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.

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Three Tips to Grow Your Payments Portfolio

Three Tips to Grow Your Payments Portfolio

by | Aug 23, 2022

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.

 

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Covering the Upcoming Regulations to Cash Discounting

Covering the Upcoming Regulations to Cash Discounting

by | 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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TIN Validation: Defined, Preventing, and Resolving

TIN Validation: Defined, Preventing, and Resolving

by | Oct 6, 2021

Tax season has arrived and has, once again, proven to be one of the most arduous times of the year. As millions of citizens scramble to seek resourceful and legitimate guidance from tax accounts, merchants heavily rely on the attentiveness of their ISO principals and processor officials to take precursive actions to prevent complications that can result from invalid TIN’s.

TIN Validation Defined

In accordance with the Internal Revenue Service (IRS), “A taxpayer identification number (TIN) is an identification number used by the IRS in the administration of tax laws” (although TINs are also issued by the Social Security Administration (SSA).

BOLD Integrated Payment’s own Client Service’s Specialist Brian McPherson was gracious enough to share his guidance regarding TIN validations. McPherson’s knowledge on this topic has expanded plenty, after having completed even the most arduous of TIN cases. In short, TIN validation is a process in which legal officials validate a taxpayer’s’/business’s tax filing status by ensuring that the following three parameters of the entity profile matches those listed on the IRS profile:

  • Corporate/Legal Title
  • Identification Number
  • Business Type (A few of the most common types include Sole Proprietorship,
    Partnership, LLC, Corporation, and S Corporation)

Preventing Invalid TINs

All partners are highly advised to take preventative measures to maintain the validity of merchant’s’ TINs. To do so, partners should be proactive to cross-check their merchant’s’ legal entity titles, identification numbers, and business types between the merchant profiles and their respective IRS profiles.

Should any discrepancies be identified, the TIN status will be declared invalid. An outstandingly common discrepancy that can be avoided during the merchant boarding process involves Legal Title acronym, character, special, or punctuation differences. It is critical that the tax filing name is completely identical to the application corporate title.

Risks of Invalid TINs

Ramifications of invalid TIN include a monthly penalty fee of $49 until TIN is validated. Should the merchant neglect this beyond 365 calendar days, the taxpayer profile will go into backup withholding at the end of the fiscal year – a serious consequence that typically impairs affected business’ operational integrities, as 24% of their business revenue should then be withheld by the government for one calendar year, or until the merchant files taxes for the following calendar year, during which the TIN gets resubmitted into the validation process for review.

How to Resolve Invalid TINs

To validate an invalid TIN, there are 3 steps that a partner/processor can take:

  • Submit a W-9 form completed with information that is identical to the IRS
    profile.
  • Obtain a copy of the merchant’s driver’s license for security verification
    purposes.
  • Obtain a copy of the merchant’s tax return from the previous year for
    identification review.

BOLD partners may submit the above documentation to Priority Payment Systems via their online portal https://www.pps.io/ or support line at 1-800-935-5961.

Agents should consult the Secretary of State webpage with accordance to individual merchant’s’ business locations.

For more information regarding TIN matching, visit IRS.gov | TIN Matching

 

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4 Common Mistakes When Boarding a Merchant Application – and How to Avoid Them

4 Common Mistakes When Boarding a Merchant Application – and How to Avoid Them

by | Aug 11, 2021

PART 1: Most Common Errors

PART 2: Ramifications of Errors

PART 3: How to Avoid Errors

In welcoming the busiest season for payment processors, we’re diving into merchant applications and the steps that payment processors take to ensure that merchants can thrive and grow thanks to the countless businesses that fuel the ever-changing payment processing system.

To process payments, it is common for merchants (businesses) to go through their POS/software provider (ISV/VAR) to be onboarded with a payments processor, such as BOLD Integrated Payments. While processors work diligently to mitigate the seemingly miniscule errors that can potentially lead to disastrous circumstances for merchants, it is mindful to note that errors are never 100% avoidable.

To limit the probability of said errors, BOLD offers all partners access to a dedicated Partner Relationship Management (PRM) team. The seamlessness of the onboarding process can determine the ease of future merchant account adjustments, such as bank account, pricing, or DBA changes – three of which are amongst the most requested merchant account adjustments.

The better part of this article details information stemming from BOLD Integrated Payment’s Partner Relationship Manager Crystal Deese’ extensive expertise on the topic of merchant applications. As a veteran in the payment processing industry, the 7 years of experience that Crystal has under her belt provides us with the answers that many ISO agents, partners, and even merchants can find tremendously useful.

The goal of this article is to:

  •  Discuss the 4 most common merchant application errors,
  • Identify the ramifications of said merchant application errors,
  • Understand how the processor and their partners can work together in effort to avoid these errors as much as possible, in turn ensuring a seamlessly flexible processing platform for our merchants.

