With a high volume of transactions, even a small fee reduction can drive substantial and sustained cash flow improvements, cost savings, and improved profitability.
If Benjamin Franklin had been an insurer processing millions of card payments a year, he would surely have added card processing fees to his famous list of life’s certainties.
Not accepting cards is unthinkable for insurers. 60% of consumer payments were made using either credit or debit card in 20231, so the fees that come with them are usually considered “just” the cost of doing business. However, this is not the same as something that insurers must accept without objection.
Understanding card processing fees in 60 seconds
The charges vary depending on the payment processor, type of payment, and the specific terms of your merchant agreement. They are not always well defined, making the true cost of accepting cards quite a challenge.
Here are five examples of card processing fees:
Interchange fees: Charged per transaction based on the card type, processing method, and industry.
Assessment fees: Charged monthly, they cover the infrastructure costs of card payments.
Payment gateway fees: Fees for online payment processing, either flat rate or per-transaction percentage.
Monthly fees: Most payment processors also charge a monthly fee for maintaining your account.
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. Conversely, unmonitored merchant processing statements can hurt financial goals with unbridled fees.
Here are a few tips on reducing card processing fees:
Monitor your statements: Review your merchant account statements regularly to avoid overcharges or unnecessary fees.
Negotiate with your processor: Some fees, such as payment gateway fees or monthly fees, may be negotiable with the payment processor based on volumes or contract length.
Bundle services: Some payment processors offer bundled services that can help reduce overall costs. For example, combining payment processing with other financial services like payroll or accounting can lead to discounts.
What to look for when choosing a payment processor
Merchants cannot directly negotiate interchange fees, but partnering with a third party like ACI Worldwide 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 cards 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
Ready to save on card processing fees?
This customer is one of the largest insurance companies in the U.S. ACI analysts saw an opportunity to drive substantial savings by incentivizing its customers to pay by debit card and ACH, which are cheaper to process than credit cards.
Results: Leveraging the ACI Speedpay platform, the client implemented our strategic interchange management, including a 2.45% surcharge to customers using credit cards, no fee on debit card transactions, and a fixed fee of just $0.19 for ACH.
Robert has more than 20 years of progressive experience in the fintech and healthcare industries, specializing in payments, core system consolidation, business development, account management, and public speaking. His expertise spans all facets of enterprise payment solutions, including C2C, B2C, B2B, C2B, and P2P, with a majority of his professional career working to improve CX while reducing costs with the largest insurers in the world.
Erika has spent the past 23 years in the payments industry, most of her tenure at American Express in global merchant and network services. Erika was responsible for acquiring some of their largest merchant partners headquartered in the U.S. She worked in a variety of industries including insurance, utilities, government, eCommerce, B2B, national retail, and T&E. Drawing on her extensive experience, Erika is leveraging the entire payments ecosystem to guide clients towards a deeper understanding of their solutions, ultimately benefiting both the merchant and their customers.
Erika has spent the past 23 years in the payments industry, most of her tenure at American Express in global merchant and network services. Erika was responsible for acquiring some of their largest merchant partners headquartered in the U.S. She worked in a variety of industries including insurance, utilities, government, eCommerce, B2B, national retail, and T&E. Drawing on her extensive experience, Erika is leveraging the entire payments ecosystem to guide clients towards a deeper understanding of their solutions, ultimately benefiting both the merchant and their customers.
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