Smart Processing Cost Reduction Strategies

Written by

James Davis

Written by James Davis

Senior Technical Writer at United Thinkers

Author of the Paylosophy blog, a veteran writer, and a stock analyst with extensive knowledge and experience in the financial services industry that allows me to cover the latest payment industry news, developments, and insights. Read more

Reviewed by

Kathrine Pensatori

Reviewed by Kathrine Pensatori

Product Specialist at United Thinkers

Product specialist with more than 10 years of experience in the Payment Processing Industry. I help payment facilitators and PSPs solve their various payment processing issues. Read more

Processing Cost Reduction

Processing cost reduction is one of the major challenges faced by merchants and payment facilitators worldwide. Typical credit card processing cost reduction strategies, usually, involve search for a new processor or negotiating better terms with the existing one. However, these strategies are beneficial only if they are applied in a smart way. Ironically enough, transaction cost itself is not the only component you should be trying to reduce. Beside transaction processing cost that includes merchant services, tokenization, and gateway fees, there are other important components, such as indirect and opportunity costs.

You can reduce transaction processing costs by eliminating gateway and tokenization fees (through licensing a gateway solution and a tokenization appliance, respectively). Or you can, at least, try to partner with an entity that provides merchant, gateway, and tokenization services as one package at lower prices. Beside that, you can negotiate lower cost of credit card processing if you consolidate your transaction volume and direct it to one processing platform.

You can reduce indirect costs if you switch to a more basic processing package then the one you are currently using (and paying for).

You can avoid opportunity costs if you partner with a more robust and technically advanced platform (or, vice versa, if you stop paying for features and services you are not using, and switch to a more basic, cheap, and suitable solution).

These and some other cost reduction strategies are covered in greater detail in the respective article on Paylosophy. And remember: cost reduction is not only about reduction of merchant services processing fees.