Competing on price with interchange optimization

Competition for merchant accounts is often characterized as a race to the bottom, with many ISOs and merchant level salespeople (MLSs) slashing margins to support lower card processing fees. But according to James Shepherd, founder and CEO of ISOamp, and Eric Jenks, national sales manager at PayTrace, plenty of savings can be had from analyzing merchant statements with an eye toward optimizing interchange qualifications.

PayTrace, a payment processing company with a focus on interchange optimization, recently partnered with ISOamp, the merchant sales technology arm of CCSalesPro, to debut a new interchange optimization tool. “We partnered with PayTrace to create this new tool because of its proven track record with interchange optimization,” Shepherd said.

The card brands have established hundreds of interchange levels, and while card type and perceived risks drive much of the cost, many transactions can qualify for lower costs simply by capturing additional information at the POS. This is notably the case when merchants accept card payments from other businesses (business-to-business payments), where the failure to collect Level II and Level III data can drive up costs in the form of transaction downgrades, the partners stated.

Interchange optimization helps merchants achieve the best rates for B2B and business-to-government transactions, provided they process payments through a third-party gateway that supports Level II and Level III processing, Jenks additionally pointed out. “Downgrades, commonly triggered by missing transaction information, are a costly but avoidable problem for merchants,” he said. “The best way to avoid downgrades and optimize each transaction for the lowest possible interchange rate is to include all the data required by the card brands.”

Simple, streamlined process

The new interchange optimization tool leverages ISOamp’s proprietary matching algorithm and PayTrace’s interchange optimization expertise to simplify and streamline the statement analysis process, Shepherd stated, adding it can project savings from interchange optimization efforts, including savings from providing Level II and Level III transaction data, thereby minimizing downgrades, as well as help to identify unnecessary processor markups.

Built on ISOamp’s existing statement analysis and proposal platform, the tool automatically generates proposals for prospective merchants, Shepherd noted.

“Serious savings and serious margins are the holy grail for large merchant accounts,” Shepherd said. “But analyzing merchant statements to identify transaction downgrades, and recommending changes to ensure each transaction qualifies for the lowest possible interchange rate, can be tedious and time-consuming.

"Our new tool simplifies this process and provides ISOs and their agents with cost-saving merchant proposals that don’t negatively impact their margins.”

Jenks stated that by using this new tool, "a sales rep or statement analysis professional enters an interchange table from a statement and with the click of a button demonstrates for a merchant where they can save money from interchange optimization."

ISOamp and PayTrace published a new ebook Interchange Optimization Made Easy, written by Shepherd and Jenks to help ISOs and MLSs better understand interchange optimization, and how it helps open doors to new merchant categories and drive better margins. To download a free copy, visit bit.ly/3bnqfsX .

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