Pass-through vs. Flat Rate Pricing: Presenting the Best Options to Your Merchants

by Crystal Deese | Sep 19, 2022

“Why is my effective rate different this month versus last month?”

This is one of the most common concerns we hear from new merchants after their first few months of processing. Explaining the fundamentals of interchange to a merchant is no easy feat. When selling based on the effective rate, the pricing model used to pass the cost to the merchant is important. The two most common pricing models sold are pass-through pricing and flat rate pricing. How do these pricing models impact the effective rate, and how do you determine which pricing model works best for your merchant?

Pass-through vs. Flat Rate Pricing

Pass-through pricing

Pass-through pricing allows the true cost of processing to be passed on to the merchant. The benefit of pass-through pricing is transparency and lower costs. On a pass-through pricing model, merchant fees fluctuate monthly based on interchange and card brand fees. Interchange is determined based on card types, the merchant industry, transaction size, and other factors, such as reward cards that give you cash back and miles towards a consumer’s next vacation.

Common examples of factors that drive interchange costs are:

Rewards Cards – Interchange costs are higher to offset the cost of the rewards programs to the cardholder.
Keyed and e-commerce transactions – Without having the swiped and chipped data, the risk that the transaction could be fraudulent is greater and therefore, a higher risk. Address verification (AVS) helps mitigate the risk.
Debit Cards – Have the lowest interchange costs due to the lower risk. Debit transactions are funded directly from the cardholder’s bank account.
Average Ticket – Merchants with a lower average ticket qualify for interchange rates with reduced transaction fees, which lower costs.
Industry Types – Schools, government entities, utilities, etc., have special interchange pricing that can lower costs.

Flat Rate Pricing

Flat rate pricing is not designed to be competitive; it is meant to be easy to understand. A flat rate pricing model gives merchants a fixed percentage that is not impacted by the cost of interchange or card brand fees. Regardless of the types of cards accepted or any of the other factors that influence interchange costs, the merchant’s effective rate never changes. It is essential to remember since the merchant’s rate is fixed, flat rate pricing should be priced high enough to cover the cost of fluctuations in interchange rates. Recommended flat rates are currently ranging from 2.75% – 2.99%. The varying costs of interchange will affect the overall residuals earned on a monthly basis.

Pass-through Pricing	Flat Rate Pricing
Merchant cost is dependent on the interchange qualification.	Merchant cost is a fixed percentage.
Merchant effective rate fluctuates based on interchange qualification month over month.	Merchant effective rate remains the same regardless of interchange costs.
Partner earns a fixed residual percentage regardless of the underlying interchange.	Partner earnings fluctuate depending on interchange qualification.

So, what is the right choice?

Choosing between flat rate pricing and pass-through pricing isn’t always an easy decision;

However, with so many variables it can be comforting for merchants to know their processing fees will not change. As long as the sales and average ticket don’t fluctuate significantly month to month, the cost will remain relatively constant and predictable.For these reasons, when it comes to selling merchant’s on the effective rate, we have found the best pricing model to use is flat rate pricing.

Looking to learn more about Pass-through vs. Flat Rate Pricing

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Three Tips to Grow Your Payments Portfolio

by Ciara Watson | Aug 23, 2022

Financial analyst analysis business financial report on digital

Advantages of a BOLD portfolio

Building a portfolio with BOLD is a unique experience that many may struggle to find elsewhere. Whether you are building off of an existing book of business or starting from scratch, BOLD has the resources to assist with your company’s growth. Unlike what most find in our industry, BOLD has complete transparency and a network of diverse team members. One of BOLDs top benefits is the lion’s share of the revenue. Providing full control over your portfolio the BOLD team works to curate a personal experience that best suits every partners’ needs.

Working with the Partner Relationship team can help meet goals and maximize return on investment. It is important to understand the benefits of residual income and ways it can drastically help your business. I have partnered with BOLDs Senior Partner Success Manager Ciara Watson to bring you her top three tips on growing a portfolio. Ciara has twenty years of industry experience under her belt and as a previous business owner herself, she understands the needs of merchants.

