Becoming a Payments Pro: What Every ISV and VAR Should Know about Integrated Payments

Becoming a Payments Pro: What Every ISV and VAR Should Know about Integrated Payments

by | Jul 12, 2023

As an Independent Software Vendor (ISV) or Value-Added Reseller (VAR) embarking on a journey into the payments industry, your choice of payment processing partners can greatly influence your business’s success. That’s why we’re here to guide you through the key fundamentals of integrated payments, the perks they offer, and why choosing the right partner can make all the difference.

What Exactly is an Integrated Payment System?

In the simplest terms, an integrated payment system is a software solution that consolidates various payment methods into one unified platform. Whether your merchants’ customers prefer to use credit cards, debit cards, ACH, e-checks, or digital wallets, an integrated system handles it all. Imagine saying goodbye to juggling between multiple systems for different payment methods – that’s the convenience integrated payments bring.

The Perks

  1. Streamlined Operations and Cost Savings: Using a unified system that processes all payment types allows ISVs and VARs to simplify their operations. This consolidation reduces the resources needed to manage different payment methods, translating into significant cost savings. It also streamlines the experience for your merchants, enabling them to manage all payment-related tasks from one centralized platform.
  2. Enhanced Merchant Experience: Offering a variety of payment options through integrated payments simplifies the process for end-users and enriches the merchant experience. It eases payment acceptance, potentially boosting customer satisfaction and encouraging repeat business. As an ISV or VAR, you can set your services apart from competitors by offering this added value to your merchants.
  3. Greater Control and Visibility: One comprehensive system to track and manage all payments simplifies issue identification and resolution. An integrated payment system provides a high level of control and visibility over all transactions. Comprehensive tracking and reporting of all payments facilitate timely issue resolution and offer merchants a transparent view of their transactions, leading to improved decision-making. 
  4. Improved Security: Security is paramount in payment processing. Integrated payment systems are designed with built-in security features like encryption and fraud detection and adhere to rigorous industry standards like PCI-DSS.

Choosing the Right Integrated Payment System

When selecting an integrated payment system, ensure it fits seamlessly within the current software and processes. Consider the unique needs of the businesses you work with. Whether your merchants operate retail, hospitality, professional services, or e-commerce, your chosen payment partner should provide solutions that align with your merchants’ requirements. Also, don’t overlook the reputation and customer service of your potential payment partner. 

The integrated payment partner you choose becomes an extension of your services. Their reputation directly impacts your own. Choose a partner known for their integrity, transparency, and dedication to service. Additionally, robust customer support for both you and your merchants can make all the difference in resolving potential issues quickly and efficiently.

Why Partnership Matters: The BOLD Advantage

Partnering with a payment processor shouldn’t feel like stepping into the unknown. At BOLD Integrated Payments, we believe in transparency and building enduring partnerships. When you team up with us, you get more than just a payment processor – you gain a dedicated partner committed to your success.

ISVs that partner with BOLD receive a majority of revenue on all income, with transaction-level reporting down to the penny. Everything is clearly disclosed in a Schedule A because, at BOLD, we have nothing to hide.

In conclusion, integrated payments can be a game-changer for ISVs and VARs looking to simplify their payment process, reduce costs, and enhance customer satisfaction. As you embark on this journey, remember the invaluable role of a reliable and transparent partner like BOLD Integrated Payments. After all, in a landscape as fluid as payment processing, having a trustworthy ally can make all the difference.

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Card Brand Changes Part 2: Take Control of your Residuals

Card Brand Changes Part 2: Take Control of your Residuals

by | Apr 10, 2023

In our recent blog post, Navigating Card Brand Changes, we delved into the importance of staying informed about changes made by major card brands to their interchange rates and fees. As an Independent Software Vendor (ISV) or Value Added Reseller (VAR), awareness of these changes is crucial to maintaining a healthy residual income from credit card processing. We also highlighted some recent updates, including new interchange programs for merchant category codes (MCC) for e-commerce and card-not-present (CNP) transactions, and discussed the significance of avoiding downgrades to protect your profit margins.

