Are You Ready for the Payment Revolution?
The credit card processing industry began a full steam march toward change in 2011. For instance, merchants saw the beginning of a mass migration towards the adoption of new mobile technologies that promise to change the way they accept payments. The industry also saw new legislation that brought public awareness to the high costs of accepting card payments, and new startup companies introduced groundbreaking services to not only help merchants accept payments but also make them smarter marketers while simultaneously lowering their processing costs.
It is my belief that the processing industry is about to undergo a disruption unlike anything is has ever experienced, and that these changes are eminent and unstoppable. Why? Two reasons:
First, and not surprisingly, merchants are fed up with the traditional credit card processing industry. Everywhere they look they are getting hit with more and more fees. It’s not uncommon for a merchant to be paying 4-5% in effective costs when all of their fees are added together against their total card sales. Not only that, but the merchant services industry is notorious for extremely poor customer service. Instead of supplying a product of value and giving merchants fair pricing, most providers rely on locking merchants into contracts with a goal to collect as much in fees for as long as possible. It’s a “churn and burn” industry and merchants have had enough of it.
Second, the new technologies and services that are entering the market promise to be different. These services are promoting features that include the complete elimination of nearly all of the most common fees imposed by traditional processors; such as cancellation fees, monthly fees, annual fees, PCI compliance fees, statement fees, batch header fees,AVS fees and nearly every other fee you can imagine. When it comes to processing costs, many of these services are offering flat rates that are easy to understand and don’t include any hidden downgrade surcharges. As you might have guessed, this is music to most merchants’ ears.
Below you will find my predictions for the top card processing trends for this coming year. Be sure to follow us on Facebook, Twitter, and Google+, or by email and RSS to stay informed as we track these changes.
Mainstream Merchant Adoption of Mobile Smartphone Processing
The popularity of iPhone and Android devices has given rise to companies like GoPayment and Square. These companies offer free card readers, free setup, no monthly or annual fees, no contract, and flat processing rates. Square reported that it has shipped nearly one million card readers since its launch in 2009 and GoPayment is likely not far behind. Not only do these services make great mobile options, but they are also great backup options in the event of a service disruption from a primary processor.
Mobile processing popularity has spurred traditional processors into offering similar smartphone apps and card readers in order to compete, but generally under traditional merchant account pricing models. Merchants will need to be careful so as to not fall prey to copycat services that lock them into expensive fees and long-term contracts. Continue reading