Claus Lauter [00:00:00]:
Welcome to the ecommerce Coffee Break podcast. Today we revisit the episode with Matthew Rej where he shared insights on reducing and optimizing credit card processing fees. So let's dive right into it.
Voice over [00:00:14]:
This is the e commerce Coffee break, a top rated shopify growth podcast dedicated to shopify merchants and business owners looking to grow their online stores. Learn how to survive in the fast changing e commerce world with your host, Claus Lauter, and get marketing advice you can't find on Google.
Voice over [00:00:38]:
Welcome. Welcome to the hello and welcome to.
Claus Lauter [00:00:40]:
Another episode of the e commerce Coffee Break podcast. Today we want to talk about ways on how you can save money in your business. Now, obviously, there's a topic that business owners are always interested in. There's a lot of parts in your business where you're spending money, where you can optimize. And one area that is being overlooked by a lot of merchants are your credit card processing fees. Sometimes a little bit hidden, sometimes people are a bit reluctant to look into this, but actually, this is a really great chance to save a lot of money. So that's the topic today. And with me on the show, I have Matthew Rej.
Claus Lauter [00:01:14]:
He is with merchantsconsulting.com and the name says it already. They are helping with optimizing your costs when it comes to different fees and processing fees. Matt has been working in the financial world for over ten years. After quickly learning the world of payments for the last eight years, Matt has been exposing the industry for what it is truly is. Matt oversees the sales team for merchant coast consulting and developing new employees and educating enterprise to bring to more to customers on how they can cut costs within the payment world. So let's dive right into it. Hi, Matt, how are you today?
Matthew Rej [00:01:50]:
I'm doing great, Claus. How are you doing?
Claus Lauter [00:01:52]:
Very well, Matt. Saving on credit card processing fees, I think that's something that is overlooked massively. But a lot of merchants, a little bit of the background story. What got you into that?
Matthew Rej [00:02:04]:
Yeah, so my background was previous to working with merchant cost consulting, I was working for a large payment processing company here in Boston, Mass. That's where we're headquartered out of. That's where I originally got into the world of payments. Right. And this isn't something that you go to school for, right. You don't get a degree or go to university for this. It was really just a job that kind of fell into my lap once I had graduated. And in short, the payment world is really deceptive for a lot of different reasons.
Matthew Rej [00:02:34]:
But when I was working there, right, how the majority of sales reps get compensated is the higher that they set the credit card processing rates on a merchant, the more money goes into their pocket. Right. From a commission standpoint, and that doesn't align with the merchant itself. Right. Merchants are trying to find something that functional for their business, especially in the e commerce, where I'm looking for a gateway that works, a checkout screen, etcetera. And you want something at the lowest overall cost. Just that's business 101. And the issue was, is that in addition to, you know, setting the rates high as the commission sales rep, the other issue in the payments world are rate increases.
Matthew Rej [00:03:16]:
Right? So it's one thing to get a rate, but it's another thing to keep it there. And a lot what was happening was over time, I would have clients call me and say, Matt, the rate was supposed to be x, but now it's increased to y. What's going on here? And that was out of my control. That was the corporate company raising pricing. Like, you see a lot in different industries, but this is a large cost, especially in the e commerce world. And it was deceptive because they weren't notifying the client. They didn't even notify us on the sales team what was going on, and to put a bad taste in our mouth. Right? So we started this back in 2016 where we said, you know, we can really bring transparency to the payment industry by letting merchants understand how the pricing works, how interchange fees work, the service markups over interchange, and really exposing it for what it is, and helping clients eliminate the fees that they pay, typically without the headache of having to make any changes whatsoever.
Matthew Rej [00:04:16]:
Right. That's the background how we got started, and we can actually dive into it more. But that's really what was the motive for the inception of MCC and where we have a focus, right. To help businesses eliminate fees that they pay without the headache of hopefully having to make any changes.
Claus Lauter [00:04:33]:
Now, these fees are sometimes, as I said, they're sometimes very well hidden. And a lot of merchants, specifically starters in the e commerce world or small and medium enterprises, who don't have the capacity the time to look into it, will be surprised at the end of the month what they pay to a payment processor and what really goes through the window. And I think they don't have control over it. Now, Shopify makes it relatively easy, and I think that has to do with convenience to pick just a payment gateway with the attached payment processes with the setup. People are not really aware that there is a million other options out there. So where do you help? Or where is the biggest pain point for merchants, when they approach you, what triggers them to change what they do?