As promised, we’re back with part two, and this time, we’re taking a deep dive into the world of residuals. In this blog, we’ll guide you through understanding your residuals, how to identify areas for interchange optimization savings, and exploring the impact of different pricing models on your earnings. Additionally, we’ll provide you with valuable insights into level 2 and 3 processing, ensuring that you’re well-equipped to maximize your revenue and stay ahead in the competitive payments landscape.

So, buckle up and join us on this journey as we continue to empower ISVs and VARs like you with the knowledge and tools needed to succeed in the ever-evolving world of payment processing. Let’s dive in!

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Understanding Residuals

Residuals refer to the recurring revenue that payment processing partners earn from the credit card transactions processed by the merchants they support. Residuals are typically a small percentage of the bank card volume and/or a fee per transaction that the ISV or VAR receives as compensation for their services.

In the payments industry, various factors can influence the residuals earned by ISVs, VARs, or ISO agents. Here’s a summary of the key factors to consider:

  1. Volume, transactions, and fees: Higher bank card volumes, transaction counts, and monthly fees can lead to increased residual income.
  2. Pricing models: The choice of pricing models, such as interchange-plus, flat-rate pricing, or dual pricing, can influence residuals. Each model has its pros and cons, and the impact on residuals will vary depending on the specific circumstances and strategy of the ISV, VAR, or ISO agent.
  3. Merchant retention: Provide exceptional support, communication, and services to merchants to ensure they remain loyal and continue generating residuals.
  4. Card brand changes: Changes in interchange rates and fees by major card brands like Visa, Mastercard, Discover, and American Express can directly affect residuals. Staying informed about these changes helps ISVs, VARs, or ISO agents adapt their strategies to protect residual income.
  5. Technological advancements: Embracing new payment methods, security enhancements, and improved processing solutions can help ISVs, VARs, or ISO agents stay competitive and maintain their residual income streams.

Pricing Models and Their Effects on Residuals

Flat rate pricing offers a straightforward approach, charging a fixed percentage and/or a per-transaction fee for all transactions, regardless of card type or transaction details. This model can provide predictable residuals and easy-to-understand pricing for merchants and payment partners. However, it can have limited earnings potential due to possible interchange downgrades leading to higher costs making this model risky and less profitable for certain merchant category codes.

Cost Plus (Interchange-Plus) pricing is a transparent model that separates interchange fees and card brand fees from the payment processor’s markup, charging merchants the actual interchange cost plus a fixed markup. This approach promotes higher residuals, tailored pricing strategies, transparency, and flexibility, giving payment partners a competitive edge. Although, it comes with increased complexity and variable residuals due to merchant transaction profiles.

 

A Dual Pricing Program

or dual sticker pricing, allows merchants to offer preferential pricing based on the payment method used for a transaction. The strategy involves offering two different prices for a product or service depending on whether the payment is made with cash or a credit card. Cash payments do not incur the cost of acceptance that credit card payments do, so merchants can incentivize customers to use cash by offering a lower price.

By offering dual pricing, ISVs, and VARs can reduce or eliminate the costs associated with credit card payments for merchants. Passing higher rates through to the consumer can result in higher profits for each transaction, ultimately leading to higher residuals for the ISV or VAR.

Impact of Pricing Models on Downgraded Transactions 

Downgrades are important to consider when managing your residuals on merchants using a flat-rate or dual pricing program. A downgrade occurs when a credit card transaction does not qualify for the best possible interchange rate due to missing or incorrect information, failure to meet specific processing requirements, or delays in settlement. When a transaction is downgraded, it is processed at a higher interchange rate, which ultimately increases the processing cost and reduces the profit margin for the partner. Additionally, downgrades can lead to lower merchant satisfaction as they seek more cost-effective payment processing solutions, potentially resulting in merchant attrition and further declines in residual income.

How to Identify Interchange Optimization Savings

Interchange optimization is the process of ensuring that your book of business gets the best possible interchange rates when processing credit card transactions. One key factor that can lower interchange rates is level 2 and 3 processing. Level 2 processing requires additional data, including tax amounts, customer codes, and merchant postal codes, leading to lower interchange fees and enhanced reporting. Level 3 processing, the most comprehensive tier, demands even more transaction data, such as item descriptions and quantities, making it particularly advantageous for B2B merchants. By adopting the appropriate processing level, merchants can enjoy reduced processing costs and a deeper understanding of their transactions.

