Third Party Credit Card Processors Could Offer Better Rates Than Banks

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Historically banks have played a principal role in credit card processing. Guessing the reason for this is not difficult. Banks are where merchants have had accounts usually for years and it was relatively simple to sell credit card processing to existing account holders. Their merchant accounts could be conveniently linked with credit card machines and the bank kept a small percentage of the money moved, thus developing a new source of revenue for themselves .

In recent years however, banks have been losing their preeminence to third party credit card processing companies. This is not accidental. Attractive pricing supported by solid technology has helped the third party credit card processing companies make major inroads into the industry.

Banks were under the assumption for a long time that since the merchant account was held by them, they had the privilege of selling every other service associated with merchant funds. This assumption was inherently faulty as the customer is always on the lookout for the best deal and if not offered one, can easily walk away elsewhere.

It is inappropriate to assume that customer prefers a one stop shop for financial services. What they do prefer is that their needs be met in the most proficient and inexpensive manner. It does not really matter if they have to source from multiple vendors so far the rate and service is outstanding. This is where the banks were edged out by third party processors. They had a strong business proposition of bettering the banks’ offering at a lower price.

This business proposition was vastly facilitated by the advent of the internet. It transformed all norms of the business world. Ubiquitous and economical connectivity made processing credit cards inexpensive and eradicated most errors . Servicing even smaller merchants became feasible without charging them exorbitant rates. While such service was earlier made available only by the banks, now a multitude of technically savvy outfits which provide if not more but equal value have come up to service the merchants.

We cannot deny that all financial services at a single point is comfortable obtaining. It saves a lot of time and effort otherwise spent in coordination. But it is crucial to cautiously consider the costs too. Businesses would be keen on enhancing their relationship with the bank especially if they have had their accounts with them for years. But they would want to get a good deal as well. It is important to underscore the other key service areas as well in addition to rates and charges: internet processing, no signature processing etc.

The third party credit card processing companies are playing a valuable role. They help businesses negotiate better with their banks. Banks are no longer complacent due to the strong competition and are altering their mode of operation to on the new competition head on. Eventual beneficiary is the consumer – the small business owner, irrespective of who they decide to partner with, they are assured the very best deal.


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