In his elucidating and detailed book, Navigating Through the Risks of Credit Card Processing, Bill Pirtle offers merchants a guide on the perils of card acceptance, as well as the benefits for those who do it prudently.
Though selecting a good card processor and vetting the contract with a sales agent tends not to top the average merchant's list of concerns, Pirtle argues that it behooves retailers to apply themselves to such tasks with the carefulness and rigor they would use in purchasing product inventory or launching ad campaigns. As the book describes, businesses can sink or swim on the strength of their processing agreements and partnerships.
Though the book explicitly addresses merchants, it is perhaps no less relevant to the ISOs and merchant level salespeople who serve them - and is a kind of hymn to those who provide merchant services in an honest and transparent way.
"As an honest agent, I am tired of seeing liars promise the world to merchants and not deliver," wrote Pirtle, President of Merchant Processing Consulting & Training, a merchant services provider and consultancy. "People ask me all the time why the contract they signed with a competitor is more expensive than they expected.
"Until the card brands, honest processors and honest agents can find ways to clean up our industry, we will suffer a bad reputation and invite regulation."
What does Pirtle suggest needs cleaning up? The author describes a laundry list of tactics commonly used by processors and merchant service providers that he believes are underhanded and dishonest.
Among them are Payment Card Industry Data Security Standard-compliance fees that, Pirtle said, many outfits levy without providing services that help with compliance; "free" terminals bundled with hidden fees that make them, in the long run, more expensive than priced terminals; and - the one that Pirtle seems to find especially egregious - early termination fees (ETFs).
Pirtle feels that not only are such fees unfair; they also portend a broader problem - lousy service. "The contract states the merchant acknowledges that the [ETF] fee is not a penalty, but is to cover the loss of profit for the processor for losing the contract," Pirtle wrote. "If that is the case, why do many processors allow the sales agents to set the ETF or receive it upon loss of the customer?
"If the sales agents' promises match the results, few merchants would want to jump ship. It seems to me that the processors who lure merchants with lies and deceit tend to have the largest ETFs."
On the subject of hidden fees, Pirtle compared the two most commonly used merchant pricing structures: plus pricing and tiered pricing. While Pirtle said tiered pricing befits certain types of merchants, he stressed that it tends to carry unnecessary costs, though it is packaged to seem like the better option.
Pirtle said tiered pricing often involves a bait-and-switch tactic where merchants are lured in with discounted rates but are ultimately charged more. Processing rates are advertised as being unusually low, but the advertised rate will apply only to a certain type of card or will carry hidden surcharges. By contrast, merchants who sign up for plus pricing get a flat, clearly stated rate on card transactions.
To be sure, there is nothing inherently wrong with tiered pricing structures, but Pirtle has a point: the more fees vary, the more room there is for deception. And he contends that tiered pricing systems are rarely the client's best option: "Tiered pricing benefits the processor, not the merchant."
Also included in the book are lists that contain the following: provisions typically found in merchant processing agreements; suggestions for our nation's lawmakers; and safety tips for merchants to prevent breaches, avoid chargebacks and navigate other hazards that threaten a business's survival.
Among other things, Pirtle advises merchants on watching out for skimmers and avoiding the storage of payment data; on storing receipts and transaction records, along with developing plans to fight frivolous chargebacks; and on carefully securing wireless POS networks.
And lest the reader think Pirtle is waging war against the acquiring sector with his expose on processor subterfuge, he does rally to the defense of bankcard players on one key issue: the regulation of interchange. Pirtle passionately stated his opposition to what is probably the most visible and well-known controversy the industry faces.
His argument here covers the usual points: that such regulation would amount to the very uncapitalistic practice of price controlling, would be no different from regulating the price of bread or gasoline, and would stifle the profitability and growth of the acquiring industry while threatening the livelihoods of its players.
Besides, Pirtle pointed out, merchants aren't forced to accept payment cards - they choose to accept them because doing so draws extra revenue (the common counterargument here is that the practice isn't really a choice because many businesses wouldn't survive on just cash acceptance). This point, again, is a familiar refrain, but that doesn't necessarily make it less true.
For all of the empathy he professes toward merchants, Pirtle shows no soft spot for the retailers that have helped launch the crusade for regulation, and he makes an interesting argument comparing some of their own practices to the tacking on of interchange.
"It is ironic to me that convenience stores are at the forefront of the interchange battle," he wrote. "Convenience stores, including the large chain with the two odd numbers in its name, have the highest markups of any store."
Interchange isn't the problem, according to Pirtle. The problem is all the hidden fees that get piled on top of interchange - fees that aren't nearly as notorious, but perhaps only because they aren't as well-known. "There are many areas where processors are deceitful," Pirtle wrote. "Interchange is not one of them."
The book also contains bonus chapters from other business consultants offering advice on topics such as business planning, social media, POS systems, visual branding, permission-based marketing, e-commerce and customer retention.
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