Assessing Residuals and Identifying Areas for Improvement

When assessing residual income from merchant processing, ensure you have access to detailed transaction data from your payment processing partner. This data should include information on bank card volume, the type of payment method used, the monthly processing fees charged, and any disputes.

At BOLD, we offer extensive reporting to our ISV and VAR partners. This report includes detailed information on all their residuals down to the penny. This level of transparency allows our partners to track and analyze their residual income with precision, identifying trends and issues that may affect their profitability. With access to this level of reporting, BOLD partners can optimize their residual income and ensure that they are getting the most out of their payment processing partnership.

Empowering your Payment Processing Partnership  

In conclusion, staying informed about card brand changes and understanding the intricacies of residuals is vital for Independent Software Vendors (ISVs) and Value Added Resellers (VARs) looking to maintain a healthy residual income in the ever-evolving payment processing landscape. By carefully considering the effects of different pricing models, optimizing interchange rates, and embracing level 2 and 3 processing, you can maximize your revenue potential and maintain a competitive edge. At BOLD, we’re committed to empowering our partners with the knowledge, tools, and transparency needed to succeed in this dynamic industry. So, go ahead and leverage the insights shared in this two-part series to navigate card brand changes and unlock the full potential of your payment processing partnership. Here’s to your continued success!

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Navigating Card Brand Changes: The Impact of Downgrading

Navigating Card Brand Changes: The Impact of Downgrading

by | Feb 21, 2023

As an Independent Software Vendor (ISV) or Value Added Reseller (VAR) relying on residual income from credit card processing, it’s critical to stay informed of changes made by card brands to their interchange rates and fees. These changes can have a direct impact on the residuals you earn. If a merchant’s processing rate is downgraded due to shifting qualification requirements or fee structures set forth by card brands, this can result in additional fees that negatively impact your residuals. In other words, neglecting to analyze these changes could lead to profit loss.

The major card brands, including Visa, Mastercard, Discover, and American Express, have recently made changes to card qualification rates and fees. These changes are all about making sure merchants are appropriately charged. This happens due to a combination of factors, including intensifying competition among card brands, evolving consumer behavior, and the need to safeguard card transactions from fraud and increase security. 

In this blog, we’re shining a spotlight on the changes that will have the biggest impact on our partners and merchants and showing you how to stay on top of the updates and avoid downgrading. These changes now include the introduction of new merchant category codes (MCC) for e-commerce and card-not-present (CNP) transactions, with different qualified and non-qualified rates. Initially slated for 2020, the changes were postponed due to the Covid-19 pandemic.

How to stay up-to-date

Interchange rates can frequently change, with updates happening every spring and fall, as the major card brands aim to continually optimize their fees and security measures. Staying on top of these updates will ensure you adjust processes accordingly. You can find updates from the major card brands on their respective websites. Check out their news and press release sections for the latest information on changes to their interchange rates and fees. Additionally, we’ll keep you informed and ready for any changes in the world of card payments.

Most significant changes among the card brands 

American Express has introduced an OptBlue Acquirer Assessment and a Transaction Fee of $0.165% + $0.02, effective April 22, 2022, applied to all non-debit card charges submitted under the program for all industries.

Discover, which issues cards directly to consumers and commercial entities, will continue to be paid directly through the merchant’s credit card processor for each transaction. A significant change noticed is the increase in their Commercial Electronic Prepaid Interchange rate from 2.30% + $0.10 to 2.65% + $0.15, a rise of 0.35% + $0.05. Discover has also introduced a new Charity US Consumer Interchange Program (MCC 8398) with card-present and card-not-present transactions eligible for this program with specified rates.

Visa is streamlining its processing with a new name and changes to the interchange rate for downgrade transactions. The new interchange rate will be Non-Qualified, with a rate of 3.15% + $0.10 for Consumer Credit transactions and 3.15% + $0.20 for Small Business credit transactions. This change comes with an increased Non-Qualified Consumer Credit interchange rate, rising from 2.70% + $0.10 to 3.15% + $0.10, an increase of 0.45%. This fee may be applied to retail merchants who key-enter a transaction or fail to batch out at the end of the day. To ensure the best rate, merchants must now meet new requirements, such as using additional data elements like CVV and AVS results to confirm cardholder identity and transaction authenticity. These changes are detailed in the accompanying tables.

