A world leader in industrial materials distribution was seeing significant success with a new, streamlined online sales platform. But this fully digital approach came with a digital-specific challenge: almost all the revenue from this business line was coming through credit cards. The fees for accepting credit cards were cutting heavily into the already slim margins that are standard to the materials distribution industry, with the potential to significantly weaken the promising new enterprise.
To manage this cost, the company turned to credit card surcharging. With InterPayments as its Managed Surcharge Provider, the company was able to target surcharging to just its digital business. InterPayments integrated into the company’s existing eCommerce technology, ensured compliance, and provided key messaging about the change to recurring customers. By treating surcharging as a business transformation, and not just a fee, the company was able to regain its margin, recovering more than $3.6 million annually.
Surcharge Program Overview
Industry: Industrial Materials Distribution
Size: 2,500+ Employees
Location: Global, with surcharging focused on the United States and Canada
ERP/Accounting Software: SAP ECC6 with Auto Auto AR & Direct AR modules
Who to Surcharge: Card not present eCommerce transactions, on account customers only
Time to Implement: 7 months
Considerations: AmEx acceptance, split auth captures, refunds
About the Company
A major industrial materials distributor focused on North America, the company is dedicated to providing high-quality materials in a variety of shapes, sizes, and finish to meet the needs of customers across heavy industry. With a focus on customization and logistics, the company gets the right material to the right place at the right time.
Solving Challenges
The company’s digital business line was drawing significant revenue: more than $200 million per year. But with only about $30 million coming from electronic checks, the vast majority of transactions were being conducted via credit card. This was a challenge in an industry with slim margins – according to analysis published at NYU Stern, margins on materials like steel as of January 2025 were as little as 6.71%! With credit cards introducing fees that could exceed 3% of the transaction cost, the impact on margins was far too much to bear, totaling $5 million a year.
But beyond just margin recovery, there were many other challenges to consider. Here’s how InterPayments worked with the company to solve them all:
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Challenge |
Solution |
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Implementing SAP – The company needed a solution. But it couldn’t disrupt the eCommerce technology it had already developed, which was already delivering significant revenue. Keeping SAP in place was essential, as well as maintaining its existing payment gateway and provider. |
Interpayments provided agnostic, independent surcharging technology that can integrate anywhere. InterPayments was able to connect this surcharging platform to the company’s existing website, minimizing technical disruption and changes to the transaction flow. The company was able to keep all its existing technology and payment providers in place. |
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American Express Compliance – The company also learned that surcharging had additional compliance challenges when accepting American Express. American Express was being used by customers, and the company wanted to maintain as many of its existing payment methods as possible. |
After looking at how customers were paying, the company saw that American Express payments were few and far between, but that debit card purchases were even lower. The company brought forward these and other details during the exploratory process with InterPayments. This was a complex choice and a difficult decision, but InterPayments made it easy for the company to choose the best solution for customers. |
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Customer Concerns – Finally, the company wanted to keep surcharging laser-focused on parts of its digital business. Other business lines contained more legacy customers with long pre-existing relationships, and there was no need to change how payments operated for them. Credit card fees were only severely impacting the new web-based shop and needed to be focused there exclusively, though the company wanted to keep options open for other business lines in the future. |
InterPayments kept surcharging focused on some of the digital business, while remaining compliant with all card network rules and government regulations. This was critical – the digital business was growing and now represented a meaningful percentage of the large company’s multi-billion-dollar annual overall revenue. While credit cards were just a small part of payments on other business lines, they represented a staggering 86% of payments to the digital business. In enabling selective surcharge, InterPayments was able to target this problem specifically for resolution. In the end, 70% of volume from this business line was surcharged. |
Results
Successes at a Glance
Fees Before Surcharging: $5 million
Surcharge Recovery: $1 million
Customer Migration from Credit Card: 52%
Savings from Customer Migration: $2.6 million
Total Savings: $3.6 million, or 72% of fees
Customer Attrition: 0%
The end result was transformative for the digital business line.
In its first year, the company saw recouped fees totaling $1 million, putting a sizable dent into the company’s credit card fees. Many customers – a little over 50% – also moved to the less expensive eCheck option. This is unusually high; the transfer rate is typically closer to 25%. But it did provide additional massive savings for the company, eliminating $2.6 million in fees. In the end, the company was able to cover 72% of the credit card fees it targeted.
The surcharging program paid for itself in less than 3 weeks, after which the business line’s margin effectively skyrocketed overnight.
What the company didn’t see was any customer attrition. Because of the rigorous messaging and business training performed by InterPayments, customers understood the need for surcharging and how it helped the company keep prices down overall. Customers seeking to avoid the surcharge simply moved to other payment methods.
Thanks to InterPayments, the company was able to maximize the promise of the digital business. The compliant and transparent surcharging program permanently relieved the heavy margin pressure from credit card fees, providing the peace of mind the company needed. With the problem solved by InterPayments, the company could stay focused on delivering the highest-value product and delivery services to customers.
Interested in seeing how InterPayments can help your company? Contact us today.
To keep the topic of the article anonymous, identifying details have been changed.