By Eric Cohen, CEO and Founder, Merchant Advocate
As software companies move more and more to integrate payment processing into their systems to increase profits, businesses remain largely unaware of potential hidden costs. These typically arise when the software provider has an exclusive relationship with a processor or isn’t making the proper updates to pass along required transaction information. Both problems can result in additional processing fees that quickly add up.
While news coverage often focuses on rising costs related to card brands, this is not the full picture. Tech-enabled payment solutions and subscription-model services can be significant contributors. As businesses continue to face financial pressures, understanding the nuances of any software integrations and their associated fees has become more crucial than ever.
The Hidden Costs of Software Integration
While these integrations may simplify businesses’ finances and data, these benefits come with a price. Many integrated systems lock businesses into specific payment processors, handcuffing them from negotiating rates or switching to lower-cost alternatives.
Beyond being tied to a single processor, outdated software can also result in unexpected processing fees. If point-of-sale software isn’t kept up to date and isn’t sharing all the required data with the payment processor, penalties will be assessed. These errors could be anything from an incorrect address verification to a failure to transmit all of the necessary data.
Why Regular Audits and Negotiations Are Essential
To avoid paying excessive fees, businesses should be sure to regularly audit their merchant accounts and update their software systems. Many companies assume that their current setup is optimized. However, even minor changes to their payment system, including software upgrades, can introduce new fees that may go unnoticed. Monthly statement audits can help identify issues or areas for cost savings like additional statement charges for missing data.
Negotiating with payment processors to resolve any issues and ensure best rates is another essential step. Businesses can seek expert advice to identify these opportunities to save on costs. Experienced consultants can analyze monthly statements, identify patterns, uncover hidden fees, and ultimately save businesses a significant portion of their revenue annually.
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Addressing Software Integration Challenges in 2024
In 2024, businesses are taking a hard look at recurring expenses, especially in payment processing. As more companies continue to evaluate the ROI of their integrations, software providers need to justify the cost with expanded service offerings. Some businesses responded quickly to these pressures and opened their platforms to rival payment providers, enabling organizations to shop for the best processing deals without abandoning their current systems.
Despite these changes, businesses should still consider alternative solutions. This can include payment bridges, which may significantly help mitigate costs. A payment bridge is an alternative solution to being tied to an exclusive processor. This option allows for greater flexibility in processor choices while maintaining all the benefits of an integrated system. Other procedural changes, such as ensuring that all transaction data is properly transmitted, can also help reduce fees without requiring a major overhaul.
Avoiding Common Pitfalls in Software Integration
Timing is key for businesses considering new software integrations or updates. Businesses that rush to upgrade may expose themselves to unresolved bugs, breaches, or compatibility issues that could lead to additional and unnecessary charges. It’s better to wait until any initial problems are resolved before making major updates. Companies should be in communication with their software and payment providers to ensure they understand all changes to get ahead of any possible complications.
Consultants can help navigate the complexities of credit card payments and reduce unwanted processing fees. These experts will monitor changes to software and payment processing configurations and flag issues during monthly audits, so businesses are aware of potential cost increases. For example, if a new line item appears on a merchant statement, it may indicate a communication issue between the software and payment processor that needs to be addressed promptly.
The Future of Integrated Payment Systems
As subscriptions dominate the tech landscape, business owners should become more educated about payment solutions to avoid unnecessary fees in addition to weighing the cost of their integrations against their value. Software providers would benefit from proactively offering flexible solutions while highlighting the benefits to retain customers in a competitive market.
Ultimately, companies looking to avoid paying more than necessary due to hidden fees or outdated systems should optimize their payment processing setup. Regular software updates, audits, and renegotiations with payment processors can help reduce costs and add to their bottom line.
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