How InterPayments Helped an Electrical and Industrial Distributor Add Surcharging to Multiple ERPs, Delivering Major Annual Savings

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.

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:

Results

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.