Green Sheet interviews Bluefin's Ruston Miles on processor diversity

The Green Sheet recently had the opportunity to connect with Ruston Miles, who co-founded Bluefin in 2007 with the core belief that a brand’s value is ultimately tied to its ability to deliver a secure, yet frictionless, customer experience. The company has been recognized for integrated payments, encryption and tokenization technologies that protect payments and sensitive data worldwide. In this interview, Miles shares his views on the benefits of working with multiple processors and drawbacks to relying on just one processor.

Can you explain processor diversity, and why is it crucial for merchants?

Merchants benefit from processor diversity because rather than depending solely on one processor either by itself or through their SaaS platform, they can utilize multiple payment processors for various transaction types. Many merchants prefer processor diversity because it offers flexibility in accommodating business and customer preferences. It also strengthens their capacity to engage with diverse geographical markets effectively.

Additionally, this approach supports cost optimization as merchants can select different processors tailored to their specific needs. However, when merchants choose to consolidate the vendors they work with and rely on just one processor, there are some disadvantages, such as potential disruptions or complexities in switching between processors.

What risks do merchants face when relying on a single processor?

When a merchant relies on just one payment processor, that processor can set high fees, control rates, limit services and make it difficult for the merchant to switch processors if the merchant does not control its payment tokens. Furthermore, the processor can refuse service and prevent the merchant from accepting payments if the merchant’s politics or policies no longer align with the processor’s, leading to a debanking or deplatforming attempt.

A debanking or deplatforming effort could cause a sudden disruption resulting in the merchant’s sensitive information and data being left with the old processor, making it challenging to transfer to a new partner to process payments promptly. It is crucial for merchants to diversify their payment options and maintain their own payment tokens to avoid dependency on one single processor and ensure flexibility in their operations.

How can having multiple processor relationships benefit a merchant in terms of cost, fees and capabilities?

Merchants benefit from having relationships with multiple processors when they have ownership of their payment tokens. This allows them to strategically work with specific processors for different payment needs, ensuring they get the best rates instead of relying on a single processor that can independently raise fees at any time. In addition, merchants benefit from using multiple processors for different payment scenarios, such as in-store, mobile app and online payments, as different processors can provide specialized services for each unique payment method and offer customers the best possible transaction experience across these different channels.

Thus, merchants can provide customers with a more customized transaction experience while reducing overall costs by choosing the most cost-effective processor for each transaction.

Why is owning their payment tokens essential for businesses when it comes to processor diversity?

Owning their payment tokens gives businesses the flexibility to switch processors without difficulties. Businesses that do not own their payment data can find it incredibly difficult to switch processors, essentially locking them into the processor that owns those tokens. If a processor is aware that a business does not own its payment tokens, they can withhold the business’s private data and prevent the merchant from taking it with them to a different processor, which requires them to start over if they want to switch processors.

Additionally, processors can impose high exit fees, which adds difficulty for businesses seeking to change processors. In contrast, if the business owns its payment tokens, it can switch processors whenever it chooses. This ensures that businesses will not be tied down to a single processor, avoid debanking attempts and increase the value of the business, since revenue generated from payments is not always factored into company valuation when the business does not own its payment data.

Could you share some tips for merchants on how to maintain a good relationship with multiple processors?

First, merchants must review their existing merchant processing agreement (MPA) to determine if they have already signed an exclusive agreement or an agreement with minimum volume commitments. It goes without saying that merchants should try to negotiate away from exclusives or walled gardens. When merchants have choices, it leads to greater levels of service and savings from each processor.

More and more merchants are accepting payments integrated directly into their software company such as an ISV, POS or SaaS company which means that their ability to select and control processors is limited or non-existent. According to Credit Suisse, ISVs will be acquiring 75% of all new SMB merchants in 2027, so merchants will be seeking more sophisticated payment offerings from ISVs that put merchants in control. ISVs that meet this need will win.

How can software companies help merchants navigate the challenges associated with processor relationships, and what solutions can they provide?

ISVs and software companies should be partnering with a payment facilitator to offer faster onboarding, payout control and processor resiliency. Software companies should work with a payment facilitator that has multiple processors and multiple sponsor banks to ensure the highest level of service, savings and redundancy. Beware that most payment facilitators rely on a single processor/sponsor bank combo.

Likewise, software companies should not be relying on the tokenization and end-to-end encryption services of a single processor. Instead, they should be partnering with a third-party provider that can provide tokens and encryption for any processor. This way, if the software company has to leave a processor, the transition is smooth and tokens and encryption keys are not locked out from them. Additionally, the use of a third-party vendor for tokens and encryption can be critical to a software company’s own valuation.

The Green Sheet Inc. is now a proud affiliate of Bankcard Life, a premier community that provides industry-leading training and resources for payment professionals. Click here for more information.

Notice to readers: These are archived articles. Contact names or information may be out of date. We regret any inconvenience.