Unexpected cost savings may be hiding in your payment strategy

Implement payment optimization solutions to reduce the costs associated with card acceptance with minimal to no investment and very little impact on business operations.

Tags: Payments, Planning, Innovation
Published: June 24, 2021

Many business leaders are looking across their organizations to find opportunities to control costs and free up cash for value-added investment. In a recent survey, 66% of companies indicated they plan to pursue cost reduction strategies over the next 12 months, up from just 38% reported before COVID-19.1 As a result, the typical budget exercise has been turned on its head this year as companies seek to restore, reimagine and thrive. Enduring cost savings strategies that eliminate expenses now, rather than shifting costs to a later date, are gaining favor.

The challenge for financial professionals is to identify quick and effective cost saving opportunities that drive value in months, not years. The good news for many companies is a simple and unexpected opportunity exists within its payment strategy. For many companies, credit card processing costs are the second highest cost behind payroll so identifying ways to reduce them can have a significant impact.2 Payment optimization offers companies the ability to reduce expenditures and create savings that can be invested in technology and resources to address evolving customer demands, security risks and supply chain management.

With minimal to no investment and very little impact to business operations, companies can quickly implement Payment Optimization Solutions designed to reduce and/or offset the costs associated with card acceptance.

 

Reduce Costs

Businesses and government agencies that process a large volume of commercial card transactions can reduce related expense through Commercial Card Optimization. Commercial cards include business cards, fleet, corporate, and purchasing cards.

While business-to-business (B2B) companies and government agencies are an obvious fit for the program, any company that conducts B2B transactions with vendors, partners, contractors and service providers can benefit. We work with consumer retail and services companies, universities, and non-profits to help them achieve meaningful cost savings by optimizing their commercial card payments. Commercial card payments are among the most expensive in terms of fees, so businesses can expect the cost of accepting these cards to increase as usage grows. It is possible to reign in these costs with Commercial Card Optimization.

Commercial Card Optimization enables companies of all sizes and types to automate the collection of Level 2 and Level 3 transaction data to qualify commercial card payments for lower interchange rates. Through our program, businesses can realize the full savings potential on every transaction by consistently gathering the data required without creating complex manual gathering processes that encumber staff and resources.

By proactively capturing all the data points necessary to meet Level 2 and Level 3 interchange requirements, our Commercial Card Optimization Service offers our customers a unique savings opportunity. In general, our clients have realized an average of 0.4-1.5% decrease in their average commercial card rate3 -- though this savings can be impacted by a few factors, including rate changes implemented by the card networks. An estimated savings can be calculated by our Payment Optimization Consultants, based on a company’s existing payment data.

 

Offset Costs

Fee Acceptance Programs are designed to enable businesses, government agencies and higher education institutions to offset or reduce the cost of accepting card payments. We offer three programs that allow organizations to add a small fee to a customer transaction to cover the cost associated with accepting the card payment.

Our Fee Programs Include:

  • Service Fees for Public Sector & Higher Education
  • Credit Card Surcharge
  • Convenience Fees

Depending on the program and/or the payment method, the fee may be in the form of a flat fee or a percentage of the transaction. Each Fee Program is regulated by its own set of card brand rules, limitations and requirements which is why it is important to work with a Payment Optimization Consultant to identify a suitable program for your organization.

Our Payment Optimization Consultants work with a seasoned implementation team to ensure the appropriate fee program is implemented in accordance with applicable rules and regulations. The implementation of Fee Programs can be complex, so we take on the heavy lifting of programming, managing and maintaining it for our clients. Our clients reap the cost savings with minimal impact to their operations.

 

Streamline Currency Conversion

A less obvious opportunity to improve payment optimization and the customer payment experience is Dynamic Currency Conversion (DCC). With the exception of 2020, every year tens of millions of people travel to North America from around the world. As COVID-19 vaccinations and testing continue to increase globally, so will international travel. DCC helps U.S. and Canadian businesses to welcome international travelers.

Prior to completing a purchase, DCC calculates the transaction amount and displays the total in both the cardholder’s home currency and the business’ local currency on the terminal screen. The cardholder has the option to complete the purchase in their home currency or make the conversion before the transaction is submitted for authorization. If they choose to convert to their currency, the conversion is calculated with the current day’s currency exchange rate instead of the exchange rate used post-submission by the card brand or the card issuer.

Each receipt shows the purchase in the business’ local currency, the conversion rate, plus the cardholder’s home currency amount. This makes it easier for international cardholders to reconcile purchases when paying card balances and reduces the likelihood of chargebacks resulting from unrecognized transactions. In addition, our DCC service enables businesses to share in a portion of the conversion fee for each completed DCC transaction creating a new source of revenue.

These are just three ways we help our customers to reduce expenses and better manage the cost of card acceptance. We offer several opportunities to achieve cost savings through Payment Optimization, which may be available to your company based on your industry and/or transaction mix. You can arrange a consultation with our Payment Optimization team by contacting your U.S. Bank Banker or Relationship Manager.

 

1.      Deloitte, “2020 Enterprise transformation and cost reduction survey”, 2020.
2.      Entrepreneur, “Considering Credit Card Surcharging? Here's What You Need to Know.”, September 29, 2020.
3.      American Bankers Association Conference for Community Bankers, Podcast: “Driving Customer Success with Higher Profitability”, February 20, 2021.