Tip #1 Keep an Open Mind

When you first start building your book of business it is a good approach to stay focused on a specific target market. As your portfolio continues to grow, having an open mind to other markets will allow you to be a part of endless opportunities. Branching out into new markets may bring up some unexpected obstacles. Becoming educated and staying informed on new avenues can be the key to overcoming any hindrance and generating a great deal of revenue.

You may try new pricing structures or different product offerings depending on a merchant’s needs. For example, some ISVs and VARs are hesitant to dive into Dual Pricing. Dual Pricing has proven to be successful with many of our partners as it allows merchants to save considerably on processing fees. Given proper education on the subject many merchants find themselves open to potential savings. While your customers continue to be approached by salesmen looking for their business, give them a reason to stay. Additionally, having accessibility to a variety of product offerings may also improve merchant retention.

Tip #2 Have Confidence in Your Skillset

Understanding your strengths and knowledge within this industry will help build a profitable strategy. Networking and attending different trade shows can help develop known weaknesses. The BOLD team finds that people are eager to educate others when given the chance. Don’t be afraid to ask for referrals and have an open line of communication with merchants. Reach out to software companies directly if you are unfamiliar with their product. All it takes is one new software or product to master, and a new target market can be acquired. Continue to build your existing skills and portfolio expansion will follow.

Tip #3 Analyze Your Current Book of Business

When analyzing your current book of business, growth can be measured in a number of ways. With BOLD you have full control over your portfolio. Growth may be tracked by revenue earned, merchant accounts boarded, monthly volume, or customer satisfaction. Reviewing current accounts is a good place to start forming a strategy for growth. Can you identify businesses that are not producing? You may find valuable resources are being misplaced. Ciara likes to refer to the 80/20 rule also known as The Pareto Principle. It is important to exert the right amount of effort to achieve desired results.

Conclusion

Applying Ciara’s tips and suggestions to your business will help revenue grow at an accelerated pace. Remember to always have an open mind when selecting a target market and be willing to explore new strategies. Have confidence in your current skills and determine areas of improvement. Continue to build on existing skills by analyzing your current book of business. Asking the right questions is essential and can help you properly allocate valuable resources. At BOLD we strive to meet our core values and exceed partner expectations.

Coming Soon

With all these things in mind, we look forward to bringing you part two of this series where Ciara’s tips will be implemented on a partner portfolio and real results will be presented.

Looking to learn more about Portfolio growth with BOLD?

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Covering the Upcoming Regulations to Cash Discounting

by Kelley Ganas | May 25, 2022

The industry and what we consider “cash discounting” is changing. As regulations from the card brands begin to mount, many merchant processors are looking to offer a variety of compliant fee-based programs for their merchants. As BOLD continues to uncover details, the direction of the card brands is becoming apparent. To understand where we might be headed, it is important to understand where it all began.

History of Cash Discounting

“Cash Discounting” found its niche in liquor stores and gas stations in the early 2000s as business owners looked for cost-cutting measures. Before card brand regulations in 2011, companies were charging card paying customers excessive fees in order to cover the cost of merchant processing, and then some. However, since the introduction of the Durbin Amendment Act, rules were put in place to protect card-paying customers and business owners while opening the doors for businesses to run a “compliant” Cash Discounting program.

In § 920 Section 4 of the Durbin Amendment (Reasonable Fees and Rules for Payment Card Transactions), the term “discount” is defined and makes abundantly clear that any program adding a fee to the regular price is not a “cash discount” as defined by the Durbin Amendment. This is the rationale for using terms such as “non-cash adjustment” rather than “cash discount” and is a large reason as to why we are in the current situation.

Current State of Cash Discounting

In terms of Cash Discounting, perhaps the biggest takeaway from the Durbin Amendment is that business owners MUST treat their program as a DISCOUNT on their regular price rather than a FEE. Many merchants began promoting their regular pricing to include a non-cash adjustment allowing customers who pay with cash to avoid the NCA (non-cash adjustment). “Cash Discounting” programs were quickly branded as in-kind incentives and or non-cash adjustments with this pricing model in place.

