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The Evolution of Merchant Processing


By Ken Lowy, NewtekOne
April 4, 2024

Credit unions play a pivotal role in educating members on the benefits of merchant processing. The landscape of merchant processing has evolved far beyond mere transaction handling and it now serves as a strategic asset that can propel credit unions forward, enhancing both member satisfaction and an institution's financial health.

From Transactions to Strategy

Merchant processing is no longer just the process of swiping cards and entering amounts.  Today, credit unions have a multifaceted tool capable of providing strategic insights into member behaviors. Analyzing transaction data with a trained eye can uncover some interesting trends. These trends can help you make better decisions about service offerings, marketing strategies, and member motivations. Taking a strategic approach to merchant processing can lead to better decision-making that aligns with a credit union’s goals.

Impact on Member Satisfaction

One of the biggest benefits of modern merchant processing is its impact on consumer satisfaction with credit unions influencing member satisfaction on a daily basis. 

At each touch point, advanced merchant processing options such mobile payments, contactless transactions, and digital wallets make it much easier for members to pay in a manner they find most convenient.

When credit unions offer recurring billing and automatic updates, you’re not only making the payment process easier for your members, but you’re also ensuring they enjoy seamless and secure transactions. This convenience can be a welcome change of pace when it prevents the embarrassment of missed payments or the hassle of updating expired cards.

When you introduce helpful options to members that they may not be aware of, they’ll see your credit union as the caring neighborhood branch that local banks can’t match. Moreover, satisfied members are more likely to become advocates of your credit union by recommending you to others. Word of mouth referrals are invaluable as they come from a place of genuine satisfaction and trust in your ability to meet their financial needs.

Innovative Merchant Processing Models

As merchant processing continues to evolve, new models are emerging that can help credit unions save money and improve their bottom line. One of the most exciting of these is zero-cost processing, which allows credit unions and small businesses to pass on credit card processing fees to their members and customers.

Explaining How Zero-Cost Processing Can Benefit Small Business Members

With zero-cost processing – also known as surcharging – businesses can eliminate the fees they pay for credit card transactions by ethically passing them on to their customers.

Here’s how it works: When a customer pays with a credit card, they’ll see a small fee added to their total – usually around 3-4%. At first glance, businesses might think convincing their customers to pay a bit more for the luxury of swiping their cards would be tough. 

Small business members may also be concerned about the ethics and legality of passing on merchant fees to their customers. When the credit union explains that surcharging is becoming increasingly popular among businesses, however, they’ll begin to see the potential of how those small surcharges start to snowball into hefty profits over time. 

Even better, many customers are more than willing to pay a small fee for the convenience it brings.

Helping Members Communicate Legal and Compliance to Their Customers

When it comes to communicating the value and advantages of zero-cost processing, it is critical to inform your members of the rules and regulations of surcharging.

At the top of the list, members must clearly disclose any surcharge before the transaction is completed. 

Surcharges also cannot exceed the actual cost of processing, or a cap set by state laws, usually about 4%. 

To clearly communicate a surcharge before a transaction is completed, small business members have several strategies they can use to ensure compliance and transparency.

  1. Checkout Page Disclosure: Simply disclose the full surcharge policy on the checkout page. 
  2. In-Store Signage: Brick-and-mortar stores can display clear signage.
  3. Receipt Line Item: The surcharge must be disclosed on every receipt as a separate line item. 
  4. Verbal Notification: With face-to-face transactions, cashiers can verbally inform customers. 
  5. Website and Other Listings: Detailed surcharge descriptions should be found on the FAQ page.
  6. Pre-Transaction Alerts: Point of sale prompts can alert customers of the surcharge on digital screens. 

This is a big win, especially for businesses skating by on slim profit margins.

Balancing Savings and Customer Experience

Of course, implementing zero-cost processing isn't as simple as flipping a switch. Making sure customers grasp all the fees without feeling like every penny is being squeezed out of them takes some solid planning and clear communication.

One strategy small business members can offer their customers is incentives to pay with cash or debit. They can also offer discounts or loyalty rewards for those using cash or a debit card. Offering clients various kinds of incentives helps reduce credit card fees and nudge customers toward using other ways to pay. 

By being honest and upfront with customers, businesses can build trust and loyalty even while passing on some costs.

