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My Predictions for Merchant Services Pricing

This is the final episode in my mini-series on merchant services pricing. Check out the links at the bottom of this article for the ones you may have missed. I have a pretty good track record of making accurate predictions in the past. Interacting with many sales reps, processors, and merchants opens my perspective. This episode […]

James Shepherd

Apr 13, 2018

This is the final episode in my mini-series on merchant services pricing. Check out the links at the bottom of this article for the ones you may have missed. I have a pretty good track record of making accurate predictions in the past. Interacting with many sales reps, processors, and merchants opens my perspective. This episode is just my ideas. Join me as I predict the future of merchant services pricing.

I see landscape changes coming in our industry pricing. The first trend I notice now is an increase in software. A few years ago, the expectation was that software would eventually give merchant services away free in exchange for acquiring software fees and data. However, in the U.S. merchant services is very expensive. So, the reality has become giving the software free in exchange for the merchant services!

There will be more companies like the one I just built, CCStorage.com. The software is created for a niche business. (Self-storage businesses in this case.) The company gives software free as long as they get the credit card processing. Then the credit card processing is going to be one flat rate. Flat rate is the most profitable one usually and the easiest to use. The pitch is, “You only pay if you use the merchant services. And that rate will be 3.5% [or whatever.]”

As sales reps, look to align with companies who are doing something similar to that idea. Recently I entered news of rolling out CCStorage.com on my public LinkedIn profile. I might have as many as 10,000 sales people on my email list. Out of those, there has been ONE who reached out with the question, “Can I sell that?” Obviously, this prediction has not been noticed yet. These software accounts are just what reps should be looking for; they are much more profitable and make good sense. Reps won’t get as big a split – not as much money per account. The company is covering all their software expenses, customer service, inside people. This is more than just credit card processing. However, the margins are much higher usually on this kind of deal. And to sell a specific product or service to a specific niche is a million times easier. So, if anyone is interested in the opportunity of CCStorage, email me at james@ccstorage.com. I’ll be glad to talk about it.

Reps should go to their processor, find companies, and call a point of sale company with this question, “I’m a sales rep who makes fifteen sales a month in merchant services. I sell for [this company] and am looking for a solution to target hair salons for the next thirty days. I like your technology. Can we integrate it with the merchant services? Can we do flat rate and not charge the software fees? I see you charge $39 a month. But if we do merchant services, we can make it cheaper.” Be thinking about strategic partnerships. Be ready to target these verticals in a more specific way.

For those who are already doing processing, be thinking about acquiring companies like that. Buy out people who have that technology and bring it in. Right now, a company might be getting fifteen or twenty new accounts a month and charging $99 per month. Imagine how many more sales they could make if you brought them in, waived the $99 fee, and just charged a flat rate for the processing. You make a lot more money and can make a lot more sales than them. Give it to your reps to sell. Really be thinking about verticals.

So, I predict that five years from now merchant services will be software you buy for your very, very specific niche. There won’t be general software but specific to the type of vertical.

My second prediction is rather a crazy one. I’ve never mentioned it before. I’ll be waiting for all the comments in LinkedIn of how stupid and wrong I am. But that’s okay. In three or four years I’ll type “Ha, ha” at the bottom of it.

I promise that somebody in the industry is going to come out with true subscription pricing. Are you thinking we already have subscription pricing? But we only have interchange plus subscription. With true subscription pricing you won’t see the interchange table or the mark-up. There are computer algorithms such as we use on instantquotetool.com which can accurately predict interchange. A flat rate will be charged by looking at the statement. Credit card processing is a service for which there will be a flat, recurring charge exactly the same amount every month. Businesses would love that. It’s the simplicity of Square times ten! Square offers a flat percentage, but who knows how much it’s going to be in dollars at the end? The monthly amount won’t be a blanket charge. Obviously, charges will be calculated per merchant. A competitor won’t have any way of knowing how much a business is paying in interchange; there won’t be a statement. To flip someone from that cost structure would be extremely difficult.

My prediction is that three years from now there’ll be a company doing three or four hundred deals a month on true subscription pricing. That’s one flat dollar amount each month without change.

I hope you’ve enjoyed this mini-series on merchant services pricing. In a few years we’ll see how accurate my predictions are!