However, card brands have recently faced difficulties regulating merchants running these types of programs. Cardholder complaints have drastically increased over excessive and inconspicuous fees as merchants implemented unregulated programs which were NOT forthcoming in the difference in pricing (violating § 920 Section 3).

Looking to talk to a Feeless Payments Expert? Let’s Talk…

Possible Future of Cash Discounting/Fee-Based Programs

The Card Brands (Visa, Mastercard, Amex, Discover) regulation on terminology and how the program is presented has ignited software vendors and merchant processors to make changes to their software and practices in order to adopt the current updates.

Terminologies such as “in-kind incentive” and “non-cash adjustment” are being phased out and replaced with a “Dual-Pricing” structure. As of the day this blog was originally posted, Dual Pricing is the safest method of running a fee-based program without the need to register with the card brands. Dual Pricing will vary from state to state based on state and local laws but here are some of the high level bullet points of this type of program :

- The credit card receipt will no longer contain a separate line item informing the customer that they will be charged for using a credit card (i.e.- non-cash adjustment).
- Cash pricing and credit card pricing will more than likely need to be displayed separately on menus, shelves, and promotions.
- All cardholders must be notified of the charges of the final total BEFORE running the credit card. (more than likely the terminal/POS system will need to be able to distinguish and provide a cash receipt and a credit card receipt)
- Signage will still need to be highly visible throughout the establishment informing the card holders of the varying prices.

BOLD will continue to monitor and update this blog as changes arise. In the meantime, should you have questions, please contact us by filling out the form below or emailing us at info@boldpay.io.

Disclaimer- The information provided does not, and is not intended to, constitute legal advice; instead, all information, content, and materials are for general informational purposes only.

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Part 1 of 3: The Tools and Unwritten Rules Used by BOLD’s Client Services Team

by Stephanie Buckley | Feb 15, 2022

Managing a successful support team for POS/Merchant Processing can be tricky.

BOLD’s growth over the past 10 years is directly related to the amazing talent we have brought on board, and one team, in particular, is the Client Services (CS) Team. Each CS Team member is trained and mentored by colleagues during their onboarding process. The team has adopted a culture where each person is encouraged to ask and answer questions. This is what makes our client services team so unstoppable and why I am excited to provide an insider’s look into this three-part series as to what makes BOLD Support so powerful.

The main benefits of this blog is to share how our team works and the tools we have found helpful when supporting our partners and merchants.

Multiple Channels for Support

Support via Email

Perhaps the most popular form of opening support cases for our partners is the use of email. Cases that come in via email directly hit our Customer Relationship Management (CRM) software and land in a Case Queue managed by our team. Cases that we receive via email provide smoother comprehension and the ability to resolve high-level issues with a sense of urgency. It also allows us to route or assign Cases to team members that specialize in that particular issue cutting down on the Case Age Lifecycle.

Routing of Incoming Emails

While the entire team is responsible for the queue, we have found that assigning one or two people (our “Queue Masters”) to assign Cases to team members drastically reduces the amount of time new Cases go untouched. This helps keep our initial response times within our goal of three hours (depending on the severity of the issue).

BOLD Unwritten Rules

Goldilocks Communication – Not too much, not too little- just right.

Too much information can overwhelm and even confuse a partner/merchant. They might not know the inner workings of a process and to find out may cause stress when it is not needed.
Too little information causes multiple attempts to communicate. Questions come up and partners are left unsure if what we’ve told them is verifying/answering their question completely.

Tools
Salesforce (Service Cloud)
Email to Case

Support via Phone

Support over the phone allows us to build a personal connection with our partners. Not all ISVs and VARs have the time to pick up the phone to call into a support number, but a verbal conversation is the preferred method for many of our partners.

Giving the Right Answer over the Phone

The Client Service’s job is to provide our partners with an answer or resolution when they need it. However, in such a technical industry dealing with various point-of-sale softwares, we have trained our team that there is nothing wrong with saying “I do not have an answer for that now, but let me speak to someone that can answer that right away.” Providing service just based on the speed of response can sometimes cultivate a culture where the first answer is not always the correct answer. We encourage due diligence to alleviate future headaches for our partners and their merchants.

