Q+A: What You Need to Know About Surcharging

Surcharging has been a growing factor in the payments technology ecosystem for ISOs, ISVs and others in the sales channel. With it comes complicated considerations regarding compliance, operations and consumer reception.

At TRANSACT Connect, ETA’s fully virtual networking event for payments professionals happening May 11-15, CardX CEO Jonathan Razi will explore surcharging in the time of COVID-19 as part of the Selling in an Evolving Marketplace educational track on May 12th at 1:00 pm ET. He will share real-world analysis and insights about the evolving landscape for surcharging, as well as best practices for ISOs, ISVs, and processors offering a surcharging program amidst the pandemic.

In advance of the event, Razi spoke to Transaction Trends about three key questions to consider regarding surcharging.

Transaction Trends (TT): What can surcharging offer ISOs and ISVs?
Jonathan Razi (JR): Our experience is that an increasing number of ISOs and ISVs are viewing surcharging as a must-have tool in the toolbox for two reasons: first, it is a high-margin, high-retention solution that differentiates them from legacy providers; and, second, it allows them to break into new verticals, especially where card acceptance was previously not common (due to its cost).
And, in the current economic environment, many merchants are planning for declines in their own revenues and pushing hard to eliminate expenses. With surcharging, ISOs and ISVs are able to help these businesses with options for cutting credit card costs, which is even more important in the face of slowing growth.

TT: How has the COVID-19 pandemic affected the surcharging landscape?
JR:In the verticals CardX serves, which include B2B and professional services, we’re seeing a pronounced shift from debit to credit cards. Since the pandemic, the average size of a credit card transaction has increased almost 50%, as cardholders are relying on credit more heavily than before to finance purchases and preserve liquidity.

Unfortunately, this is also driving up processing costs when merchants can least afford it. We believe surcharging is the perfect middle path—it lets merchants continue to offer the important credit card option while eliminating its cost.

We look forward to providing a drill-down into the statistics we’re seeing in our TRANSACT Connect session.

TT: What should every payments technology company understand about surcharging?
JR: Whereas some observers have thought about surcharging in terms of customer reception, the real pain points for surcharging are in compliance and operations. We believe great technology is the key to delivering automatic compliance as well as seamlessly meeting up with our merchants’ IT and operations practices; for us, those pillars are all about making surcharging as easy to do (and, for our partners, as easy to sell) as traditional merchant processing.

Razi’s session, happening May 12th at 1:00 pm ET, will be available 24/7 throughout the remainder of the event as part of TRANSACT Connect’s virtual platform. Click here to register for TRANSACT Connect.