Optimize Your Revenue with a Zero-Fee Payment Strategy

Jan 25, 2023 by Kelsey Banerjee

Credit card processing fees and other transaction costs cut deep into business revenue—in 2021 alone, U.S. merchants paid $137.83 billion in fees. And that’s just for accepting credit card payments.

For accounts receivables professionals looking to optimize their revenue in 2023, taking a closer look at transaction fees is crucial. If you’re paying percentage amounts for every transaction, you are losing hard-earned dollars that could be reinvested in growth.

AR teams can create strategies to reduce or eliminate fees. But before we can understand how, we must lay out the general fees for each payment method.

Which Transaction Fees Can You Get Rid Of?

With so many payment options available today, AR teams must compute various types of transaction fees. General transaction fees include:

  • Interchange plus — Whenever a customer pays an invoice with a credit card or debit card, the issuing and receiving banks must authorize and verify the information. Each card issuer requires a different credit card processing fee, but other factors, such as whether or not the purchase was made online or in person, can also affect the total transaction cost. The interchange fee tends to include various micro-fees, as well as a low flat rate. Generally, interchange plus fees range between 1.5% to 4%, plus $0.20 to $0.50.
  • ACH fees — A direct deposit or ACH transfer is low cost, but it isn’t free. While this payment method often gives a bigger bang for your buck, each transaction can cost between $0.20 to $1.50. In some cases, it could be as high as $3.00. But for B2B transactions that are often worth thousands of dollars, this is a small price to pay.
  • Bank wire fees — This old-school method of bank transfers is often costly. Transaction fees can easily amount to $25 or more per transaction.
  • Payment gateway fees For B2B and eCommerce companies that use payment gateways or POS terminals, you may have to set aside another percentage cost for every transaction. Depending on the platform, you could be paying 1.5% to 3%, plus $0.25 to $0.50 for every filled invoice.

You can also choose to invest in flat-rate or tiered pricing discounts for a more predictable monthly fee, which can be helpful for businesses with high-volume transactions. Out of these two options, flat-tiered pricing tends to offer the most transparency, but it depends on each provider.

If your business also accepts paper checks, you’re likely spending a significant amount on traditional lockboxes or manual labor as your team focuses on manual data entry.

Out of all these methods, there are a few different ways to reduce fees and associated costs:

  • Use flat-fee pricing options for ACH and bank transfers
  • Limit or eliminate your payment gateways
  • Shift the transaction fees to the customer as convenience fees
  • Eliminate paper checks or use a smart lockbox platform
  • Automate the payment process to reduce time spent on data entry
  • Using Level 3 card payment processing

Out of these options, one of the most popular is the convenience fee. But why should your customer pay for credit card transactions?

Who Should Pay for Transaction Fees?

No matter your fee structure, someone always has to shoulder the costs, whether that’s your business or your customers. But who should handle the costs?

Transaction fees, particularly in relation to credit card, ACH, and bank transfers, primarily offer convenience to the payer. They no longer need to take out cash, go to their bank to manually send a wire, or write a check. Instead, they can just key in their details and send their payment.

For merchants and AR teams, however, these payment methods are marginally more convenient. While automated payments make this easier, accounting departments still need to review, match, and consolidate electronic payment data.

This is why more and more businesses are baking the cost into their prices or adding it as a convenience fee.

However, the question isn’t really as simple as who should pay. Flexible payment options and accounts receivable strategies turn the question from “who” to “when.”

Defining a “Zero-Fee” Strategy

When it comes down to how you want to be paid, most AR teams want to reduce fees, get paid quickly and securely, and provide a stellar customer experience. To create that superior, seamless payment process, AR teams often accept multiple payment methods.

This is where strategy comes into play.

B2B companies can leverage Zero-Fee transactions to incentivize preferred payment methods, such as ACH and bank–to–bank transfers. There are two components to this kind of strategy:

  • Tack on a convenience fee to costly payment methods, such as credit cards
  • Absorb fees on the lower-cost methods, such as ACH

This approach has two benefits. First, if the customer chooses to use a credit card payment, your business doesn’t shoulder the higher transaction percentage. But if they choose ACH, the customer and you pay less, even if you’re absorbing the fee.

Let’s see how this works in practice.

Imagine that you run a solar energy company specializing in installing and maintaining renewable energy sources for businesses. You bill a customer twice—once in advance, once upon installation—for a $20,000 setup.

If your customer chooses to pay with a credit card and the transaction fee amounts to 2%. With a convenience fee, you save $400. And if, instead, they choose to pay via ACH with a fee of $0.50 per transaction, you’ve only lost $1.

Either way, you’re driving revenue up. All while giving your customer a choice.

Optimize Your Revenue with Paystand

Strategically using convenience fees and Zero-Fee options ensure that your business retains as much revenue as possible. And through providing numerous payment options, you can also reduce your DSO and keep cash flow healthy—no matter how your customer pays.

Many platforms let you offer different payment options, but not all of them are as user-friendly, seamless, or as customizable as Paystand. Our solution makes it a cinch to implement a Zero-Fee policy, but that’s just the beginning.

Paystand provides B2B and eCommerce businesses with an end-to-end payments platform with features like:

To find out how simple AR can really be, see Paystand in real-time in a customized demo.