Matthew Rej [00:05:18]:
So it's a fully loaded question, right? So what? Shopify, stripe, PayPal, Addian, a lot of these new were players and the payment space that typically focus on e commerce businesses reoccurring payments, subscription models, SaaS products, right. Is they've created a pricing plan that makes it super easy for you, the merchant, to understand, right. So a lot of the starting packages start at like 2.9% plus thirty cents a transaction. And then if you take American Express, it's whatever, 3.5% plus thirty cents a transaction. And as you, the business owner, the merchant, that's super easy for you to understand. You know basically what you're going to be paying every month for the type of card that you accept. The issue with that is, and we'll get into it, but if you peel back the layers like an onion, right, there's so many different things and fees involved in that one flat rate that they've packaged all together. You have interchange costs, you have assessment fees, you have network costs.
Matthew Rej [00:06:22]:
I mean, the list goes on as far as what that is, markup costs, and they know all of that. And they price that into the rates that they're offering merchants. And a big thing that merchants don't understand is all that that goes into the pricing plan. And yes, it may be super simple for you to understand it's a business and maybe to track for your expenses, but if I were to tell you that, hey, you know, you're paying 2.9% plus thirty cents a transaction, but really the underlying cost for Shopify, stripe PayPal adding is like 1.7% and they're making that difference in commission spread, you'd be pretty unhappy about it because you would say, well, wow, that's, that's super expensive, they're making a ton of money on every single transaction that you're processing, right? Another big thing within this realm of payments is that e commerce websites are always looking for functionality. You're looking for something that has simple code, simple integration. If you have whatever, an ERP system, an inventory management system, some type of software outside of the gateway, you want something that ties in really seamlessly or has open code, open API, whatever. And these companies that I mentioned previously make it super simple to do that. Stripe, Shopify, it's easy to build a website and have the back end code just integrate.
Matthew Rej [00:07:44]:
Right with your checkout screen or your gateway. And you are paying for some of that, the convenience to do that and the ease of use to do that and the tech involved. But there's a fine line between paying like a small premium to have that versus price gouging, in our opinion. Right. And there's no transparency into this as far as like, these companies aren't telling you, hey, you know, as a merchant, you're probably going to take 50% debit card, 50% credit cards. Well, the difference between a debit card cost x versus a credit card costs y, we're charging you z. You know, here's the different spread and commissions. They're not telling you any of that information.
Matthew Rej [00:08:25]:
Right. So with all that being said, depending on who you use, I know most of your listeners are Shopify based, which is great. We really bring value to merchants that have Shopify plus, because it's another level that allows for customized pricing, so to speak, that gives us the ability to leverage all the data and analytics that we have to essentially get them better pricing while staying on the Shopify platform. If you've built a website on Shopify, obviously to leave them and change is going to be not impossible, but super difficult. Something that you probably don't want to do, right. And that's why a lot of companies contract us, is because they want to keep with what they have. They don't want to make any changes to the gateway, etcetera. Right now what we do is we say, listen, mister and misses customer, you're paying XYZ right now at the rate we think we can get you down to ABC and we'll run our analysis negotiations, handle that from start to finish.
Matthew Rej [00:09:26]:
If we don't get to where we feel your company should be priced, we then can present other options to you and say, listen, we'd be doing you a disservice not to say if you went with company XYZ. Here are the cost savings that you could potentially have now, depending on what that merchant or customer wants to do if they have the bandwidth to make a change, if there's not that much technical aspect or integration aspect to do it, you know, they can explore those options. We ultimately don't care for our clients use. At the end of the day, our main focus is to get you the best deal possible, nine out of ten times with the provider that you're currently using. Right?
Claus Lauter [00:10:06]:
Hey, Claus, here, just a quick one. If you like the content of this episode, subscribe to the weekly newsletter at newsletter dot e commerce coffeebreak.com. I score and create 50 news sources so you don't have to saving your hours of research, grow your revenue with ecommerce, ecommerce news, marketing strategies, tools, podcast interviews and more, all in a quick three minute read. So head over to newsletter dot e commercecoffeebreak.com to subscribe as at 100% free. Also, you will find the link in the show notes. And now back to the show. That makes perfect sense. Now, as a lot of merchants do not know about that, and I'm surprised to hear that.
Claus Lauter [00:10:38]:
How much kind of negotiation room is there? And also, as I said, it's convenience. Shopify makes it very easy to take stripe, to take PayPal and all of these very expensive payment gateways. There's certain business types or certain merchants that sold certain products that will not be taken by every payment gateway, selling weapons, knives, I don't know, cannabis or any of these things. Is that something you help with to find another payment gateway provider or how does that work?
Matthew Rej [00:11:09]:
Yeah, absolutely. So if someone's in, like, we'll call it the high risk realm, right, of processing. It doesn't mean that you're running an illegitimate business or anything like that. It's just what the banks deem to be in the high risk category, right? So for example, anyone who has a marijuana dispensary, right, it's not federally legal. So while a lot of states it is legalized for recreational use, right, because from a federal standpoint, the baking regulations don't. It's not all sunshine and rainbows. I could say for that specific industry, it's not as easy to get a merchant account. Same with, like, if you're selling firearms, knives, online, et cetera.
