Unlocking the Secrets to Ideal Merchant Banking: Tips for Lowering Costs and Increasing Commissions

Merchants have a set of expectations from their POS terminal when it comes to ideal banking. They seek a secure transaction process and the highest commission from their payments. Additionally, they want to lower their costs of buying and using the POS machine. However, based on my personal experience and conversations with many merchants, I have observed that three desires are most common among them.

Firstly, many merchants desire to receive a free POS device. While this seems like a lucrative option, it comes at a cost. POS machine suppliers compensate for the loss of providing free machines by charging a higher transactional fee from the merchant. This fee is charged upon every transaction the merchant conducts and can significantly impact their annual commission. Thus, paying for the machine upfront is more intelligent than paying higher transactional fees in the long run. Merchants should negotiate with the supplier for a lower price or pay in instalments.

Secondly, low transactional fees are an essential requirement for merchants. The country's interchange rate affects the transactional fee and varies depending on the card. Knowing how much American Express, Visa, or MasterCards charge for settlement is crucial. The blending transaction fee is around 1-2.5%, while for the majority of domestic market cards, it is 0.8-1.4%. Merchants must select an option with a lower transactional fee, as paying more than 2% in some countries can be costly.

Thirdly, merchants want the quick settlement of their transactions. However, settling payments within a day is impossible for most banks without incurring an extra cost, which is then transferred to the merchant. Therefore, choosing an acquirer that provides settlement within 2 to 5 days is better. Merchants who can afford to wait for a more extended settlement period can select a settlement plan that works for them, such as my eCommerce business which settles payments every Monday.

In conclusion, merchants must be careful when purchasing a POS machine and understand that options that seem too good come with a downside. While they desire a free POS device, low transactional fees and quick settlement, it is crucial to consider the impact of these options on their annual commission. Negotiating with suppliers, selecting options with lower transactional fees, and choosing a settlement plan that works for them can help merchants achieve ideal banking.