Choose Your Payment Processor Wisely: Avoid Common Traps with These 8 Red Flags to Look Out For

I’ve helped a lot of large merchants find the right payments partner(s) over the years and been involved throughout the buying process, from identifying key requirements and challenges early on, right through to negotiating the contract and deploying the solution.

There are good guys and bad guys in this world of payments, and here are some red flags to look out for if part of your job is to look after payments vendors.

1. Hidden Fees

1. 1. If fees aren’t completely transparent or if you’re confused by your statements, this is a bad sign. Ask yourself why it has to be this way and what they could be hiding
   2. Get confirmation in writing that any pass through fees are just that, with no mark-ups or bundling… this could help you later
   3. A very well-known global acquirer goes to great pains to say their pricing is interchange ++ with complete pass-through of IC and scheme fees. However, they pocket the interchange that gets returned on refund transactions without telling merchants. This can be sizeable for certain verticals like fashion/apparel.

2. Restrictive Contracts

1. 1. A provider shouldn’t need exclusivity to provide value. They should put their money where their mouth is and if they perform well then you won’t need to look elsewhere and they’ll likely get more of your business
   2. Your business requirements may change (new geographies, new payment types, new business model) and your current provider may not always be the best fit. Your growth shouldn’t be hampered because your provider can’t keep up or you move in a different direction

3. Dodgy (or Great) References

1. 1. Most vendors will give you references but these will usually be hand-picked by customers most likely to sing their praises. Try to tell them who you want to speak to or, better yet, find someone in your network that also uses them

4. Lack of a Solid Strategy

1. 1. They should be a pivotal part of your go-to-market strategy, understanding customers, local nuances etc.
   2. You should ask where they are strong and where they aren’t, which verticals they focus on and which they don’t. Think about whether they are a good fit for you, both now and in the future. Do they have a lot of similar merchants with similar issues and experience to draw from?

5. Your Goals & Ambitions

1. 1. They should be asking intelligent questions early on about what your goals are, what your challenges are, who your customers are, what success looks like for you etc. Too many providers concentrate on all their wonderful features without making it relevant to the merchant. Every merchant is different and providers need to recognise this and show they have the solution to fit your specific wants and needs for the long-term… and give examples of others they’ve supported with the same problems.

6. Growth & Education

1. 1. They should relish the opportunity to educate you and pass on their knowledge to make you and your business the best you can be. Some will see this as risky (if you upskill you no longer need them) but this is key to a successful long-term relationship. As you learn more you’ll need them less which frees up their time too.
   2. Don’t let them give vague answers and back-off when you want to get into the detail on a particular issue
   3. If they’re not being proactive, spreading best-practice and working through problems collaboratively, then don’t underestimate the missed opportunities that are probably passing you by.

7. Technology & Capability

1. 1. You probably want rapid onboarding, real-time analytics with sophisticated insights, built-in tools to increase auth rates and route transactions, straightforward reconciliation tools, no-code changes  possible in the back-office portal etc.
   2. They should make your life easier not harder and keep up with latest developments as standard, without charging you for new features
   3. Ask what their approach is to new features updates, both regulatory changes like SCA or functional updates like network tokens. Some have a stacked pipeline of great updates which become available to every merchant automatically. Others will charge every merchant to spin up a project for adding 3DS v2 (yes that happened) or adding a new payment method – this can be both opportunistic or just because the tech stack requires a tonne of duplication
   4. Some providers are more commoditised and their technology has clearly lacked investment over the years. Don’t be wooed by low prices unless you know exactly what you’re getting in to.

8. Data and Decision-Making

1. 1. Your payments data should be available and easy to access
   2. Can you use it to figure out important questions like why transactions are being declined? Can you run single and multi-variable A/B tests to improve performance over time or test the water in a new market?
   3. Do you need to request reports from them whenever you have a question or a problem to solve?

Whether you’re comparing multiple providers right now, or just thinking about how your current providers stack up against the competition, using this list frame some extra questions may just help you avoid making the wrong decision.

Choosing the right partner doesn’t just allow you to collect money from customers. It has the potential to ensure you’re compliant, reduce technical debt, save your staff time, maximise conversion rates, mitigate fraud, enter new markets with agility and make informed decisions, big and small, over time. All of this leads to competitive advantage, which is what you’re really trying to achieve.

Steve Glover

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