A global leader in electrical and industrial distribution needed a solution to expanding credit card fees. While the company was large and had many business lines, a select few parts of its business were seeing significant payment volume from credit cards, driving high acceptance costs that were cutting into margins. The company was looking to make acquisitions and knew that this challenge could grow alongside this approach.
The company needed a targeted solution for this challenge. Because the challenge wasn’t being experienced company-wide, the payments technology stack couldn’t be changed to accommodate surcharging – an integration into the existing system was required. The company also wanted a considered approach, so it could see if surcharging was the correct solution for its large and unique customer base.
The company researched many options before landing at InterPayments, the only Managed Surcharge Provider that could meet every one of these needs. The results were both positive and surprising. Surcharging is more than just a fee, and the company’s savings ended up coming from more than just fee recovery. Instead, the surcharge resulted in many customers moving to lower-cost forms of payment like ACH. While an unusual result, it didn’t change the company’s massive annual savings – over $1.4 million annually, or 84% of their total fees. The delighted company decided that surcharging was critical to maintaining this preferred customer behavior, using it to drive savings for years to come.
Surcharge Program Overview
Industry: Electrical and Industrial Distribution
Size: $100+ Million in credit card revenue
Location: Global, with surcharging focused on the United States and Canada
ERP/Accounting Software: Multiple, including Mincron and in-house solutions
Who to Surcharge: All card-not-present transactions
Time to Implement: 6 months with testing period
Considerations: Gateway and multi-ERP support, single sign-on, shifting volume away from credit card
About the Company
A global distributor in many industries, the company is deeply devoted to providing smooth service to its wide and varied customer base. To power this service, the company prides itself on building innovative solutions to complex problems, an approach that has led it to become one of the leading companies in multiple businesses.
Solving Challenges
Of the company’s billions of dollars in annual revenue, only a fraction was coming from credit cards. The company wanted to target just a portion of this amount – a revenue volume of around $55 million. The company wanted to roll out surcharging, see the real-world result, and determine the best ongoing approach based on this data.
To address the company’s needs, InterPayments crafted a targeted surcharging program with real-time data analytics:
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Challenge |
Solution |
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Maintaining Technology – The business components looking to surcharge were using a mature implementation of Mincron, an ERP built for their industry, as well as two complex, proprietary systems built in-house. All of these needed to stay in place, along with existing payment gateways. |
Interpayments provided agnostic, independent surcharging technology that can integrate anywhere. InterPayments replaced the existing gateway virtual terminal with PayLink, an advanced virtual terminal and payment solution with surcharging pre-integrated. PayLink was connected to the existing technology stack, keeping both the gateway and every ERP in place. |
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A Considered Rollout—The company was comfortable taking its time finding the best solution. It was important that the company see the results in the real world before making a decision to keep surcharging in place permanently. |
InterPayments offered real-time analytics data and frequent touchpoints, allowing the company to understand the data using the subject matter expertise of the InterPayments team. This rigorous process was left in place for the first six months following implementation, until it was no longer required. |
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Customer Behavior — A critical point the company sought to understand was how customers would be impacted by the rollout. Customer acceptance was critical to the success of the surcharging program. |
InterPayments understands if you treat surcharging as just a fee, customers are more likely to reject it. But InterPayments has never lost a merchant due to customer churn by treating surcharging as a business transformation. A plan was put in place to communicate the upcoming surcharge program early and often, explaining that it prevents across-the-board price increases and can always be avoided by changing payment method. Customer satisfaction levels were maintained before, during, and after surcharging was implemented. |
Results
Successes at a Glance
Fees Before Surcharging: $1,680,000
Surcharge Recovery: $360,000
Customer Migration from Credit Card: 62.5%
Savings from Customer Migration: $1,050,000
Total Savings: $1,410,000, or 84% of fees
Customer Attrition: 0%
Together with InterPayments, the company received massive margin improvements in an unconventional way, proving the importance of treating surcharging as more than just a fee.
The company saw a relatively small fee recovery from surcharges relative to its credit card volume – just $360,000. The reason for this surprised the company – more than half of its customers migrated away from paying with credit cards to avoid the surcharge. This eliminated credit card fees for the company on a huge section of its customers, resulting in total savings of over $1.4 million dollars – 84% of the company’s credit card fees.
This amount of movement away from credit cards is highly unusual. Most of the time, about 25% of the customer base opts to change payment methods to avoid paying a surcharge. The savings remain the same for the merchant, however, as this result deflects the high fees associated with credit card acceptance. Most importantly, this didn’t impact customer satisfaction, as InterPayments helped customers understand the reason for the surcharge and the ways to avoid it.
The company was delighted with the result and opted to keep surcharging in place permanently to drive this new customer behavior. As the company grows through acquisitions, it knows it can trust InterPayments to grow alongside it, acting as an unbiased advisor and partner that can fit in to add compliant surcharging to any payment acceptance method – and gateway – that might get added on.
The company now expects to receive high savings year after year, improving margins and cash flow.
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.