How to Reduce and Optimize Credit Card Processing Fees | #197: Matthew Rej

Please support the show if you liked today's episode:

• If you love the podcast, please get someone else to listen, too!
• If you enjoyed this episode of the Ecommerce Coffee Break podcast, please head over to Apple Podcasts, leave a rating, write a review, and subscribe.
• Share the podcast with your family, friends, and co-workers.
• Tag the podcast on Instagram @clauslauter and let me know what you like about it.
• If you like the content and would like to support the podcast, you can buy me a coffee here.
• Become a guest on the show or sponsor an episode.

Claus Lauter: Hello, and welcome to 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 a topic today and with me on the show, I have Matthew Rej. He is with merchantcostconsulting.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 10 years. After quickly learning the world of payments for the last eight years, MED has been exposing the industry for what it is truly is. Met oversees the sales team for Merchant Coast Consulting and the developing new employees and educating enterprise to bring the motor customers on how they can cut cost within the payment world.

So let's dive right into it. Hi Matt. How are you today? I'm doing great. Fa, how you doing? Very well, Matt. Saving on credit card processing fees. I think that's something that is overlooked massively, but a lot of merchants. Tell me a little bit of the background story. What got you into that?

Matthew Rej: My background was previous to 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. . 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. But when I was working there, right, how the majority of sales reps get compensated is the higher that they set the credit card process and 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's. Functional for their business, especially in the e-commerce world. I be looking for a gateway that works, a checkout screen, et cetera, and you want something at the lowest overall cost, just that's business 1 0 1.

And the issue is that in addition to setting the rates high as a commissioned sales rep, the other issue in the payments world are rate increases. it's one thing to get a rate, but it's another thing to keep it there. And a lot what was happening was, is over time I would have clients call me and say, the rate was supposed to be X, but now it's increased to Y.

What's going on here? And that was outta my control, right? That was the corporate company raising pricing, like you see a lot in different industries. this is a large cost, especially in the e-commerce world, and it was deceptive because they weren't notifying the clients. They didn't even notify us on the sales team of what was going on, and it put a bad taste.

In our mouth, right? So we started this back in 2016 where we said 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. that's the background in how we got started and we can obviously dive into it more, but that's really what was the motive for the inception of MCC and where we have a focus to help businesses eliminate. Fees that they pay without the headache of hopefully having to make any changes.

Claus Lauter: Now these fees are sometimes, as you said, they're sometimes very well hidden and a lot of merchants, specifically starters in the e-commerce world or small medium enterprises who don't have the capacity, the time to look into it. We'll be surprised at the end of the month what they paid 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, and 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: So it's a fully question, right? So, What Shopify, Stripe, PayPal, add in a lot of these newer players in the payment space that typically focus on e-commerce businesses, reoccurring payment subscription models, Sachs 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 30 cents a transaction. And then if you take American Express, Whatever, three and a half percent plus 30 cents a transaction. And as you, the business owner, the merchant, that's super easy for you to understand. What you're gonna be paying every month for the type of card that you accept.

The issue with that is, 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 altogether. You have interchange costs, you have assessment fees, you have network costs. 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.

a big thing that merchants don't understand is all of 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're paying 2.9% plus 30 cents a transaction, but really the underlying cost for Shopify Stripe, PayPal, add in is like 1.7%, and they're making that difference in commission spread.

You'd be pretty unhappy about it because you would say, 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 E R P 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 backend code just integrate right with your checkout screen or your gateway and you are paying for some of that. The convenience to do that and the east of used to do that in the tech involved, but there's a fine line between paying like a.

Small premium to have that versus price gouging in our opinion. And there's no transparency into this as to far as like, These companies aren't telling you, Hey, as a merchant, you're probably gonna take 50% debit card, 50% credit card. So the difference between a debit card cost X versus a credit card cost is y.

We're charging you Z. , here's the different spread and commissions, they're not telling you any of that information. 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 a.

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 It's not impossible, but super difficult. It's something that you probably don't want to do, right? And that's why a lot of companies contract us is because they wanna keep with what they have. They don't wanna make any changes to the gateway, et cetera. Right now what we do is we say, listen, Mr. And Mrs.

Customer, you're paying X, Y, Z right now as a rate. We think we can get you down to a abc. And we'll run our analysis negotiation, handle that from start to finish. 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 your disservice not to say if you went with company X, Y, Z, 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, 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 10 times with the provider that you're currently using, right?

but that's the long-winded answer to your

Claus Lauter: question. It makes perfect sense now as a lot of merchants do not know about that, and I'm surprised to hear that how much negotiation room is there. And also, as I said, it's convenience. Shopify makes it very easy to take Stride, to take PayPal and all of these very expensive payment gateways.

