How to Choose a Zero-Fee B2B Payment Processor

Sep 28, 2021 by Kelsey Banerjee

The cost of credit card processing, especially for B2B payments, isn’t cheap. And, as CFOs and accounting professionals look for more ways to free up working capital, choosing an affordable payment processor is certainly one way to go.

However, while more and more AR departments are open to receiving credit and debit card payments, AP tends to have mixed feelings. According to a 2019 MasterCard study, 20% of finance professionals feel that making payments with credit cards is too expensive, and 36% are worried about payment fraud. Uncertainties about data security, card acceptance, and usability are also causing many B2B clients to hesitate.

For AR teams, this means that your payment gateway should be not just affordable, but secure and easy to use. So, before we get into the most cost-effective option, let’s look at what features you absolutely need if you intend to accept credit cards.

5 considerations for a credit card processor

With the evolution of payments and AR, it’s no longer enough to belong to credit card networks, like Visa or MasterCard. Interchange fees, ERP integrations, compliance, and other factors all come into play. As we mentioned earlier, security and anti-fraud efforts are mandatory, especially if you accept international payments.

To make matters more complex, your processor should be secure whether your end-user is paying from their desktop, tablet, or smartphone.

At the same time, you’ll need to balance your feature list with your budget. After all, your payment gateway should ideally be saving you money, even with its monthly fees.

1. Dealing with transaction fees

Transaction fees on credit cards are really where many businesses lose money. A transaction fee is made up of one to two components, depending on the cards you accept.

First, every card charges an interchange rate, also known as the credit card processing fee. The card’s issuing bank charges this fee for fraud protection and the labor cost of shifting money from the card to the bank.

The second charge is the network fee, which is used by Visa and MasterCard. Unlike Discover or American Express, these two credit networks do not have an issuing bank.

As you may know, the interchange rate is set by a number of factors. For example, the average rate for debit cards is 0.3%, and it’s 1.8% for credit cards. Using card-not-present transactions can increase the cost, while using EMV chip cards may decrease it. This, again, has to do with the fees being linked to fraud protection.

As you can imagine, this markup can cause some serious leakage. Even if you’re paying 1.8% for every swipe – and that’s not uncommon to pay up to 3% – that’s $18 for every $1,000 transaction. If you’re in B2B and your clients are buying $20,000 worth of equipment, software, or services, $360 of that is going towards the transaction fee!

So, when looking for a credit card payments system, it can help to look for platforms that allow you to shift this charge to the consumer as a convenience fee. And, if you offer other methods of payment, such as ACH or eChecks, this is a great way to incentivize these other payment methods without sacrificing usability or speed.

2. ERP integration

Next, it’s vital that your point of sale (POS) system works in conjunction with your ERP. The last thing you want is disjointed platforms because that will cause a headache for your AR team as they manually sync the invoices with the payments.

You’ll want a payment gateway that links to your ERP in real-time, and, ideally, can even be used directly from your ERP dashboard. In addition, it can be incredibly helpful to have a platform that collects data as you process payments. Having access to robust data, from invoice to payment, will allow you to better strategize your AR workflow.

3. Pricing transparency

Next is pricing transparency, which is less about card processing and more about the platform itself. As we mentioned earlier, your payment portal should be reducing costs, not adding to them. But the issue is that most platforms have their own pricing models layered on top of the credit card processing fees. Common models include the following:

  • Interchange plus – This pricing model takes the published interchange fees and adds an additional fee for each transaction.
  • Flat-rate pricing – With this payment method, vendors will charge you a flat fee based on volume.
  • Tiered pricing – Also called "bundled pricing,” tiered pricing is when a merchant services provider creates their own markup for their services with different qualified rates. While you can plan around tiered pricing, it tends to be less transparent because it's difficult for teams to determine how to get the best rate.

A part of pricing transparency is remembering to review the contract terms. Are you locked into a long-term contract? Do you need to place funds in reserve? Your ability to adapt is just as important as reviewing the upfront costs. Because if you can't change course at the right time, you'll be facing significant opportunity costs.

4. Achieving PCI compliance

Earlier we mentioned how AP teams are concerned about fraud and security. For this aspect, you’ll want to look for a payment gateway that uses encryption and, ideally, tokenization.

Encryption allows you to maintain PCI compliance, which is critical if you want to avoid fees. And tokenization takes that to the next level.

Tokenization is when you replace sensitive data with a meaningless token. This process keeps customer data secure from both external and internal sources. In other words, you can protect against intentional fraud and human error.

But that’s not all. With tokenization, you can even save customer data through the token so they don’t have to input their payment information every time. Not only is this safe, but extremely convenient for the end user.

5. Don’t forget about customer service

Finally, you need a card payment processor that actually answers your calls. Accepting card payments is serious business. Any potential error, no matter how innocent or technical, can negatively affect your brand perception. So, it’s critical that your payment gateway help desk be accessible 24/7.

How to save money on credit card processing

The fact is, with so many alternatives out there, you shouldn’t be absorbing the cost of credit card processing. To reduce costs and free up capital, you should work with a payment gateway that provides the following:

  • Flat-rate, transparent pricing
  • Convenience fees to shift the burden of interchange fees
  • Zero-fee options to encourage ACH and bank-to-bank transfers
  • ERP integrations
  • High-end security to ward off non-compliance fines and other costly issues
  • Easy-to-use user interfaces that ensure your invoices are filled quickly and efficiently

To learn more about how you can find more savings from credit card processing, check out our guide on decoding your merchant statement. Or, if you're ready to talk to an expert in AR optimization, book a demo with us today.