By Drew Sementa
Settling on a payment solution may not immediately spring to mind as one of the bigger strategic decisions a company needs to make, but it’s an unavoidable one that business-owners often make too hastily. In fact, selecting the right solution can mean saving thousands of dollars in the long run, so businesses need to carefully weigh their options and not be reluctant to get into the contractual nitty-gritty.
For example, there are merchant service providers (MSPs) out there that try to take advantage of their customers with hidden fees, cancellation charges, transaction requirements, and other questionable business practices. In order to avoid choosing an MSP that doesn’t have your company’s interest in mind, you should be asking the following questions:
Did my MSP pitch me qualified rates or tiered pricing?
A huge red flag that your organization needs to look out for is MSPs advertising “qualified” rates in their pitching, which indicates a tiered pricing model. With tiered pricing, the provider quotes an extremely low rate, often without explicitly telling you that only some of your transactions will qualify for this rate and you’ll be charged more for all other transactions.
In addition to this, providers offering “qualified” rates can them change at any time, for any reason, under criteria that they often won’t disclose when you sign up. And even if they do, they’re often at the liberty to change it later if they feel like it. For example, MSPs could outline their rates as “starting at..” without actually detailing what the additional rates are or when they apply.
Is my MSP trying to get me to lease equipment?
It’s generally never a worthwhile idea to lease equipment from your MSP. Not only does it actually work out as much more expensive as buying the machines yourself ($300 to 400 vs. $50 a month for four years), but it also could mean getting locked into a contract you cannot cancel.
Business owners have faced expensive lawsuits while trying to get out of such a lease, and they usually go through a third party, meaning a separate contract to the one you have with your payment solution provider.
Does my MSP charge me for under or over-transacting?
Unbelievably, some MSPs will actually charge businesses for having a bad month, which seems ridiculous considering they earn more during your good months. This is something to look out for–your MSP should be your partner, not beat you when you’re down.
It also pays to check whether or not there’s a transaction cap, and if so, what is the cost of surpassing it. Similarly, this is evidence of an MSP that isn’t putting its customers first. It is already earning more money on your increased transactions, why should you be charged?
Do I receive breach assistance in case of a PCI compliance issue?
Some MSPs offer breach assistance in the case of PCI compliance violations, which is a great failsafe to have in the case of a breach. In addition to this, it’s also worth checking how much PCI compliance support you get from your MSP. Some providers help their customers stay compliant with specific PCI compliance dashboards — reducing both labor costs and stress levels.
How is my MSP helping me fight back against chargebacks?
Chargebacks can be a much bigger cost than many businesses expect. In 2017 alone, businesses lost $31 billion — and that’s just the immediate financial impact of chargebacks, not taking into account false declines, return fraud, and threats to merchant sustainability.
So, finding a way to fight back against chargebacks is crucial for any business owner. You can have a big impact on getting this number down by introducing pre-authorizations and having a dedicated chargeback representative. Does your MSP assist you with chargebacks with a team member and/or thought leadership? If the answer to this is no, then it’s a conversation worth having with them.
Does my contract include excessive terms like cancellation fees?
Unfortunately, MSPs exist that look to feed off their customers’ failures. They will always be around, but companies can be sure to avoid them by being on the lookout for contracts that ask for a lengthy commitment (5+ years) with a hefty cancellation fee. They should be earning your business, month after month, not locking you into unreasonable contracts.
In the end, your MSP should feel like a partner, not like they’re waiting for you to fail or finding ways to squeeze you for extra money. By seeking out an MSP that equips you with the latest tech, offers technical and compliance-related support, and is looking to see your company grow, you can have piece of mind that your provider has your best interests at heart, and potentially save your company thousands of dollars.
Drew Sementa is CEO of Tidal Commerce, a merchant solutions and payment processing company that focuses on helping small and medium-sized businesses grow.
MSP stock photo By Artem Samokhvalov/Shutterstock