Now, there is certain business types or certain merchants that sell certain products. That will not be taken by every payment gateway, selling weapons, knives, I don't know, cannabis or any of these things. Sure. Is that something you help with to find another payment gateway provider? Or how does that work?

Matthew Rej: Yeah, absolutely. We'll call it the high risk realm, of processing. It doesn't mean that you are 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, it's not all sunshine and rainbows, I should 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, 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, strike, et cetera, 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 priced at, the type of business you have.

Transaction size, volume count, all this laundry list of things to get the best feel possible.

Claus Lauter: Now, as merchants that Shopify Plus is, more qualified than a small business for that, how much on data, on how much on proof do you need to go into negotiation for a Shopify merchants to get a better price?

Matthew Rej: the e-commerce world's a little bit different, For the most part, these e-commerce payment providers are gonna say by not having the card present, taking the card either over the phone, a reoccurring 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 chargeback, right? So, They'll leverage that point to charge you more. And that's why you see the starting rates at 2.9 30 cents per transaction. There's a little bit of truth to that.

But there's gray areas, 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 B2B sales, for example, cause they can both fall into different categories, that's gonna dictate the type of rewards card you're gonna see, corporate card, purchasing card that you're gonna see all have different interchange rates and with over 700 different interchange rates available that you could be charged, Relatively speaking, the type of business that you have, what interchange rates you're gonna see, and then we can calculate the service markup based on your current pricing. 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. You know what I mean?

And it does vary from industry to industry too. You know what I'm saying? So that plays a big factor. That's a lot of what we're leveraging as well. And we know the marketplace, if you're a merchant and you went to addon, Stripe, Braintree, PayPal, in Shopify, we know which of those four providers, just using them as an example, is gonna price you the best or give you the best quote right off the bat.

And in addition to that, we know how low they're really willing to go. How much they leverage tech over cost, 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 upsells that they can do, or services that they provide. But that's all the stuff and data that we're leveraging that we know in the marketplace we have on current clients, et cetera, to really get them the best deal.

Claus Lauter: It already shows that you need to have a lot of financial background information in that specific field to make 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: It just depends on how fast you as the customer, the merchant move. And what your 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 them the new ones once your merchant account is approved I don't wanna say the more sophisticated gateways, but the ones that have much better tech, 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, that's gonna vary depending on the client. All in all, a changeover, like a more sophisticated changeover, probably gonna take a bottom month. A less sophisticated changeover is probably gonna 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, that tokenized data into the new gateway so that's consistent. When you're processing the payments there's not a discrepancy or anything like that. You wanna make sure that you're charting the customer consistently, even if you switch gateways. And that can take time. It just depends on what, you're looking for, if you are looking to make a change.

Okay.

Claus Lauter: 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: 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. Again, these companies know that and they almost use that as leverage the hand tide merchant.

I'm trying to use an example, but NetSuite is a really big, e r p system, right? And NetSuite thankfully does partner with multiple credit card processing companies. But if you wanna 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. 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 is gonna be minimal from making a change from what you already have, doesn't make sense to go through all these steps.

If the cost savings is gonna be drastic, but 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? 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're the gateway that allows the payments to be processed. But you can also use the software cuz 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: Okay, now there's a huge potential for cost savings. Now, where do you earn money? What's your pricing structure?

Matthew Rej: 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 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 is 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. 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. They're not adding any markups anywhere else. That's part of what we're doing and that's also what you're paying us for.

Claus Lauter: Oh, I have been through that process of setting up payment gateways four times, on four different continents.

I've done it in US and Europe and Asia and in South Africa. Sure. There always was a complete pain in the neck and, I'm a hundred percent sure I did it potentially not the best and most cost-saving way at all. I would've loved to have you by my side back in the time. , where could people find out more about you guys?

Matthew Rej: Yeah, if they want, I can provide a link obviously, but our website is merchant cost consulting.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, Claus, to provide to your listeners. But my email is Matt, m a t t, merchant cost consulting.com.

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: Okay, I will put the links in the show notes as always. Then you just wanna click away just to finish our coffee break today and to our listeners that's something you should, as a emergency, you should look into that.

And as you can hear from Matt, it's a very complex topic. There is so many moving parts to it, which it's probably not the worst at the time. Worse for yourself to look into it. So get in touch with Met 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: I appreciate it. Clause. Thanks for having me on.