Priorities for negotiating payment processing deals

Whilst commercial implications are obviously an important factor when choosing a payment processor, how can you be sure that a proposal represents best value? In my opinion, there are two key considerations to take into account if you want to get this right – and avoid falling into the trap of focussing solely on price.

The first consideration is whether a prospective provider is a genuinely modern card issuing and payment processing platform. Arguably, the best way to establish this is to try before you buy. It’s beneficial to be able to access a sandbox and kick the tyres of the tech, so to speak, before signing any binding agreement.

The second consideration is whether you feel that the commercials quoted represent a good deal. You can only arrive at this conclusion after comparing prices from a range of potential processing partners and rating them against the tech offering. Again, the ability to test first is a key part of this process and if it’s something you’re being denied then chances are, you risk being both underwhelmed and underserved. 

So, with 20 years’ experience in this sector, it’s my view that the payment processing partner is too important a component in your success to leave to chance. But how might you go about executing these considerations in an effective and business-beneficial way? And what are the potential pitfalls in choosing a new payment processing partner? To help you navigate this challenging landscape, I’ve drilled down into the detail below.

You get what you pay for still holds true today  

Firstly, if you think you’ve negotiated superb commercials for your business I would encourage you to think beyond the headline figure. It might seem like you’re making a business saving but have you considered that the price is possibly a reflection of how much a supplier values you as a customer? Let’s think about that for a moment – it’s my belief that the price a supplier quotes is an indicator of how much they value your business and how much they intend to invest to deliver you the world class service you expect. Price is a factor, but value is much more important.

Indeed, for the price you’re being asked to pay, can you be sure that you’re going to get the level of service you require? And are you buying into proven, future-proof technology? It’s a good idea to create a matrix of your prospective suppliers and rank the lowest priced solution against the highest rated technology and service offering. If you find that the lowest priced supplier ranks lowest on your technology evaluation it’s usually for good reason. In my experience, it’s because price is being used to try to mask the fact that you’re unlikely to get value for money.

The response that I often get when I raise these points is if the supplier commits in the contract then they have to deliver the quality of service they promised, or based on what we’re being told everybody’s solutions are much of a muchness. Trust me, I have been taken in here myself and earlier in my career made some buying decisions that I wish I could have rolled back. In my defence, back then I didn’t have the option of trying out the technology before committing to a three- or five-year contract. These days, thankfully, that’s no longer the case. 

Put simply, it’s very possible that suppliers who don’t let you try before you buy, and whose pricing places a very low value on their offering, aren’t necessarily prioritising the service side of any future relationship. There’s absolutely no reason why you should accept this. 

Something else I hear is that this level of pricing can be offered because the supplier is taking a volume-based approach. There is perhaps a risk that the pricing in this situation doesn’t factor in the need for continued evolution of technology and service. Evolution could mean new products, features or functionality, or the continuous improvement and modernisation of the platform to ensure it never becomes outdated or outperformed. Could it be that the supplier in question isn’t going to invest in preventing a degradation in service or market suitability? It’s a purchasing pitfall, for sure.  

The bottom line is that the commercial agreement you’re entering into needs to ring true in terms of commitments to future platform functionality. Part of the answer to this lies in knowing whether a processor’s client base is sufficient enough to support the articulated vision or depends on further third-party funding.

Use the buying skills you’ve honed as a consumer

I don’t know about you, but when I am making major purchases as a consumer I spend a good amount of time evaluating the purchase. 

Would I buy a car I couldn’t test drive that was being touted as identical to one that I could – and was being sold at a price that suggested its value was significantly below the market benchmark? Not a chance. Yet this is what many companies are being asked to do when selecting the technology providers that they are going to rely on for the next three to five years.

If a consumer is offered something at a below-market price it tends to raise suspicions; is it the real thing? And what’s wrong with it? We really should apply this logic when procuring business critical services. There’s the saying buy cheap pay twice. In the payments technology world being locked into a contract that isn’t working for you could ultimately jeopardise your business, and end up costing you a good deal more than the proven, market leading option.

At Marqeta, we provide unfettered, instant access to our fully-documented open APIs and private sandbox. This allows you to test what we offer and be sure that our technology is a good fit for your needs. We’re the only proven, modern card issuing platform that adopts this approach. 

Make sure you’re comparing like for like

Headline price rates can look deceptively attractive and there are myriad ways in which technology providers present prices that can make comparing multiple proposals difficult. Don’t be daunted by this. It’s an absolutely essential exercise to ensure you benchmark like for like.

This starts with having complete confidence in what the provider will be charging for on a day-to-day basis and having a firm grip of your own businesses projections; will you be charged for API calls, and if so how many will you be making? Will they charge for authorisation declines – what proportion of your transactions do you anticipate these to be? And so on. 

Marqeta provides a very simple pricing structure designed to give you access to a modern card issuing platform that drives your business success, and crucially is structured to only charge fees where we’re enabling your customers, processing purchases and helping protect you and your cardholders from fraud. 

Understand the total lifetime cost of a commercial agreement 

As well as understanding the day to day costs of the service, I would advise thinking ahead to understand future development requirements. Very often providers who offer below-market pricing will charge you for the simplest of platform configurations or changes, which you can only service through them as they do not provide you access via APIs or a meaningful user interface.

It’s also worth considering what your plans are for launching new products, expanding into new countries or diversifying into new market segments. All too often these business plan initiatives are likely to incur significant project fees from providers who rely on professional service fees to make money from your business. In my experience, it’s always valuable to have a clear outlook on the next three years of your business evolution and to challenge would-be providers to give you ballpark estimates to support your roadmap.

With a realistic view of business-as-usual costs and future development needs, you can undertake a holistic analysis of the total cost of service from various providers. It sounds straightforward, but I’m amazed at how many companies don’t have this overall view.

Marqeta will provide you with the control and flexibility to configure your programmes via open APIs. Expanding into new countries or creating new product variations (e.g. launching a corporate expense card) does not warrant additional projects or fees at Marqeta. We want you to control your own destiny and are here to support you, not to control everything that you do and to charge you for the privilege.

Going beyond price – why cultural alignment is critical 

I started this blog by emphasising the importance of value as a factor in considering price. Value has several indicators, one of which is cultural alignment. We want our partners to be assured that they are choosing to work with a like-minded business, whether that’s a start-up looking to change the world or a large organisation embarking on a journey of digital transformation. We pivot our culture to fit yours – to ensure your customer-driven innovation plans become a reality. You can’t put a price on this value-centred approach but it’s not something you’d want to forego.

Payment processing is fundamental to your business 

A good payment processing partner has the potential to transform your business. Deals tend to span years, so it’s important in my opinion to hold a telescope up to your eye and scan the horizon. What looks like a great deal for your company today could turn out to be a hindrance to your development in the coming years. Your ambitions should be facilitated not frustrated.

Now it’s time to choose

So, if you are looking for a robust and stable payment processor, one who’ll deliver genuine control over your card programme, and one who is committed to innovation, all at a price that represents the best value to your company, there really is only one consideration. Marqeta.