Processing Cost Reduction after 2020 Stock Crash

Back in autumn 2019 just a handful of analysts predicted economic downturn, based on some indirect signs. Now 2020 stock market crash and indices jumping back and forth indicate that recession is under way. Although relief package of $2.2 trillion, signed by the US President, breathed some optimism into stock market players (as we can see, again, from the indices), the overall impact of coronavirus on economy might leave the whole industries paralyzed. As a result, many companies are thinking of ways to maintain their profit levels, or at least lose as little as they can. During the bull market run, that preceded the recession, the obvious thing to do was boost product sales. And that was the approach that many businesses successfully followed. But today’s coronavirus business impact makes them wonder how they should change their modus operandi. So, under the circumstances, instead of sales increase, numerous market players will choose to concentrate their efforts on cost reduction strategy.

Does payment processing cost reduction make a difference?

Within merchant services industry transaction cost is an important factor of processor and gateway selection. Credit card processing fees can be calculated as percentage of payment amount (usually, several per cent) or some fixed amount charged on per-transaction basis. However, since large companies’ net profit in relative numbers is not very large (sometimes, 10 to 15% or less), even a small reduction of processing fees matters. Plus, we should not forget, that the costs related to implementation, maintenance, and support of gateway and processing solutions also indirectly contribute to transaction cost. So, reduction of these indirect costs should also be a priority, especially, in times of economic recession and bear markets.

So, how can one reduce transaction processing cost during the coming economic recession?

Smart transaction processing cost reduction strategies call for being open-minded and flexible. Credit card processing fee is an important cost criterion, but it is far from being the only one. Indirect costs are harder to detect, but they are also quite significant.

If you choose to focus on reduction of transaction processing fees, then you should try to consolidate processing volumes of all your sub-merchants, subsidiaries, affiliates, channel partners, departments etc. All respective payment flows should be streamlined to a unified processing solution. Based on large consolidated processing volume you will have higher chances of negotiating better processing terms from your current or new service provider.

Direct processing costs are visible and easily traceable through merchant statements and reports. But what indirect cost items should a company look at? First, manual work is a significant source of indirect and “opportunity” costs. Merchant onboarding and monitoring, reporting, accounting, transaction settlement, fund reconciliation, chargeback management: all these services should be automated. You might be amazed by the amount of resulting resource savings. Second, the more transparent the process is in the eyes of your customers, the more you save on tech support. Finally, in order to be able to reduce both direct and indirect processing costs, you should be ready to change your existing processing or gateway technology to a more robust one. UniPay Gateway solution is an example of a payment solution, that is suitable for and successfully implemented by a wide range of customer categories, thanks to its high customizability and robustness. It is available in both cloud hosted version and a licensable open-source version, and integrated with many processors and acquirers worldwide, through its numerous users.

Conclusion

Economic recession and stock market crash today might call for bold steps, such as transition to a new flexible payment technology. If you need targeted advice on cost reduction for your business, contact our payment specialists at UniPay Gateway.