Matthew Rej [00:11:48]:
There's a whole laundry list of what banks classify to be a more riskier asset, so to speak, or business type. But yes, if there are businesses out there that are trying to use Shopify, PayPal, stripe, etcetera, and you are getting denied because your underwriting team is saying, no, we don't accept this business type. Yes, we have plenty of relationships that can get you approved if you wanted to go that route or if you're already approved and you just think you're paying way too much for processing, we can obviously help you get a better deal with your current provider, right? So plenty of different options in that realm. You really need to know how these processing companies think in addition to having the data and analytics to say, based on where your price stats, what type of business you have, transaction size, volume, count, all this laundry list of things to get the best deal possible.
Claus Lauter [00:12:44]:
Now, as merchants said, Shopify plus is more qualified than a small business for that. How much on data or how much on proof do you need to go into a negotiation for a Shopify merchants to get a better price?
Matthew Rej [00:12:58]:
The e commerce world is a little bit different. All for the most part, the e commerce payment providers are going to say by not having the card present, taking the card either over the phone, a recurring billing payment online through your website, that it's a riskier transaction because the card is not present. Someone is physically not there to show you their id with their credit card, making sure that it is actually them. There's a risk of fraud and chargeback, right. So they'll leverage that point to charge you more. And that's why you see the starting rates at, you know, 2.930 cents per transaction. There's a little bit of truth to that, but there's gray areas. And the data that we have allows us to see based on the type of business that you are, whether you're a consumer product or you're doing B two B sales, for example, because they can both fall into different categories.
Matthew Rej [00:13:54]:
That's going to dictate the type of rewards card you're going to see, corporate card, purchasing card that you're going to see all have different interchange rates. And with over 700 different interchange rates available that you could be charged. We know, relatively speaking, the type of business that you have, what interchange rates you're going to see. And then we can calculate the service markup based on your current pricing. Right. That's a lot of data that merchants don't have access to. They only have access to their data points. And that's it.
Matthew Rej [00:14:24]:
You know what I mean? And it does vary from industry to industry, too. You know what I'm saying? So that's, that plays a big factor. That's a lot of what we're leveraging as well. And we know the marketplace. Right? Like, if you're a merchant and you went to Addian Stripe, Braintree, PayPal and Shopify, we know which of those four providers is using them as an example is going to price you the best or give you the best quote right off the bat. Right. And in addition to that, we know how low they're really willing to go, how much they leverage tech over cost. Right.
Matthew Rej [00:15:00]:
A lot of the rebuttals you'll see from sales reps in the payment industry, especially for those companies, is like, well, we're a tech company. We don't compete on cost. You know what I mean? They're trying to bring value from the different whatever upsells that they can do or different services that they provide. But that aside, that's all the stuff and data that we're leveraging that we know in the marketplace we have on current clients, etcetera, to really get them the best deal.
Claus Lauter [00:15:25]:
It already shows that you need to have a lot of financial background information in that specific field to make an educated decision for your client. So if somebody decides they want to switch to a different payment gateway provider, what's the timeline and what are the steps involved to get you up and running with a new one?
Matthew Rej [00:15:44]:
Yeah, it just depends on how fast you as the customer, the merchant move in. What you're you and your doing needs are. If you say, Matt, I have a legacy gateway, for example, authorized.net is a big payment gateway within the legacy field, and I want to make a change that's super simple. You literally just take out the API codes in the background of your website and you plug in the new ones once your merchant account is approved with I don't say the more sophisticated gateways, but the ones that have much better tactics. Right, have ability to do other things. It depends on how integrated you currently are with your current gateway situation and what you're looking to change. You know what I mean? So that's going to vary depending on the client. All in all, a changeover, like a more sophisticated changeover, probably going to take a bottom.
Matthew Rej [00:16:37]:
A less sophisticated changeover is probably going to take less than a week if that just depends on the approval time and the underwriting process from the provider that you want to switch to. In that case, what technical integration that you might need with your current setup and how you do things. And the third thing that a lot of people overlook when they're switching is, let's just say you're a subscription based business or you have reoccurring payments, the tokenized transaction that you have saved on file, those are the credit card data that you have saved. You have to get that information from your current processing company, and usually there's a cost to do so for all your tokenized data, which is a whole different conversation, but you pay that cost to extract that data and then you have to give it to the new provider, and then they enter all that tokenized data into the new gateway. That's consistent. When you're processing the payments, you want to make sure that you're charging the customer consistently, even if you switch gateways. And that can take time. It just depends on what you're looking for.
Matthew Rej [00:17:38]:
If you are looking to make a.
