Why do you need my Merchant Statements?
Do you feel skeptical or on-guard when a payments sales rep asks you for your merchant statement in order to give you a price quote? If so, you are not alone. Most business owners today just want to know, “What is your rate?”. We live in an age where transparency matters and pre-determined, flat rate pricing feels transparent to customers and, more importantly, it feels fair. You post a price that is the same for everyone and it is straightforward & easy to understand. Of course, most people want to buy from that vendor because they don’t have to worry about whether they are being taken advantage of or being priced fairly.
However, there are tradeoffs that come with pre-determined, flat-rate pricing- that one-size-fits-all approach. Any pricing structure that does not take into account your business processing environment will tend to be more expensive than one that does. Pre-determined pricing indicates that pricing was set without an understanding of the costs for acceptance. The price must therefore be high enough to cover any costs that come through regardless of the type of card. Let’s dive into that more.
To understand how baseline pricing is set for card acceptance- you only have to google, Visa Interchange chart, or Mastercard Interchange chart. You will find documents pages long that detail the baseline costs for acceptance of credit cards. Visa, MasterCard, Discover and Amex charge different prices for different cards based on several factors:
1) The card type- Debit vs Credit
2) The card issuer and programs- Is it a rewards or corporate card? What consumer benefits come with the card?
3) What type of business do you operate? Are you a utility company, medical office or grocery store?
4) What is the size of the transaction?
5) How are you accepting payment? (In-person, online, over the phone)
All of these factors play a part in the costs of your acceptance. When you provide statements to someone, you are allowing them to understand the costs associated with your unique business and customer base, before they provide you a price quote. This gives them a chance to analyze how you are processing cards and provide a price quote that is fair to you and also ensures they will make a profit.
It is important to note that interchange costs are not the only costs that factor into acceptance, the processor also has their own costs that are not published, but interchange complexity is what drives the request for historical statements.
If you just don’t feel comfortable providing your statements to get a quote, thats ok too. Most payments companies utilize a pricing model to anticipate interchange costs for a particular type of business and so they may only need to understand your monthly credit card sales volume and number of transactions in order to provide you a quote. Feel good going this route if you are confident that your business will likely align with the averages of your industry in terms of card mix. I hope this helps demystify payments for you a little bit! Send me your payments questions and I will be glad to get them answered for you: firstname.lastname@example.org.