Enhancing Mobility and Flexibility in Payments

In today's fast-paced, on-the-go world, we all expect to be able to pay for goods and services wherever and whenever we want. Thankfully, that's where mobile processing comes in – and it's quickly becoming a must-have for businesses of all sizes.

The Rise of Mobile Processing

Mobile processing allows businesses to accept payments from anywhere, anytime, using a smartphone or tablet. This means members can take their business on the road, set up a shop at events or markets, or even process payments right at their customer's doorstep.

But mobile processing isn't just about convenience – it's also about meeting customer expectations. In a world where people can order groceries from their phones and have them delivered in an hour, they expect the same speed and flexibility from every business they interact with.

When small business members offer mobile processing, they show their customers that they're modern, adaptable, and ready to meet their needs. It's a simple way to stand out from the competition and build loyalty with tech-savvy consumers. Plus, with features like digital receipts and real-time inventory tracking, mobile processing can help streamline operations and reduce paperwork. That means less time spent on administrative tasks and more time focused on growing a business.

Optimizing E-commerce Through Secure Payment Solutions

E-commerce platforms are changing the game when it comes to online transactions. They're leveraging secure payment gateways and shopping carts to make the process smoother and safer than ever before. These platforms offer businesses a world of opportunities to optimize their payment systems. 

With the right e-commerce setup, a credit union can provide its members with the peace of mind that comes with knowing their sensitive information is protected. And what's more, with a smooth shopping cart setup, they can breeze through their purchases without any fuss.

E-commerce platforms are revolutionizing the way we do business online. By investing in secure payment solutions, small business members are not just optimizing their transactions – they’re building trust with their customers and setting themselves up for long-term success.

Streamlining Payments With ACH and Electronic Checks

When small business members are looking to take their checkout process to the next level, they’ll want to explore the world of ACH payments and electronic check services. These innovative solutions are all about streamlining the payment experience while boosting security at the same time.

Advantages of ACH Payments

Credit union members may or may not know that ACH payments are processed through the Automated Clearing House network. Either way, this advantage allows payments to be moved from one account to another without using paper checks.

It’s exceptionally helpful when members understand ACH payments are a win-win for both businesses and customers alike. For starters, they're incredibly convenient – no more waiting around for checks to clear or dealing with the hassle of cash.

But that's not all. ACH payments are also super secure, thanks to the rigorous authentication process that comes with them. When members know they can rest easy because transactions are protected from fraud and other security risks, it gives them confidence and peace of mind.

And let's not forget about the cost savings. By eliminating the need for paper checks and manual processing, ACH payments can help members cut down on expenses and boost their bottom lines. 

Honestly, everyone comes out on top in this scenario.

Electronic Checks – Security Meets Convenience

Electronic check services are another game-changer in the world of merchant processing. They're taking the traditional check processing system and giving it a major upgrade, making it more secure and convenient than ever before.

With electronic checks, credit union members can say goodbye to the risks associated with paper checks, like lost or stolen payments. Instead, members get a fully digital process that's fast, efficient, and super secure. Plus, electronic checks make it easy to keep track of transactions and reconcile accounts. 

Because everything is digitized, members don’t have to worry about sifting through piles of paperwork or trying to decipher illegible handwriting. 

There’s a real benefit in partnering with credit unions to allow ACH payments. First, ACH payments can lead to a smoother checkout experience and increased convenience for customers. Secondly, with electronic check services, members are getting the best of both worlds – top-notch security and unbeatable convenience.

In conclusion, merchant processing is more than just a way to accept payments. It's a powerful tool that can drive economic growth and transform societies.

When businesses can easily and securely process transactions and clients enjoy a frictionless checkout experience, it opens doors for growth. More sales means more revenue, which can be reinvested back into the business to create jobs, expand operations, and develop new products and services.

These are just a few examples of how merchant processing can be a catalyst for economic growth and social change. As technology continues to evolve, merchant processing is destined to transform economies and improve lives.

Connect with NewtekOne to learn more.

About NewtekOne

From lending and payments to payroll, insurance, and technology, NewtekOne provides leading business solutions to credit unions and their members. Businesses expect more and NewtekOne (NASDAQ: NEWT) delivers core solutions that help businesses grow. As a partner, NewtekOne provides SBA lending services, business financing, merchant processing, payroll, insurance and website/technology services that credit unions can offer to members.