The payments industry has one of the worst reputations one can find. Commoditized offerings, horrendous support, and little value are just a few of the complaints you’d find on any review site. We suspect the disdain for payments comes from the lack of transparency at the rather large price point: merchants shell out thousands of dollars yearly on processing yet pay a fraction of that amount for tools that make their businesses more successful.
When you compare the two, it’s no wonder people are indignant.
Be that as it may there seem to be no shortage of payment processors behaving in questionable ways. We understand that businesses need to make money, but the methods payment processors use to answer that call certainly merits further dialogue. As we attempted to elucidate in an earlier article, payment processors too-frequently choose their tactics because organic growth is elusive, and they’re often not clever enough to innovate their way into a solution that would generate the growth they’re seeking. By default, ratcheting payment rates is easiest, sadly.
What has caught our attention over the past few months has been the marked increase in complaints from merchants processing with Global Payments. Not only merchants, actually, but Global’s own channel, who sees Global’s rate increases as an assault on their personal brand.
Think of it this way: Global has a network of thousands of employees who sell processing. The upper echelon of these employees win deals on rapport, not on price. “Merchants are choosing to do business with the person who walks in their door and it doesn’t matter what logo they’re carrying,” says a long-time payments sales agent.
For these few, high quality sales people, their reputation is on the line. When their service provider increases processing rates far beyond the expected business norms (which should be 0 if we’re honest), they’re the ones that get the calls. “We have to look our customers in the eye and explain what’s happening, and a lot of times we’re finding out about it from our customers first. It’s not a great place to be.”
And over the past few months we’ve heard just how bad it’s been.
“Global just raised their processing rates by 60 basis points and .10 cents, effectively increasing many merchants’ processing costs by more than six times. I’m certain it’s the largest increase ever taken by a processor.”
Global Payments agent
This from a long-time Global Payments agents who had no problem getting evidence to prove their point, attached below.
They were one of several agents who received a notification of rate increases from Global. Global seems to have retroactively increased rates: agents received a notification of a rate increase on October 25, 2018 for an increase that started on October 1, 2018.
Is that wasn’t enough, Global instituted another rate increase in February.
Many more agents shared statements that reflected these changes. Below are some examples that best show how the rate increase is being obfuscated.
Still other agents shared that Global seems to be increasing rates by 30 basis points (bps) for their accounts coming off three-year contracts.
“We just went through another round of increases this month and about eight of my own clients were on the list. One of my clients saw his rates increase by 35 basis points on $2M in annual volume. Another one of my customers, a wine shop, saw his rates rise by more than 30 bps.”
Global Payments agent
If you’re curious how these rate increases translate into tangible dollars and cents, let us run through a quick example. Global counts many restaurants as customers thanks to their acquisition of Heartland, a restaurant POS horseman. A typical restaurant might earn an acquirer a profit of 10 basis points and $0.10 per transaction on the smaller side, and even less on the larger side. If a restaurant was doing $100,000 in monthly processing with a $45 check average, these changes from Global represent a monthly increase of $822 in processing costs, or $9,864 per year – straight to the acquirer’s bottom line, mind you.
Agents have tried to rationally explain the increase.
“In the past Global has increased rates more than I’ve seen at other processors – and more frequently. Typically the rate increases coincided with quarterly earnings and we always heard it was related so the management team could meet their bonus expectations.”
Global Payments agent
Another chimed in with their prognostications using Global’s past behavior as the baseline for their predictions:
“Global has a history with these sorts of rate increases. Global raised rates on PayPros merchants after they acquired PayPros and I expect what we’re seeing now is the long path to rate increases for their Heartland merchants. Watch out.”
Global Payments agent
These sorts of maneuvers can come with unintended consequences. While the payments company often uses modeling to determine their rate increases – subtracting the revenue lost from churning merchants from the amount the stand to gain on the ones that stay – the spreadsheet doesn’t account for the pain the agents go through.
“What’s been coming into my equation recently is certain strategic referral partners becoming aware of this and showing hesitancy to continue referring me new clients. I couldn’t bullshit them, and I can’t blame them for putting more energy into becoming their own ISO so at least they have more control over this kind of thing. Honestly, it’s not pretty from my perspective and it has me beginning to carefully weigh options.”
Global Payments agent
We asked Global for comment on the matter and they never formally replied.
Not cool.
If you elicit a strong enough reaction in the market agents will find that their deal flow becomes a trickle. Some agents may opt to leave Global altogether, chalking it up to a logo that they can’t rest their personal reputations upon. The market is pretty elastic so it’s not as if these merchants have to take the increases either: merchants will just find another commoditized provider for their processing.
We went ahead and created a tool to help monitor some of these rate games. Long term we can use AI to identify bogus fees and markups. Today it works more simply: a user creates an account, searches for the real processing costs directly from the card networks, and can see where markups might be coming from.
For agents, the tool provides a way to input your own buy rates to quote intelligently to figure out how overcharged existing accounts are. Oh, and did we mention that it’s free?
