Insurers have the potential to save millions by modifying their business model

Card processing fees are a catch-all term for several charges levied by the various payment players facilitating card payments. Many of these charges, though not all, are negotiable or reduced through process optimizations.
The fees vary depending on the payment processor, type of payment, and the specific terms of your merchant agreement. They are not always well defined, making interpreting the true cost of accepting cards quite a challenge.

Here are five examples of card processing fees:

1. Interchange fees: Charged per transaction based on the card type, processing method, and industry.
2. Assessment fees: Charged per transaction by the card networks.
3. Payment gateway fees: Fees for online payment processing, either flat rate or per-transaction percentage.
4. Monthly fees: Most payment processors charge a monthly fee for maintaining/servicing your account.
5. PCI compliance fees: You may also be charged a fee to ensure your business complies with the Payment Card Industry Data Security Standard (PCI DSS).

With a high volume of transactions, even small reductions in any of these fees can drive substantial and sustained cash flow improvements, cost savings, and improved profitability. On the other hand, failing to monitor merchant processing statements can undermine financial goals due to unchecked fees. Here are a few tips on reducing card processing fees:

1. Negotiate with your processor: Certain fees, such as payment gateway fees or monthly fees, may be negotiable with the payment processor based on volume or contract length.
2. Leverage a third party: Some third-party providers offer more competitive pricing by processing high volumes across multiple clients. They can negotiate better rates, leading to significant savings for your business. They also handle PCI compliance, chargebacks, and dispute resolution, reducing your operational load.
3. Monitor your statements: Review your merchant account statements regularly to avoid overcharges or unnecessary fees.

Merchants cannot directly negotiate interchange fees; however, partnering with a third party can lead to substantial savings.

• Promote the use of ACH or debit cards: ACH transactions offer a significantly lower cost than credit card transactions, and fees associated with debit cards also tend to be more economical.
• Consider surcharging: Insurers are increasingly adopting surcharging models to pass the cost of credit card processing on to customers.
• Least-cost routing: This can get technical, but an expert payments partner can help you optimize transaction routing to take advantage of lower processing costs, such as processing payments through the customer’s issuing bank.

One of our clients, a major U.S. insurance provider, encouraged customers to switch to more cost-effective payment methods. ACI analysts saw an opportunity to drive substantial savings by incentivizing its customers to pay by debit card and ACH, which are less expensive to process than credit cards. 

Results: Leveraging the ACI Speedpay platform, the client implemented our strategic interchange management by adding a surcharge to customers using credit cards, while applying no fees to debit card or ACH transactions, ultimately saving them millions of dollars.²