Payments Directions – March 2025

Time to Shake Things Up

Hi there, 

Well, we missed March (in like a lion out like a . . .lion) I looked up from my keyboard . . .and it was April!?!?! (and now it’s almost the END of April). So, get ready team, we’re going to double up for a few weeks.  Thanks for sticking with us.

Let’s get started, I anticipate a “little” pushback from some industry insiders as a result of this month's newsletter, but certain truths need to be spoken. As many of you know by now, I have no problem speaking the truth, no matter how many noses it may put out of joint.

So without further ado….

Uncomfortable Truth No.1

Your payment provider is probably lying to you

I know, that’s a terrible thing to say. But it’s a terrible thing to have to say—but it doesn’t make it any less true. Regrettably, the well-worn adage about how to tell when politicians are lying (their mouths are moving) also applies to many (most/nearly all) payment providers.

If I could accomplish just one thing in reforming the payments industry, it would be for merchants to STOP focusing SOLELY on price. The real question is “What are you actually getting for what you’re paying?” Most providers can't (don't/won't/aren't equipped) to offer merchants any meaningful assistance beyond price—and even then, it’s often a misrepresentation or carefully crafted half-truth that obscures the actual costs.

The problem here is that—contrary to popular belief—you probably DON'T know more about payments than your provider. Even if you’re sure you do, just for a moment, consider the possibility that you might not. What if you concentrated on your core business and found a payment expert who could transparently explain your costs and the associated services? What would that be worth to you? To your business peace of mind? To your monthly focus?

Your response: “But Joe, you’re just like the rest of them, here comes a well crafted “pitch”. Nope, but more on that as we dig in a little more.

Uncomfortable Truth, No.2

Most people have no idea what they’re paying for payment processing (and even fewer track it consistently).

Nearly everyone complains about the COST of payment processing, but I’d venture to say many (most) don’t actually KNOW what they are paying. Do this simple math to begin to understand.

Total fees divided by total transaction volume equals your "effective rate." I preach this constantly, yet most clients, when asked about their effective rate, don't know it, don’t have it nearby, or  don’t remember where to find it, even if they calculated it once, long ago, in a merchant contract, far, far away.  

I recommend calculating it monthly, tracking it, and then recalculating it at year-end based on ALL your volume and ALL your fees. Some providers sneak in annual fees that inflate the rate in one lump sum, and many merchants miss this (often around the holidays when volume and fees are already high).

NOW we’re getting somewhere. (Nope, still no pitch, are you surprised?)

Uncomfortable Truth, No.3

Surcharging, cash discounting, or charging customers for credit card use is NOT a sound strategy

Calculate your profit per sale. Now, deduct roughly 9% of those sales (because you lost that many clients), all because you're now itemizing credit card processing fees instead of incorporating them into your product price. You'll never know how many sales you've lost, but trust me, it happens. A lot of people, when they see the "extra" charges on their bill ABOVE the cost of the product, decide to NEVER return. And, what are you making on that transaction? Maybe 3% (maybe less)? You get the processing for free? (truly is it ACTUALLY free? – nope, never is).

You may not witness these lost sales directly—and some customers will still come back, admittedly—but many won't. Do you charge them for the electricity? If you’re a restaurant, do you charge for the gas you use to cook their meal? What about the delivery fees for your supplies? If the difference between business success and failure hinges on your card processing costs, your margins are (MHO) dangerously thin.

Still no pitch. See a theme here? You should.

Uncomfortable Truth, No.4

If it TRULY is only about price, then why are there SO MANY payment industry players who always seem to offer slightly lower rates?

Because that's all their customers care about, and they know it. They exploit that, and customers fall for it every time. Break the cycle. Focus on what you're actually GETTING for what you're paying. Ask that question and watch them disappear into a puff of smoke.

If you need help with any of the issues I’ve raised here, don’t hesitate to get in touch. Or stick around for next months newsletter. There is a LOT more coming this year.

Until next month, all my best,

Joe Zahaitis 

Payment Processing Expert (and mythical speaker of truths)