tssradio - 3:10 am on Jan 23, 2008 (gmt 0)

I echo that, most local banks are not really in the business of credit card processing anymore.

The industry is dominated by a few processors and many ISOs (independent sales organizations) that re-sell the service.

Customer service is usually handled by the ISO during the day and the processor during the night, although it is a very complicated value chain and there are all kinds of arrangements.

The most important thing to remember is that the ISO sets the price. And there are thousands of them, so they basically have no bargaining power (except for their power to confuse you! :) ). The majority of revenue that you pay the processor is passed on to the card issuing bank, this is called interchange, on average for an online merchant it is 1.84% + 0.12 / transaction[, an additional 0.095% is paid to visa and mastercard, this is called the assessment, another 0.04 is paid by the ISO to the processor to cover the cost of the network. Add it all up and 1.95% + 0.16 is the minimum bound for negotiation - see how close you can get. :)

When you are just getting started, don't worry too much about pricing, just make sure they are reputable and do not agree to a termination fee. If they insist on a termination fee, hang up and call the next guy. After you have been in business for a while and have some volume you can use the leverage to negotiate your rates down a bit.

I have been burned a few times, it is important to educate yourself so you can negotiate from a position of information parity.

[edited by: tedster at 5:22 am (utc) on Jan. 23, 2008]