sure you are partnered with a company that has a billing structure that passes through those items,” says Jamie Nonni, CEO of Nationwide Payment Solutions. “In the past, many companies would offer tiered rates to hide these types of fees, but in our opinion, those days are gone. Cost-plus billing gives resellers more flexibility.”

Visa, MasterCard, and the major banks have responded by issuing new fees to help meet the shortfall they experienced post-Durbin. Visa, for instance, announced new fixed acquirer network fee (FANF) and transaction integrity fees in April, and MasterCard announced new fees for July, including a new license and registration fee and a new Type III third-party processor registration fee.

"Rate structures are more complicated than ever," Nonni says. "There are more fees and items that impact merchants based on how they interact with their customers. It's important to do business with merchant services companies that understand these changes and can educate the channel about what it means for their customers."

The new FANF fee, for instance, will cost the average merchant an additional nearly $60 per year. "Partnering with the right company that stays ahead on these issues and communicates them with the resellers is huge," Nonni says. "As a reseller, if you aren't educating and communicating with your customers the impact of these changes, you could damage the relationship and risk losing them as customers."

Security Is An Ongoing Challenge
Security and PCI compliance remain an important consideration for payment VARs; simply having PCI compliance is not enough. "I've talked to POS VARs who are using gateways or have paid security companies to validate them. After they do so, they think they don't have to worry about it any more," Nonni says. "That's not the end of the road. You still have to maintain security, and being validated doesn't mean you have completely reduced your risk of exposure to a breach."

Find a partner with a gateway solution that offers tokenization. Make sure the gateway solution removes the VAR's exposure to handling cardholder data. "Just because a gateway handles the authorization doesn't mean they've removed all the cardholder data from the VAR's system," Nonni says. "You have to completely eliminate that exposure, not just reduce it."

Providing visibility into processing and interchange fees and maintaining proper security measures are only part of the equation, however. Nonni says that ongoing customer communication is critical for merchant services providers and their channel partners.

Why? Because while POS loyalty remains relatively stable, merchant services retention is much more challenging. Merchants are constantly barraged with merchant services offers, many of which are misleading. That's a risk for both the VAR and whatever services providers they partner with.

Nonni says taking the extra step in communicating with customers can help make a difference in retaining relationships. Don't just rely on email — pick up the phone and call customers on a regular basis, and if possible visit them in person. That personal touch will help distinguish you from the generic solicitations that merchants receive every year — and help improve customer retention rates.