3 reasons why merchant account prices are not published

A lot of suppliers advertise “Merchant Account prices from…..”, but we all know these rates are usually unavailable to most merchants.  Why do they not publish detailed pricing that merchants can reference before they contact a supplier?  Almost all items that consumers buy, whether its in-store or online, have a price tag.  On rare occasion they don’t :

  1. If you have to ask, you can’t afford it“.  Usually high end designer brands, watches, cars, speedboats, etc. You want it because it is so expensive and dare I say exclusive so price doesn’t matter (or so you pretend).  Doesn’t sound like a merchant account ?
  2. The product you need is so bespoke, there are a lot of variables which impact pricing and its terribly difficult so you might not understand “.  Maybe true for complex services, eg a multi-channel media campaign.  Doesn’t sound like a merchant account ?
  3. I want to make as much money as possible and I havn’t worked out how much I can get away with charging you yet”. Hang on a minute, I don’t like the sound of that.  Are you saying I might be charged a different price from the next buyer that comes along for the exact same product?  Yes we are!

Unfortunately, the 3rd category above is quite common for business services for SME’s and particularly for merchant account prices.  Acquirers don’t advertise their pricing upfront for 3 reasons :

Your lack of knowledge of market pricing

Those of you who have switched their card processing providers will be all too familiar with the script……..before suppliers tell you the merchant account price they ask “How much do you currently pay?“.  What this really means is “I want your business but at the highest margin I can possibly get away with.”  Suppliers know there is a good chance that if they can save you some money then you will switch without them having to offer their best merchant account prices.  So the script is a way of eliciting the information up front that they need to begin the negotiation at as high a price as possible.  They know you are unlikely to spend the time necessary to phone multiple suppliers to get a range of quotes and even if you did, comparison of merchant account prices is difficult because of the complexity and range of different charges.  Never, ever answer this question – what you currently pay has no relevance to the quote you should be given.  Make the supplier show their hand first and put forward their best merchant account prices.

You can buy the same product cheaper elsewhere

The large acquirers (WorldPay, Barclaycard, Global Payments, First Data, Elavon, etc) use a “multi-channel distribution strategy” and offer different merchant account prices in each channel.  A channel is simply a customer referral source.  If you go directly to one of the acquirers or their “bank partners” (RBS, Natwest, Barclays Bank, HSBC, Santander, etc) you pay a premium price.  What you probably don’t realise is that the acquirer will also sell the same product through a reseller channel, known as the “ISO channel” (Independent Sales Organisation).  These ISO’s are small sales organisations who receive discounted pricing from the acquirers and their merchant account prices can be 40% cheaper than the bank partners or the acquirers for the same product.  This differential pricing used across these channels would cause the acquirer problems in publishing up-front pricing, which is why they don’t publish it.  New customers could make direct comparisons between the channels and choose the cheapest channel for the same product – the ISO’s.  Fewer customers would go direct to the acquirer or to their bank and the fat margin opportunity would be lost.

Existing customers would realise they are over-paying

Merchant account prices in the market have reduced across the board in recent years due to increased competition.  However, many merchants have not switched or re-tendered their business and are paying merchant account prices set 3 – 10 years ago.  If acquirers’ current pricing was publicly published, these merchants would quickly realise they are paying a significant premium to current market pricing that new customers are getting, and would switch or re-tender.  The larger acquirers have a portfolio in excess of 200,000 SME’s and a large proportion will be over-priced.

So, all acquirer’s follow the same strategy of not disclosing their pricing publicly to make it as difficult as possible for customers (both new and existing) to compare merchant account prices.  If you want to ensure you are not over-paying, you have to shop around to make comparisons.  I think it would shock most business owners if they knew that identical businesses to their own, in the same industry, were paying a materially different price for the same merchant account.  But without a price-tag, they will never know!


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