Merchants are looking for any means to cut costs due to concerns about the national and international economies, market uncertainty, supply chain interruptions, and an increase in cyber crimes every day. Those online retailers who don’t have brick-and-mortar revenue sources have been hit particularly hard. However, they may typically quickly save money by changing banking and payment providers.
Basic Payment Concepts in Ecommerce
Many businesses use phrases that sound similar but have various meanings in the world of e-commerce. They occasionally use the same names wrongly for several items. The bank of an online retailer accepts, holds, and transfers money. Banks frequently co-brand with both processors and networks in a variety of transaction-related scenarios, so an owner of an e-commerce business may hear the name of a bank used in connection with a payment processor and a network (Mastercard, Visa, etc.). This is because banks are frequently linked to merchant services companies.
Payment processors can either directly use incorporated e-commerce store solutions or a third-party payment platform that the merchant’s website refers to at the moment of sale to receive customer and sales data from a transaction. To verify that the customer has sufficient cash available, they send the data to the linked network and then to the bank or card issuing organization. After accepting the returned information, they transmit it back to the gateway so that it can approve or reject the transaction.
Payment service companies often operate as processors and provide a payment gateway. By offering their own merchant financial accounts and platform outside of conventional banking systems, they can also perform the functions of a bank. In this case, similar to PayPal and Square, the platform is made to handle a certain kind of payment that is exclusive to them and is completed through their accounts. They often enable ecommerce merchants to accept a wider range of payment types than standard debit and credit card processors because they process other forms of payment.
Processing and Acceptance of Payments: Considerations
When relevant, the merchant’s bank assesses various fees for keeping an account. If they set up their processing through a business connected to the bank, they might get a discount if they accept specific payment methods.
Every time an e-commerce merchant accepts a payment, they typically have to pay fees. The kind of payment and even the industry in which the merchant operates might affect the charge per transaction. For instance, if the transaction involves a debit or credit card, the charge may additionally be influenced by the network connected to the card, the issuing bank’s affiliation with the network, and any unique agreements made with the processor.
When an online retailer uses a payment services provider’s gateway to manage point-of-sale transactions, they frequently have to deal with additional fees on top of those connected with accepting debit and credit cards, cheques, and other payment methods. In exchange for using the platform, they often pay a setup charge and a monthly cost. They could be charged a set fee or a percentage for each transaction.
Are There Any Money-Saving Tips, Tricks, or Hacks?
The best approach for online retailers to cut expenses is to compare the products and prices offered by various e-commerce banking and payment companies, and then bargain for lower rates with their current service providers or rivals. Savings can also be achieved by selecting integrated service packages that come in bundles or by custom combining a la carte services through a single point of payment.
A merchant might opt to forego paying a percentage per transaction if they anticipate a high volume of sales or accept a higher per-transaction cost. Some service providers don’t charge a fee for each transaction. As long as the merchant processes a specific number of monthly transactions, they impose a fixed cost. After that, they add the % to any transaction that exceeds the predetermined threshold. Many various methods of payments are accepted by e-commerce companies, therefore blended rates of a certain percentage and flat cost are occasionally available.
If a business wants to stick with its present bank and payment processors and is seeing an increase in sales and revenues, it may frequently renegotiate by looking at its data from the previous year, which includes the types of payments accepted, revenue totals, and fee summaries. They can utilize this data to support their case for getting renegotiated pricing. Long-term customers of either company may ask for a loyalty discount or assert that they will be compelled to migrate to a new provider of better prices.
What About Unique Transactional Factors?
Foreign transaction (FX) fees from international card processing, currency translation, and money transfer typically hit the merchant hard if they accept payments from international clients. These FX charges add very quickly. They should think about banking locally, paying for their overseas transactions with those banks in local currency, and then arranging transfers through local banks or FX exchanges after locating the lowest rates if they want to save money.
Of course, a retailer may discover a platform for payment services that offers a better bargain and delivers all these services silently and quickly. Researching the subject and comparing bank, payment platform, and exchange options is the only way they can learn more.
Finally, a lot of e-commerce businesses are unaware of the fact that by minimizing technical and other issues at the point of sale that cost them money and time, they can save money and generate valuable traffic to their sites. By simply switching to a service and platform that operates more quickly or effectively, they can save money during checkout. Through these easy adjustments, you can also generate a ton of new leads. Customers who share their positive experiences online generate more attention, website visitors, and sales than those who share negative experiences through word of mouth and online reviews.
Changing to a provider that collaborates with other companies to offer benefits and savings to the merchant in relation to their overhead or even customer service initiatives, such as giving them price cuts on future advertising or shipping services, could help a business save money.