reduced processing rates for association members

I’ve reviewed several businesses receiving special ‘association rates’. These are preferred rates offered as member benefits to those who belong to the special group. So far I’m unimpressed.

I belong to associations myself and look at member discounts as an important part of the overall value of my membership. Deals on car rentals are the worst- there are too many places you can get them so I find those of little value. Deals on health insurance are invaluable- that’s a big cost I’d like to control better.

Membership deals on credit card processing should be much better than what I’ve seen. The problems are widespread- the base rate is not low enough, and the vendor is not providing the consulting services that members can benefit from. Many offer free equipment, and some offer free supplies, but for companies processing any serious volume, they are paying for that equipment many times over.

The problem for the processor is the wide variety of businesses- some are 3rd, 4th, or even 5th generation with stellar credit history. Others are newer small businesses that are not financially secure. Thus the processor finds a middle ground to offer a deal for all members, and makes it especially easy for small businesses. Is it the best solution for each business? So far, I find the middle ground is much too high for the larger businesses, and they don’t get much benefit, if any.

The solution for an association may be to negotiate a deal for members processing the most in credit cards. Any other company that can make is through the stringent underwriting can ride on their coat tails. Those that don’t qualify (can’t make it through underwriting) will qualify for a 2nd tier plan.

All members get a real benefit, and the association has tangible savings members can measure.

What about a report with year over year savings that the association can present to members upon renewal? This one scares me a little because there are many variables affecting the savings. OPTION A: Savings are presented as a snapshot in time. Each member receives a proposal with estimated monthly & annuals savings, based on a single month analyzed. OPTION B: Savings are calculated at the end of the year.

Option A is probably the most accurate comparison. It uses the rates that apply to both current & past processors at that moment in time and extrapolates the data. As time passes, rates fluctuate. If you compare the new solution with current rates and the the old solution with old rates at the end of the year, it’s not a fair comparison.

What about locking in rates? The only way to lock in rates is to artificially inflate them in a new agreement to offset potential increases that may occur. Interchange is updated twice per year, regardless of any individual processing company ‘fixed’ rates. For this reason, it is standard practice to have a clause that says all rates are subject to change with interchange rate updates.

Why do associations with big buying power end up with so little real benefit to their members on these deals? It’s not their fault. As addressed in this web site, 98% of all companies offer very similar deals. Therefore, they can shop 20 companies and get proposals that are nearly identical from them all.

– Does the vendor have an adequate understanding about interchange? (Ask an open ended question such as- “Can tell me a little about interchange?” it doesn’t matter too much what they say, as long as they can give you a clear answer. That’s how you can shortlist. Ask this question early and they’ll give you better answers for everything else.
– Ask what type of plan they offer? (you really want to know if it is- 2 tier, 3 tier, or something else) Get them to give you their specific plan name.
– Ask what reports members will get monthly? What details are on it? (What you really want to know is do the various types of interchange show up or not. This should knock out a bunch of contenders.
– Don’t just kick the tires. Get board members or representatives from your biggest member companies to agree to be part of the analysis. ( To be fair, they should be willing to switch suppliers if the vendor can show how they’ll benefit.) Have some real merchant statements available and ask for a proposal based on that information. Now you’ll have real data for the monetary side.

Money is not enough. But that’s a starting point. What else does the vendor bring to the table?
A saavy vendor will ask questions that go beyond the statements. Cross off anyone who doesn’t ask questions and just submits a proposal based on the statements alone.

Should you make all questions & answers available to everyone to look at? You are not choosing for your own company. You are choosing a vendor to interact with

    your members, your customers.

Therefore, in my opinion, you should stick to something less formal. This really lets you interact with the vendors, and gives you a better opportunity to learn more about how each might act with your members. In the end, it’s not just about the numbers, it’s how much value they bring to your customers.

Of course…for the best value, look no further than this web site!

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