Source: “Visa Modifications to Credit Interchange – Effective April 18, 2020” by Brittney Carlisle.

Let’s also examine how Visa’s new interchange rate on non-qualified consumer credit transactions has affected real merchant data. While these merchants had no changes from their processors on fees, their interchange rates significantly increased due to Visa’s updates.

Mastercard’s Standard interchange has increased from 2.95% + $0.10 to 3.15% + $0.10, an increase of 0.20%. This fee is typically applied when the transaction does not match basic qualifications, such as missing AVS data or failing to settle sales daily.

Meanwhile, the Enhanced Standard and World US Standard are also set to increase by the same amount. On the bright side, the High-Value Standard and World Elite Standard will see a decrease, with rates dropping from 3.25% + $0.10 to 3.15% + $0.10, a decrease of 0.10%.

To view the full summary of Fall 2022 Card Brand 7 Debit Network changes, click here.

Upcoming changes to card brand fees

  • Visa: Introducing two new fees. The Estimated Authorization Fee will be 0.02%, and the Incremental Authorization Fee will be 0.02% for any approved Estimated and Incremental Authorizations. These fees will impact merchants processing Visa Credit and Debit transactions and processing estimated or incremental authorizations.
  • American Express: Inbound fees on foreign-issued cards will increase, excluding JCB and foreign-issued debit cards. The AMEX OptBlue Inbound Fee will increase from 0.40% to 0.60% (a difference of 0.20%). This will impact merchants processing AMEX OptBlue transactions.

NOTE: The changes will be effective from April 17, 2023 (Visa) and April 15, 2023 (AMEX).

What is downgrading?

Downgrading occurs when a transaction is not processed at the qualified rate and is instead processed at the higher, non-qualified rate. Understanding these changes and what downgrading means is crucial for merchants to ensure they are appropriately charged for transactions. This can happen for several reasons, including insufficient information being provided during the transaction or the transaction not meeting the card brand’s security requirements. 

Reasons for downgrades

  • AVS and CVV/CVC results: Transactions that fail the Address Verification Service (AVS) or Card Verification Value/Code (CVV/CVC) check may be more likely to be downgraded.
  • Transaction type: Card-not-present transactions, such as those made online or over the phone, may be more likely to be downgraded as they carry a higher risk of fraud. This is because the card is not physically present during the transaction, and the cardholder’s identity cannot be verified by checking a signature or government-issued ID. Certain types of transactions, such as recurring payments or international commerce, may be downgraded due to their higher risk profile.
  • Settlement status: Transactions that are not settled promptly may be more likely to be downgraded. 
  • Insufficient information: If a merchant does not provide enough information during a transaction, such as a customer’s billing address, the card brand may classify the transaction as non-qualified and subject it to a higher rate.

How to prevent downgrading 

Don’t let downgrading get you down! To avoid it, merchants should ensure that their transactions are correctly processed. There are a number of best practices that merchants can follow:

  • Use Address Verification System (AVS) and Card Verification Value (CVV); AVS and CVV are security measures used to verify the cardholder’s identity. By using these measures, merchants can reduce the risk of fraud and ensure that their transactions are processed at the correct rate.
  • Promptly Settle transactions.
  • Confirm that the Merchant Category Code (MCC) associated with the business accurately reflects the type of goods or services being sold.
  • Ensure that the correct billing and shipping information is provided during the transaction.
  • Adhere to card brand security requirements, such as using a secure connection and implementing proper fraud protection measures. 
  • Regularly review transaction data to identify and resolve any downgraded transactions.

By following these steps, merchants can minimize the risk of downgraded transactions and ensure they are charged the correct rate.

Conclusion

In conclusion, it is imperative to stay informed on the significant modifications made by leading card issuers, which considerably impact our partners and merchants. We have briefly discussed the meaning of downgrading and different methods for downgrading prevention. As an ISV or VAR generating residual income from credit card processing, staying informed of the latest developments will ensure the health of your portfolio. Stay tuned; our next blog is your ultimate guide to success. We’ll cover how to assess your residuals, spot areas for improvement, and uncover the effects of various pricing models.