PART I: The Four Most Common Application Errors.

Pricing Errors
Pricing errors mean having to call the merchant to request a signature on a Change Request Form (CRF) to correct the pricing as well as provide a copy of their Driver’s License.

Inaccurate Corporate/Legal Name – TIN Mismatch
Providing inaccurate Business Legal Name and Fed Tax ID combos causes a TIN Mismatch or can Pend the application in Underwriting.

Invalid Banking Information
When Invalid Banking Information is keyed into an application, it causes an ACH Reject to occur.

Owner address matching the DBA address and Owner Nicknames
The Owner address cannot be the same as the DBA Address as it must be the physical address of the Owner. Owner names must be full legal names, no nicknames.

PART II: Ramifications of the Errors.  

Pricing Errors
Pricing Errors cause negative residual income for the Partner or an overcharge to the Merchant. Pricing cannot be changed without a merchant signature on a CRF. The merchant will also have to be back billed on a future statement, or the Partner will have to potentially take a loss for the period the pricing was incorrect. Pricing changes are only approved on the first day of each month, so it is essential that pricing changes are submitted no later than the last day of the month. If the cutoff is missed, partners and merchants will have to wait an additional month, which typically leads to the accumulation of negative residuals and back billing.

Inaccurate Corporate/Legal Business Name
If the Merchant has a TIN Mismatch, they have 90 days to correct their information.  The Merchant will incur a $49/month fee until the TIN Mismatch is corrected. At the end of the 90 days, if the Merchant has not made the necessary corrections, the Risk Department will withhold 25% of their deposits for backup withholding for the IRS. 

Invalid Banking Information
When the Processor receives an ACH Reject, they place a 100% hold on the Merchants funds. To remedy this error, a bank change case must be submitted along with a CRF that is completed by the partner and signed by the merchant. The SLA time for a bank change is 6-7 business days, which can delay funding to the merchant, in turn causing strain on business operations. Additionally, this typically leads to an ACH reject fee of $30 each time a deposit attempt is rejected.

Boarding Owners by Nicknames in Lieu of Full Legal Names
Owners of merchant accounts must be boarded under their full legal names listed on the legal ID or driver’s license. Boarding a merchant with an owner’s nickname results in extension on account pending status.

PART III: How to Avoid Such Ramifications.

Pricing Errors
Merchant pricing is more of a strategic process than an everyday price-tag implementation. It is important for our Partners to work with our PRM team for statement/profit analysis and review, which can be conducted in the form of virtual conference calls.

Inaccurate Corporate/Legal Business Name
Anytime Crystal is completing an application with a Merchant, it becomes her mission to seek out even the most miniscule of errors. Typically, it is very telling that an error has been made if the DBA name matches the legal name. Unless a business is a Sole Proprietorship, the legal name should never exactly match the DBA name. The legal name should always be followed by an LLC or Inc.

Productive research can be conducted on each merchant per the Secretary of State (SOS) website. Amongst the extensive research that she conducts daily, Crystal also verifies the legal name, legal address, and ownership of each merchant. Additionally, she Googles the merchant’s business to verify the business address, the business website to gain insight on their products/services offered, and satellite images reflecting the storefront of the specified address.

While formulating applications, it is imperative that the agent/partner asks the merchant to verify small yet sensitive details such as the EIN, SSN, DOB, Bank Account Number, Routing Number, etc. at least twice in attempt to decrease the margin of error.

Invalid Banking Information
The most reliable method of verifying a merchant bank account is to obtain a voided check. Although voided checks are no longer required to proceed with Click to Agrees, they are still an extra form of verification for the banking information that implements security for both the processor and the merchant. Asking for the voided check or bank letter to verify the banking information upfront can reduce or eliminate the possibility of an account going live with the wrong bank account on file. In the case that it is impossible to obtain a voided check or bank letter, one should implement checks and balances by having the merchant verify the sensitive data twice.

Boarding Owners by Nicknames in Lieu of Full Legal Names
As previously mentioned, the Secretary of State website is amongst the most reliable sources for DBA/corporate name/ownership verification. It is common practice to ask for a copy of the owner’s driver’s license at the time of the application. If you cannot obtain a copy of the merchant’s driver’s license, be sure to verify names that are commonly known to be nicknames, i.e. Jim or Jimmy (James) , Mike (Michael), Pat (Patricia), etc.

 Conclusion

In any given industry, many errors are preventable through the practice of proactivity. Per Crystal’s extensive explanation of merchant application errors, we learn the true value of attention to detail for both the payment processor and the partner. All parties involved are susceptible to the negative effects of the ramifications that can easily be avoided should the processor and their partners provide their due diligence applying the aforementioned points to every last merchant application process.

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