Should higher risk merchants pay more than lower risk
Posted by: Curtis Stevens on November 20th, 2009

I recent discussion on an industry forum was about another credit card processing competitor had a furniture store merchant that was considering switching companies.  He currently processes $300k a month.  He is currently paying Interchange plus 0.15% and some other provider quoted him 0.05%.  The sales agent went onto to mention this client has been with him for four years and he tried to explain to the merchant about the great service he has received during that time.  The question comes down to is that sufficient profit for any ISO to take the account.  That is only $150 total profit on the account, which the ISO will share with the agent.  I personally do not think that is enough profit for an account like that.  Furniture stores are very risky.  I have seen ISO’s take huge losses on furniture stores because of the way they are setup and how they buy/sell the products.  They could run $300k in charges and close their shop before the merchandise gets delivered, which would result in mostly chargebacks creating a huge loss for the ISO.

The question is, how much is a reasonable amount for the risk assumed?  0.50%, 1.00%?  I’m not sure what the correct answer is, but I know $150 is too low, even to service that type of account.  If you were to remove any associated risk, how much should you make to simply provide that merchant great service?  Take care of any needs they have when they call and really hold their hand.  All of this comes at a price.  I have merchants that make us a lot more than that each month with a fraction of the volume  and risk.  We take care of the merchant and everyone is happy.

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