The category of “Managed Surcharge Provider” is new and rapidly growing. But what does that really mean? Why is having a managed surcharge provider important, and what can it bring to your business?
To start, it’s important to understand how the phrase “managed service provider,” or MSP, is used. This term describes companies that handle the implementation, execution, and day-to-day operations of one or more specific areas of a business. MSPs have exploded in popularity as businesses have grown in complexity and are especially popular in the technical space. Companies often outsource non-core, complex processes to an MSP to free up resources for core products and services.
This makes MSPs especially popular in the technical sector. Major MSPs include:
- PricewaterhouseCoopers for IT services and cybersecurity
- IBM for hybrid cloud infrastructure
- ADP for payroll services
- Aramark for facilities management
What all these MSPs have in common is that they provide expertise and skills for business tasks that are critical to a company’s healthy functioning, especially for tasks that are too complex for the company itself to handle efficiently. MSPs do this by supplementing the tools companies already use, integrating into existing systems and processes.
Credit card surcharging is a perfect example of a critical but non-core complex business process. Done correctly, surcharging can free a company to accept credit cards without the burden of associated fees, which they would have to pass on to all their customers in the form of higher prices or reduced services. This makes surcharging the fair way to increase customer payment options and improve margins significantly while always giving customers an option to avoid the surcharge by switching to a lower-cost form of payment, like debit or ACH.
The Challenges of Surcharge Management
But implementing surcharging is much more complicated than it seems on the surface. Implementing a flat fee is far too risky and hides numerous challenges:
- Will the surcharges be compliant? Nearly every aspect of a surcharge is heavily regulated by state, local, province, and federal laws, as well as card network regulations. As surcharge demand has grown, laws are aggressively enforced with high fines. Because of the number of regulatory bodies, rules and laws can often conflict, surcharging requires technology to handle this complexity.
- How will surcharging affect each part of my business? Surcharging has ramifications for payment systems, which often act as the backbone of a business. But it also impacts auditing and records, sales and marketing messaging, the transaction process itself, and more. These parts of the business will have to be prepared for the changes to come.
- How will the system handle income tax, sales tax, chargebacks, and more? There are dozens of small challenges like these that must be handled before savings can be realized.
- What business lines and accounts should be surcharged? A surcharging system should be flexible so it can be applied in ways that best benefit the business. For example, surcharging can only be applied to credit card payments for on-account customers, avoiding adding fees to fast-paying Cash on Delivery customers. Surcharges can be used to incentivize good customer behavior by only surcharging later payments. And surcharges should always be waivable for top tier customers or unique situations.
- How much should the surcharge be? A surcharging system should be able to maximize recovery while staying compliant by optimizing rates based on the true cost of accepting each card.
The truth is that no merchant has surcharging expertise in-house, making these challenges daunting and expensive to solve without a dedicated partner.
A Partner Takes the Complexity for You
This is the role of the Managed Surcharge Provider. This specialized MSP eliminates all these complexities for the merchant by performing all the work on their behalf. A Managed Surcharge Provider will tailor a surcharging program to the needs of the business and its customers, adding surcharging to whatever payment platform is already being used. It will assist you in implementing a compliant surcharge program company wide. This includes providing training support and services for every impacted part of the business.
Critically, Managed Surcharge Providers will provide a fully compliant solution, automating compliance at the technological level. But it will also step in to dispute any compliance issues that may occur, and fully indemnify their clients from any compliance risk. Best of all, Managed Surcharge Providers are the fastest way to get to surcharge recoveries. This is because they have economies of scale that limit costs for their customers, who would otherwise have to build and maintain a much more expensive custom solution.
A Managed Surcharge Provider offers the best-case scenario for surcharging: maximum fee recovery and customer flexibility with minimum disruption, ongoing effort, and risk.
InterPayments is proud to be the only Managed Surcharge Provider in the market. InterPayments alone offers an independent, platform-agnostic and 100% compliant solution down to the state and local level with full indemnification. Reach out to our experts to learn more.