Routing of Incoming Call

Similar to our email system, incoming calls also end up in a phone queue. Each team member is responsible for logging into the queue when available and out of the queue when they are away from their desk. Each team member has visibility as to which rep is available and makes sure the phones are covered before logging out. Depending on the prompts the user selects when calling, the call is routed to the proper channel based on severity of the call. Should a voicemail be left, the reporting and transcript immediately hit our email Case queue described above where it is assigned to the first available representative.

During uncommon times when the calls outnumber our available reps, BOLD has integrated a solution that allows our busy partners the chance to remain in the queue while they await a callback. When this solution is used, our phone system immediately rings the first available representative and, when answered, automatically places an outbound call to the partner.

BOLD Unwritten Rules

It’s okay to say that you’re not sure, and want to find out that information for them. Trying to answer incorrectly or beating around the bush because you want to perceive you are “all-knowledgeable” is a waste of the partner’s and your time.
- Find the answer quickly – don’t keep them on hold – offer to call them back once you have found an answer. If they would rather hold, great! Check back every 5 minutes or so to gain trust

Tools
GoTo Connect
Salesforce

Portal/Online Support

Opening Cases via Online Forms

Another popular channel for our partners opening a Case with BOLD is our partner portal. Perhaps the largest benefit this has for the Client Services team is the fact that incoming Cases can be automatically categorized and assigned to the proper channel bypassing our Email Queue. Depending on the form being filled out, our System can predefine the Case Category and walk the partner through necessary fields for opening the Case.

Providing a Partner Knowledge Base

Along with the ability to open Cases, a knowledge base (linked here) is available for our partners to quickly find documents, QRGs, and answers cutting down on the amount of inbound calls/emails our services team receives.

Tools
Salesforce Communities
Salesforce Knowledge Base

(Coming Soon)

Part 2

How BOLD Categorizes and Organizes Incoming Cases
Managing Vast Amounts of Information

Part 3

Managing Multiple Team Members
Taking Advantage of Customer Feedback Tools

Questions on implementing some of these tools for your team?

Contacts us below and we can get you started.

BOLD Payments Merchant Statement Breakdown: Part One

by Nichole Kazenske | May 6, 2021

This post kickstarts a two-part blog series on Merchant Statements. What you will discover here is something every merchant should know about statements, a breakdown in pricing structures and how interchange can affect them, as well as a BOLD Statement Analysis.

EVERY STATEMENT IS DIFFERENT

If you are a merchant, it is important to keep in mind that every statement will look different depending on who the processor is. Some statements may be easy to read and comprehend, while others may appear confusing. In some cases, for merchants who have used the same processor for years, it’s more challenging to identify whether or not their statements could be worse for better. Perhaps it’s because using the same processor is comfortable, or it truly is the best deal. At the end of the day, it’s simple: You don’t know what you don’t know.

WARNING: IT MAY BE CONFUSING

When reading a statement, two of the most confusing things that pop up are the structure of the statement itself and understanding interchange. Here is a breakdown of merchant pricing structures and how an increase in interchange can affect them:

1. Flat Rate Pricing– Flat rate pricing is one rate on transactions provided by the merchant processor/partner for all transaction types (manually keyed, swiped, moto, etc) and usually does not change when interchange fluctuates. Unless the merchant processor/partner decides to increase the merchant fees to offset the cost, a merchant on flat rate pricing will feel no effect of a rise in interchange rates.

For an accurate cost comparison when quoting a merchant for flat rate, it is vital to specifically compare the merchant’s True Effective Rate to their new rate.

HOW TO FIND THE TRUE EFFECTIVE RATE

Total Credit Card Fees / Total Credit Card Sales

The True Effect Rate is determined by dividing the merchant’s TOTAL credit card fees by their TOTAL credit card sales. For example, a merchant who pays $1,250 in total credit card fees runs $50,000 in credit card sales has a True Effective Rate of 2.50% ($1,250/$50,000)

2. 3 and 4 Tier Pricing– A merchant paying rates based on tiers will also not feel the effect of a rise in interchange. In this scenario, a merchant processor has given the merchant 3-4 rates based on the transaction type (i.e.- the merchant will experience a higher rate when a transaction is manually keyed as opposed to swiped/dipped). As interchange fluctuates, the tiers remain the same.

