Great GPOs always have their member’s best interests at heart. But what if there was something many great GPOs had overlooked that was a massive expense to all of their members?
GPO’s reducing costs with a payment processor!? Read on to find out more…
Here we will explore the issue of credit card processing, how it affects GPOs members, why costs continue to rise, unethical practices in the industry & what GPOs can do about it.
Payment Processing is a massive, yet often overlooked, expense for virtually all businesses. Processing fees deduct approximately 3% of a business’s card revenue right off the top with even more money being spent on fees, terminals, and POS solutions. With interchange fees exploding and margin increases driving up rates every April and October the price of accepting credit card payment is not getting any cheaper. This problem is exacerbated by consumer’s demands for more cashless ways to pay for goods and services.
Beyond this, merchants rarely even get quality service despite the massive expense incurred to process in the first place. GPOs are in the perfect position to help their members reduce, and in some cases nearly eliminate their member’s processing fees.
A GPOs first step towards helping its members reduce payment processing expenses is to identify a great payment processor.
What makes a great payment processor?
While every processor out there would likely argue that they are a great processor there are a few objective signs that can help GPOs determine the validity of that claim.
1- What is the Processors Attrition Rate?
While many processors would attest to providing great service and having many satisfied customers, the numbers don’t lie. What is the processor attrition rate, or in other words, how many clients does the processor have leave per year or once their contract is up? If the attrition rate is high (X%) then clients are leaving in droves and that is a sign of poor quality service. The bitter taste of poor quality is remembered long after the sweet taste of low price is forgotten.
2- Does the Processor have margin increases?
It is standard practice in the payment industry for processors to raise their margins every 6 months in April & October. This allows processors to do two things,
1, To sign accounts they couldn’t get otherwise by efficaciously undercutting the current rate incurring a loss initially, then insidiously raising rates overtime to make up for it, at a profit. And 2, To make more and more money off the backs of their existing client base resulting in big bonuses and lofty company evaluations.
Don’t be fooled by payment processors that just quote lower rates, make sure those rates are permanently fixed, and get that in writing!
3- Are Their Agreements Term Based?
Nearly all processors make their clients agree to process with them exclusively for a given period of time. As a GPO trying to offer members the best service and experience possible this is not a practice you want your members to fall victim to. Look for a processor that works hard to earn each clients business and has month to month agreements.
4- Does The Processor Charge a Termination Fee?
If a merchant wants to switch processors or change POS systems most processors will charge the merchant a termination fee. This makes for a nightmare when coupled with routine margin increases, term based agreements, and poor quality of service.
5- Does the Processor Lease terminals or POS systems?
Equipment leasing is widely known within the payment processing space as a rip off and scam. A processor that does that to its customers is knowingly exploiting them for their benefit. Opting to partner with a processor that refuses to participate in terminal and equipment leasing will ensure an honest and ethical relationship that benefits your members.
6- Is the Processor equipped with a team that can handle software integrations?
The payment processing industry is rapidly moving towards integrated company management software and point of sale solutions. If a payment processor does not have a dedicated team of software engineers that can do those integrations, the members of your GPO will be technologically left behind. This will be a massive unnecessary headache for the merchant down the road that should be as easy as putting an already established and experienced software team to work.
If you are a GPO looking to partner with one of the few payment processors that never raises rates, has virtually no attrition, has a team of expert software engineers, exclusively uses month to month agreements, never charges termination fees, and places the needs of the merchants above its own then you can get started here!