Claus Lauter [00:17:39]:
Change, are there any roadblocks that your existing provider can throw in your way to stop you moving or that will slow down the process. Is that happening?
Matthew Rej [00:17:50]:
If you have a specific software or enterprise resource planning tool or inventory management system, and let's just say that ties in to your gateway for whatever reason, if there's a partnership or relationship there where that software that you use only partners with a specific gateway or processing company, you may not be able to use that software. You have to use the credit card processing company that they're affiliated with because that's what works with the system. You could use a third party processing company or gateway if you wanted to, but it creates an extra step. These companies know that and they almost use that as leverage to hand tied merchants. So I'm trying to use an example. But Netsuite is a really big ERP system, right? And Netsuite thankfully does partner with multiple credit card processing companies. But if you want to make your life easier using Netsuite as a netsuite customer and accept credit card processing payments through them as an integrated provider, you have to use one of their options. You could use a third party provider if you wanted to.
Matthew Rej [00:18:58]:
Just creates another step. It's not a seamless and that's something that you have to weigh out the cost, right? Like if the cost was going to be minimal from making a change from what you already have, does it make sense to go through all these steps? If the cost savings is going to be drastic, what is that number and is that cost savings? Does that outweigh the extra work that you'll have to do without that seamless integration that might be there? You know what I mean? So those are all things that you get to think about that we help from a consulting standpoint, and you'll see that a lot with Stripe, for example, stripe's a big player where they partner with a ton of software companies. They are the gateway that allows the payments to be processed. But you can also use the software because that's what you're in on a day to day basis to process payments. It's a little bit different if you just have like a Shopify store or a strict e commerce website. But those are different scenarios that we run through based on what our customers have for their existing payment landscape.
Claus Lauter [00:19:56]:
Okay, now there's a huge potential for cost savings. Now, where do you earn money? What's your pricing structure?
Matthew Rej [00:20:03]:
Our business model is strictly contingency based. So we get a percentage of the savings that we achieve our clients. That is it. So the beauty of it is, is that we do all the work upfront we actually have to walk the walk in order for us to get compensated. If you hire us and we negotiate with your processing company and we fail, you don't owe us anything, which is the beauty of the service, right? There's no financial risk to you whatsoever. And really, it's more of a waste of our time than yours because we're allocating resources to actually do business before we get compensated. Now, if we're successful, we take a percentage of that, right? Which is the beauty of it. If you win, we win.
Matthew Rej [00:20:46]:
Everyone wins in that scenario. And in addition to that, we're auditing your account every single month for rate increases. So, yes, we get hired to negotiate. We take a percentage of the savings that we achieve your business, but as an ongoing service at no additional cost, we're auditing and policing your account to make sure that interchange rates are true. There's no markup or padding, there's no surcharging. They're not downgrading the cards. You know, they're not adding any markups anywhere else. That's part of what we're doing.
Matthew Rej [00:21:15]:
And that's also what you're paying us for.
Claus Lauter [00:21:18]:
I have been through that process of setting up payment gateways for four times on four different continents. I've done it in us, in Europe, in Asia, and in South Africa, and it always was a complete pain in the neck. And I'm 100% sure I did it. Potentially not the best and most cost saving way at all. So I would have loved to have you by my side back in the time. Where can people find out more about you guys?
Matthew Rej [00:21:41]:
Yeah, if they want, I can provide a link, obviously, but our website is merchantcostconsulting.com and you can go and just check us out on how we work. You can email me directly if you have questions, concerns. I can provide my contact information to you, costs to provide to your listeners. But my email is matt. Matt merchantcostconsultant.com dot. Feel free to shoot me a note, ask questions. Happy you provide any insight that I can guide you in the right process. But that's the best way to reach out or just check us out online.
Claus Lauter [00:22:12]:
Okay, I will put the links in the show notes as always. Then you just want to click away just to finish our coffee break today and to our listeners. That's something you should as a merchant, you should look into that. And as you can hear from Matt, it's a very complex topic. There are so many moving parts to it, which it's probably not the time. Worse for yourself to look into it. So get in touch with Matt and get a good opinion on how you can optimize your cost structure when it comes to payment gateway processors. Thanks so much Matt, for your time today.
Matthew Rej [00:22:42]:
I appreciate it. Claus, thanks for having me on.
Claus Lauter [00:22:45]:
Hey Claus here. Thanks for joining me on another episode of the ecommerce Coffee Break podcast. Before you go, I'd like to ask two things from you. First, please help me with the algorithm so I can bring more impactful guests on the show. It will make it also easier for others to discover the podcast, simply like comment and subscribe in the app you're using to listen to the podcast, and even better if you could leave a rating. Thanks again and I'll catch you in the next episode. Have a good one.