3. Interchange/Cost Plus Pricing- The most common rate structure offered by merchant processors, Cost Plus Pricing is based solely on the rate of interchange with an additional markup for the merchant processor. In this scenario, the merchant’s rate will fluctuate with interchange while the fees to the processor remain the same.

TAKEAWAYS:

Be curious. | You don’t have to make a switch right off the bat. However, asking questions and gaining better understanding of other available options will help clear the path in deciding what is best for you and your company.
Be confident. | The last thing you want is for your business to be taken advantage of due to misunderstandings. Familiarize yourself with the terms above and if anything on your statement seems confusing or out of place, bring it to the processor’s attention.

A ONE STOP SOLUTION

While it’s easy to get tripped up in the tiny details and hidden fees of merchant statements, at BOLD, we provide a transparent Statement Analysis. First, we match what the merchant is currently being charged to give our partners insight as to what profit would look like if it remained the same. We then provide input on areas of the statement where the partner can save the merchant money while maximizing their profitability.

After receiving a statement, our team will provide an analysis and proposal within 48 hours. To receive your Statement Analysis, submit a case below with your attached statement or email our PRM team at prm@boldpay.io.

Continue Reading Part II Here

BOLD Benefits for Partners and Merchants (A Case Study with Total Merchant Supply)

by boldpay | Mar 16, 2021

This post is applicable to both partner processors and merchants. In this post, you will find examples of two case studies that show how impactful a switch to BOLD can be. Learn more about how Total Merchant Supply swooped in to save “Smokers Depot” by collaborating with us.

THE BEST OF BOTH WORLDS

BOLD presents the full package. Learn about the benefits as a partner processor or as a merchant. We are here for you! It’s the best of both worlds.

THE BENEFITS FOR A PARTNER PROCESSOR

Let’s say there is a multi-site company who has worked with a partner processor for roughly 3 years, but they are currently looking to save money. The company feels they had a disservice from the payment processor, and are asking a dealer who works alongside payment partners.

Overall, if we say they have 3-4 chip reader stations at each of their locations, there is going to be a significant cost to make the change across all of their locations if they work with their bank. Realistically, it could be anywhere from $4-6K per location to maintain what the company is getting for free. That comes from adding up the retail value on the hardware; POS, machines, card readers, etc. The total cost from the processor would be around $5K, with an additional $13K to change over.

However, if the dealer brings the company to BOLD, as a partner processor, the raw cost would be more to switch over but the monthly profit is greater. To give specific numbers, the switch over would cost about $11K, but the monthly profit would be $9K. After a few months and investing in equipment, the change with BOLD would result in larger financial gain than would be expected with a processor.

THE BENEFITS FOR A MERCHANT (A Partner Case Study)

One of our partners, Total Merchant Supply, recently ran into a sticky situation with their customer, Smokers Depot. During a routine service call, Total Merchant Supply was made aware of neglected computer backups, inflated fees, unclear merchant statements, and a True Effective Rate of 3.76%.

Understanding the urgency of the situation at hand, Total Merchant Supply immediately backed up the database, switched to a subscription based POS software, and kickstarted a merchant account with BOLD

You can find the full case study linked here.

BOLD offered a straightforward merchant statement, no additional unnecessary fees, 100% return on dealer’s line. Ultimately, BOLD brought the True Effective Rate down to 2.50% saving the merchant more than enough money to cover the cost of a new POS system. The savings per month came out to be $630.00.

Presently, Smokers Depot successfully stays 10 steps ahead of the game. Not only are they taking advantage of system updates, they are doing so with the elimination of monthly subscription fees. With that under control, they can now focus on growing their business and leave the tedious reports and statements to the ones who handle it best.

SOCIALS

Looking to find more information about the benefits of working with BOLD? Our team would love to answer any questions you may have! Give us a call at (877) 515-8472 or fill out the form below.

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