Credit Card Processing Fees

What banking executives need to know to generate income.

By Patrick O’Boyle, Michael Higgins and Steven Beene


Credit cards are a convenient and increasingly ubiquitous means of making payments. Today, credit card acceptance has passed far beyond the simple consumer purchase at a retail store or restaurant. In fact, credit card use has permeated almost every industry, with an estimated 30 million businesses accepting credit cards worldwide.

The percentage of payments accepted this way continues to increase in all industries; including of more than 20 percent in industries such as business-to-business (manufacturers/distributors/wholesalers), professional services and healthcare. In 2016, the volume of purchases for goods and services on credit cards issued in the United States exceeded $5.14 trillion

For a community banking executive, the trend toward prolific credit card acceptance represents an opportunity. With the right merchant processing approach and a working understanding of the mechanisms of the credit card processing industry, a community bank can compete and even surpass any regional and national competitors.

An Often-Overlooked Service

At many community banks, merchant services are often an afterthought: a commodity service that is occasionally needed. In these cases, banks are not only missing an opportunity for additional fee income, but just as importantly they are missing an opportunity to increase their value and expand their relationship with their commercial customers.

For businesses, credit card acceptance is an increasingly critical financial tool. However, experience tells us that many community banks service less than 20 percent of their business customers that accept credit card payments. Unfortunately, when a community bank does recommend merchant services, typically it becomes a referral to a third-party sales group whose primary objective is to sell the solution – not to advise the business customer and provide ongoing service and support. This approach too often leads to drastically inflated costs, a solution that is not tailored to the needs of the business, and a less –than-favorable contract for your customer. None of this is in the best interest of the community bank, leaving it open to reputational risk associated with the “recommended” solution.

What Your Customers Are Experiencing

Due to the increase of credit card acceptance across every industry, the fees associated with merchant processing have become a significant cost line item on the P&L. In many cases processing fees have entered into a business’ top five expenses. With this increased impact to the bottom line, the marketplace has become more complex as well. Businesses are forced to navigate ever-expanding regulations, increasing security compliance requirements, as well as new payment technologies. Common pitfalls (challenges) and complaints from businesses about their merchant processing include:

  • A “one –size-fits-all” approach to solutions for businesses. There is a lack of any differentiation and customization for their specific business type and need. A manufacturer will be setup the same as a retail flower shop. This type of sales approach drives costs higher and provides no efficiencies for a business.
  • Deceptive sales and billing tactics that erode profitability. Often what is sold versus what is delivered varies greatly. Businesses complain there is no accountability, and merchant statements seem to be purposefully confusing and cryptic with confusing rate structures and previously undisclosed fees.
  • Lack of advocacy, training and support. Businesses are left rudderless in the typical approach to selling merchant services. There is limited knowledge of the account setup, no customization to optimize their payment acceptance needs, and no help managing their bottom lines.
  • Punitive contract terms and penalties. Contracts forced upon businesses by merchant sales groups are one-sided and typically include punitive exit clauses. There is no advisor helping businesses understand card association terms including those simply stated in contracts by sales groups to tie the hands of business owners.
  • Ever-increasing risk and fraud concerns. With cyber threats and fraud scams on the increase, there are real concerns from business owners and those responsible for the well being of businesses.

Businesses are looking for guidance and advice to help them decrease costs, mitigate risks, make the most of new technologies and streamline payment acceptance. Who is better positioned to fill this need than their community bank?

What Your Customers Could Be Experiencing

Parkside Financial Bank & Trust has a culture of delivering professional, customized services to its clients. It was this commitment that prompted the bank to partner with a merchant services company to expand its services and value to commercial customers. Parkside, in the St. Louis suburb of Clayton, Mo., was not comfortable simply tossing customer referrals over the wall; it wanted and needed a partner that would act as an extension of the bank and offer a differentiated approach to merchant services.

The alliance allows Parkside to better concentrate its resources on its core competencies of commercial lending and cash management. The merchant services partner manages all sales and support of their customers’ merchant processing, while ensuring Parkside’s reputation for high-quality service is delivered. The results of this partnership have made a significant impact for Mike Murphy, senior lender of Parkside Financial Bank. According to Murphy, Parkside’s relationship managers have the utmost confidence that their clients’ needs are consistently met with custom solutions and pro-active support. Since they began offering this merchant services partnership, Parkside has realized the following results related to their merchant service portfolio:

  • Ninety five percent customer retention year over year.
  • Eighty percent adoption rate by existing customers and new prospects.
  • Increase in treasury management wins.
  • Increase in bank division fee income, now exceeding $50,000 annually.
  • High client satisfaction.

Of equal importance are the benefits experienced by Parkside’s clients, including substantial cost savings, improved efficiencies accepting payments and management of risk exposure. Murphy concludes ,“Virtually all of our commercial clients who contracted with MSP Consulting have saved money. However, I think an important benefit they have derived is to have access to the MSP’s payments expertise.” Utilizing expert advisors allows commercial customers to focus on their core business instead of spending time on payment processing issues.

Value-Added Merchant Services

Community banks are uniquely positioned to offer their commercial customers value-added solutions and services in the area of merchant processing. There is no need for a large investment or dedication of resources to increase fee income and build even deeper relationships with their customers.

Community banks can be advocates in this area with an educationally focused approach that businesses will greatly appreciate. Bank executives need to ensure they offer tailored solutions to optimize the acceptance needs at each business, helping them manage the bottom line. Likewise, it is critical that pricing and contracts are transparent, so customers know their best interests are foremost.

With expert support and account monitoring, the community bank can demonstrate accountability to its customers. Ensuring these attributes are provided in their merchant processing services, community banks will have a differentiated offering in the market, allowing more wins against regional and even national competitors, while increasing overall customer satisfaction as well.


Patrick O’Boyle, Michael Higgins and Steven Beene are founding partners of MSP Consulting, which provides guidance to businesses to help them optimize their merchant services solutions. For more information visit

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