Plenty of merchants, big and small, choose their bank as their merchant services provider. This can be for a number of reasons, but chief among them is convenience.
The thinking usually goes something like this: “I’m using this institution for banking, so why should I not use them for credit card processing? It makes sense, the two are pretty similar and if I have problems, I can call my banker.”
That line of thought is not completely flawed, but there are a few issues with it.
The first problem is that many banks outsource their processing to a third party. This means that if there is an issue with the processing, your banker most likely will not be the person to talk to about it. They will have to forward you along to the processor to resolve any issues.
The second issue is that for the convenience, it is expected that the bank will overcharge on the processing rates. There are a couple reasons for this, but a common cause is that the bank will likely receive a monetary kickback from their preferred processor. The agreement usually looks something like this: “If you send us merchant processing clients, we will give you a percentage of the profits we receive from them.” It makes sense for both businesses, but many times the merchant’s rates are higher because of this.
Also, if you have only spoken to one organization and do not have another competing on price, you are most likely going to be overcharged.
This is going to be especially true if you are also receiving a loan from the bank. Again, it may make sense to keep loans, banking and processing under “one roof” on the surface, but once you dig deeper, there is a good chance that you are paying more than you should.
Let us flip the script here and look at the benefits of using a merchant processing company. The obvious viewpoint here is that the merchant processor has a large book of clients, and they are very experienced at keeping their merchants happy and providing them with lower rates. Since the processor does not need to pay the previously mentioned kickback to the bank, it allows them to offer lower rates for their clients, which leads to more direct savings for the merchants. Also, with a processor, there truly is only one organization to call if there are any issues: no more being forwarded from the banker, to the processor, to the support line and so on.
This being said, when you are choosing a processor, keep in mind that the most convenient option may not be the most beneficial for you. To learn more about how Payscape can help you, click here!