Page 15 - GBC Summer ENG flipbook 2024

Let’s Do The Math
“Cost Plus” pricing has become popular with payment processors, but those “small” fixed prices per transaction can accumulate, especially on small dollar items. If your payment provider is charging you 2.4% plus $0.30 per transaction, that $0.30 can really add up. Let’s look at these 2 examples:
1. Golfer A checks in for a tee time at the pro shop and pays for a twosome round of golf. They pay the course $200 in one transaction. The effective rate on that transaction is $200 x 0.024 + $0.30 = $5.10 or 2.55%.
2. However when, Golfer A gets hungry at the halfway house and buys a Powerade and a bag of chips for $7, your effective rate is now $7 x 0.024 + $0.3 = $0.47 or 6.67%. These seemingly small per transaction add ons can have a significant impact on the effective rate you are paying.
a) Partnership agreement. This agreement can amount to 2.5-5 basis points of total throughput. The traditional model is employed by merchant processors and GMS companies. In other words, the GMS company you do business with earns revenue on each bank card transaction.
b) ISO agreement. ISOs receive 10-25 basis points of total throughput as a middleman between the merchant and a processor.
c) Sub-ISO and PayFac. A PayFac is a hybrid receiving 5-40 basis points on total throughput. They sign up thousands of merchants in different verticals on the same omnibus contract and facilitate the conversion process paperwork when converting merchants. Several GMS companies have adopted this model.
Pay close attention to the non-negotiable and negotiable fees.
The non-negotiable fees must be monitored to be sure they aren’t altered. The negotiable fees ultimately decide whether or not merchants pay a fair and competitive rate.
INTEGRATED, PROPRIETARY AND DE-COUPLED SYSTEMS
There are three ways bank cards (credit and debit) can be processed: integrated, proprietary and de-coupled. Here is a breakdown of what each of these different types means, how they work, and various pros and cons to them.
1. Integrated
Available for years, a payment processing system that communicates seamlessly with a GMS system is considered “integrated.”
Potential pros of GMS integrating with payment processor include:
• Transaction data flows seamlessly back and forth from the GMS to the
transaction module, commonly called the “brick” where customers
insert, swipe, or tap their cards or mobile devices.
• Integrated is as efficient as a proprietary system, and ebables operators
the option to shop around and get the best pricing for processing payments with a GMS system that integrates. As stated in the “Does
your software play well with others?” article (Golf Business Canada, 2023 summer), one of the biggest benefits to software integration is that it allows a company to focus on what they do best, while integrating with other companies that will excel in something completely different. This synergy between specialized software will effectively give you the best of both worlds.
Potential cons of GMS integrating with payment processor include:
• When transaction problems occur,
it’s sometimes difficult to ascertain if it’s the processor’s or the GMS software’s problem and will occasionally lead to “finger- pointing” between the two as to who is at fault and delays a solution.
2. Proprietary
“Proprietary” is the term applied to GMS systems that are also the payment processing system, an “all in one” solution. It negates the need to find and negotiate with a separate vendor for bank card processing.
Potential pros of GMS integrated as a proprietary bank card processor include:
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