 

Sources:

Carlisle, Brittney. “Visa Modifications to Credit Interchange – Effective April 18, 2020.” January 20, 2020.

Carlisle, Brittney. “Visa Modifications to Interchange Notice: Effective Dates April 18, 2020, & October 17, 2020.” February 10, 2020.

Rej, Matt. “Most Common Interchange Downgrades.” October 22, 2022.

Miller, Susan. “Spring 2022 Card Brand Changes.” May 13, 2022.

Questions on How to Navigate Card Brand Changes?

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Analyzing Merchant Statements: Let Technology Do the Hard Part

Analyzing Merchant Statements: Let Technology Do the Hard Part

by | Jan 5, 2023

Analyzing merchant processing statements can be a simple process with the right tools. Those who stay ahead of the curve are taking advantage of software that powers the payment processing industry. We recognize that statement analysis is essential, and we want our partners to use technology to accelerate their business. If you need to incorporate statement analysis in your sales approach, we encourage asking merchants for current processing statements. However, understanding statements and time spent analyzing them can be frustrating and time-consuming. To maximize profit and efficiency, we rolled out a new statement analysis tool for all our partners.

How it Works

BOLD’s Statement Analyzer Tool is designed to take the grunt work out of statement analysis, freeing our partners to do what they do best; prospecting and sales. A closer look at statements will reveal information about current payment processing fees and identify growth opportunities.

Product Features:

  • Fast Turnaround Times (Avg under 20 minutes)
  • Accurate Analysis (Data Entry / Categorization issues are detected and fixed by an expert)
  • Interchange Padding Detection
  • Level 2 and Level 3 Optimization Potential
  • Custom Pricing Templates
  • Proposal Templates with Custom Branding 
  • Residual Calculation & Margin Control
  • Full Feature API

Benefits of Using Our ISO Quote Tool

Identifying various aspects of a statement takes time, some can take up to a couple of hours. For example, assessing price models, processing fees, and chargebacks may be strenuous. With all of these different factors, it is easy to miss hidden fees. We certainly don’t want our partners to waste their time with complex statements. BOLD’s Statement Analyzer Tool allows you to manually generate an analysis without a statement in case your merchant is unable to obtain theirs. An estimated savings proposal will pique their interest if that’s the case. 

Here is an example of a proposal template!

Click here to register for a LIVE demo on 01/17/2023 presented by BOLD! 

Current partners can gain access to BOLDs Statement Analyzer Tool today. Simply contact the Partner Experience Team @ prm@boldpay.io for user credentials and training. You’ll be analyzing in no time!

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Sealing the Deal: Setting Merchant Expectations to Keep Up with Industry Trends

Sealing the Deal: Setting Merchant Expectations to Keep Up with Industry Trends

by | Oct 20, 2022

The Payment Industry has new advancements in technology that frequently alter merchant expectations. As they continue to experience increased products and services to help grow their business, the market grows even more competitive. What are you doing that’s part of the trend, and how can you adjust your strategy to stand out from the crowd?

Expand from Merchant Processing 

Today’s merchants get incessant offers and calls to switch their processing. The same pitch is heard over and over again, promising lower rates. You may find yourself spending an unreasonable amount of time trying to obtain a statement from your prospect. When you finally create a proposal and show your prospect the amazing savings promised, they sometimes end up ghosting you. Well, what can you do now? The key is to have multiple selling points apart from guaranteeing lower rates.

Have Open and Honest Conversations with Prospects

Once you put in all the effort and the merchant decides to take your hard work back to their current processor it becomes laborious to peak their interest again. Having open and honest conversations with prospects help identify their needs before you exhaust resources. They may value payment security or operational efficiency more than a huge savings on fees.  What can you provide that their current processor can’t? Many merchants are looking for more than just payment acceptance. 

Managing Expectations Day One

Make an effort to manage expectations from the start of the relationship.  Pinpoint different product offerings that specifically resolve an issue the merchant may be experiencing. Openly discuss areas where you can add value and ease to their day to day operations. Keep in mind the end consumer and how their wants impact the merchant. Offering a better quality of service overall will help seal the deal. 

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

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

by | 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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