Why Companies Can’t or Won’t Change Their Credit Card Processor
Companies may be unable or unwilling to change their credit card processor. In this post, we explore the reasoning behind these decisions.
Risk and Underwriting Issues
All card processors have a Risk and Underwriting department to evaluate new client contracts. They change their risk and underwriting guidelines from time to time. Common reasons for rejection include industry type and personal credit challenges. Even if your business is in an average industry, underwriting analysts may be forced to group your business with other high-risk complementary products and services. Rejection could occur due to the government, e.g. “Operation Choke Point” or based on cardholder dispute ratios for your industry. If your industry is prone to receiving chargebacks, you may be rejected even if your business has never received a chargeback. Personal credit issues include low credit or recent personal tax liens, foreclosure, short sale or bankruptcy. If you can’t get approved by a new credit card processor, there is no way you can leave your current processor.
Contract Obligations and Termination Fees
Many companies are in long-term processing contracts with varying early cancellation penalties. Such penalties can range from a few hundred dollars to hundreds of thousands of dollars. The processors have contract leverage on their business client and are strict enforcers of these penalties.
It’s true that other processors’ technology just isn’t compatible with your business’s POS or Web software. Specifically, proprietary integrations might not work at all without an expensive upgrade or unreliable third-party plugins. Incompatible software is nothing new though it’s another roadblock on the way to changing your services.
Your bank or financing service may require you to use a specific processor as a way to make sure they receive their funds and to make additional profit on your account. This limitation may you with little choice other than to use their partner credit card processor. You may want to investigate if you are the victim of an illegal “tying” relationship by reviewing relevant federal statutes like the one found here:
A Resistance to Change
Innovation and change can be frightening. Businesses often fear that changing the relationship could result in problems. Employees tasked with making the changes don’t want to be responsible for failing technology, security risks or fee increases. The status quo may be easier to deal with than taking on risk for major issues.
No Clear Value Proposition
Without a crystal clear value proposition, it’s challenging to convince business owners that switching to a new service is in their best interest. What’s the point in switching to more modern technology or service if the one they have is just fine? Imagine that you’re a recurring billing business with 10,000 monthly auto-pay clients running through your processor’s gateway. Would you want to move all of that card data to a new provider and re-key it?
Don’t Want To Upset Their Sales Rep
Companies don’t often like changing providers if they are close with their processing sales representative. It isn’t unusual for companies to solely sign up with processors because the sales rep is a close friend or family member. Friendship or family relationships may be more important than being overcharged.
Now You Can Keep Your Processor and Reduce Your Fees
Since 2009, IdealCost.com has helped hundreds of companies nationwide reduce their merchant account fees through identifying and fixing hidden profit, overcharges, fake fees, and billing errors. Clients have saved $300-$20,000 per month on their credit card processing fees without going through the hassle of changing their processing vendor, bank or equipment. Switching credit card processors should be a last resort, only reserved for funding delays, poor customer service or technical difficulties. See if you qualify for IdealCost.com’s monthly savings program by uploading your most recent merchant statement for a free analysis. You’ll receive an estimate within 24 business hours.