What has happened in my industry of providing the services for credit card processing and the POS Industry has made me very upset for close to three years. Both of these industries have lost the respect and honesty to the retail and especially the restaurant industry which I will explain and hope that you do not get into a situation that you cannot get out of.
In the not so far back past, if you wanted a good POS System you would go to the traditional systems such as Micros, Aloha, Squirrel and others. These systems commonly gave you the features that you would need so that you would run your business accordingly. The problem with most of these systems is that they are expensive and while you have these systems I have found that they would charge many fees for maintenance, support and quite a lot of money to upgrade the system for compliance. Why did they do this? You had no where else to go and because you had a substantial investment in the system and thought that this was part of the expense of keeping your business successful. So they charged whatever, quite frankly, they can get. I have seen upgrades of systems over $12,000 for an original $25,000 system.
Then a few years ago the I Pad was invented. A very good electronic configuration that keeps improving. If a good designer for the retail/restaurant industry can establish a good software program for the I Pad to provide all of the features and needs that the merchant has at his disposal, then maybe it can be a good replacement for the expensive traditional POS providers. What has happened is that it did and it did it at a fraction of the cost!
In fact, there are more features in some of these I Pad systems than the traditionals and if you ever need to have some sort of addition into the software, it can be done. Now please remember that this section is the BAD NEWS and not the good news so I will go on.
The majority of the POS Cloud I Pad providers out there have established relationships commonly with one credit card processing provider. What this means is that if you wanted to purchase their system you would need to sign up with the credit card processing services. They may give to you many unjust reasons for doing so. They may say it is better communication in the system, better troubleshooting, finding transactions but it is all a bunch of baloney. The real reason is attrition of not losing the account and to receive compensation back from the credit card processor for setting them up with their services. Now you will be paying two entities for this system and not one.
Sure the credit card processor may say that they will match your present fees but I have found when I analyze many of these statements a few months down the line that it is much higher. When you find this out and complain, what can be done about it? Nothing! You became entrapped in a situation where you have no power to keep your processing fees to a minimum and at the mercy of your POS provider and the processor and this is just one item that will happen to you.
In the beginning the credit card processor may give to you an interchange plus program but through my findings of analysis I have found that basis points on to the interchange is tacked on or in other places of the statement. This is additional profits to these two entities and at your expense. An example; a restaurant merchant receives quite a lot of rewards credit cards which the cost of interchange percentage is about 2.00%. I have seen many times an addition of .30 points added in on this charge or 2.30%. Let us say that you receive $25,000 per month in rewards cards. Just take $25,000 X .0030 and you will get $75 in additional fees for that month and this is just for one type of card. That is $900 per year. That $900 goes directly into the profits of this relationship and it is just one type of card. Let us say that this same restaurant does about $100,000 per month and that their debit card acceptance is 60% of all the cards accepted which is about the norm for debit cards. That is $60,000 per month tack on the .30 basis points into the interchange of debit cards and you can see that your charges will also go up another $2,160 per year.
Many of these providers have been accused and are being sued in class action lawsuits. I will just name a few which are all very large providers. Mercury Payment systems which is now called Vantiv are being alleged of adding hidden fees and or over charges within their statements. EVO which has at least 500,000 merchants are being sued regarding deceptive additional charges on interchange. North American BankCard (NAB) is also in a class action lawsuit accused of defrauding client users by undisclosed monthly fees and falsely advertises many services as free but then charged. Wells Fargo Merchant Services is another that is facing lawsuit and is being alleged with misleading sales tactics, expensive cancel fees and over-billing and mislabeling some of its own fee as interchange. Just type in these entities on the internet and the word lawsuit and they all come up. They are all, I believe, trying to settle and make this go away and will probably settle for pennies on the dollar and a slap on the wrist.
Additionally I am seeing constant increases being announced in the merchant statements with increases that is taking away the profits of the merchant. More so I am seeing increases within the statements that are not announced. The only reason why your account should have an increase is if the card associations announce an increase in their interchange and then is simply passed on to you. This is not being done in these entrapment partnerships.
My industry of providing the processing of your cards understands that you do not understand your statement. Many statements do not itemize interchange and it is because of this reason and other dishonest factors going into making additional profits after the contract has been signed. We know that a successful restaurant owner is more busy making his business successful than any business out there. The relationship of a POS Provider and a credit card processor is disrespectful and dishonest to the merchant.
If you have been investigating I Pad POS solutions for your business I am sure that you are running into this type of scenario in that they want you to use their processor. Some of them say that in order to use another provider is that they would then need to provide to the system a middle-ware. A middle-ware is what communicates with the processor when you swipe the card. Of course, the middle-ware is free when you use the recommended processor but to use a third party source it will cost you money and commonly I have seen between $1,200 to $2,500 to purchase. On top of that is they will charge a monthly fee to communicate with the middle-ware in the tune of about $50 per month. What this simply means from the sales rep that gave you this information is that they will make over and above about $350 for the middle-ware and or much higher and the $50 per month for the charge. Again, dishonest and no respect. Then the fees with the POS provider start to go up. Monthly maintenance, compliance upgrades, tech support or whatever.
This is what I call ENTRAPMENT. You have no power to negotiate other than leaving that provider for another and lose your investment, time and inconvenience while just getting stressed out with their attitude. Enough is enough. I miss the days of a handshake. If a POS Provider or credit card processing provider wants to make more money in their business than go out and get another. They should not increase their rates and charges and trap you into a situation that you can do nothing about.
Most restaurants make a net profit of about 6 - 8% each month. Why give almost 3% to 3.75% back to these people! Eventually if not sooner this is where they would like to be and possibly your only answer to be successful is to raise your prices. If you think that you are in this type of situation now just let me know and we will together get this resolved.
This is the bad news, now go to the good news.