Processing fees can be a pain point for many merchants. As a result, many new payment processors offer solutions to pass along payment processing costs onto the merchants’ credit card paying customers. One such product is known as cash discounting. With razor-thin margins for some industries, more and more merchants are exploring the viability of this method of payment processing. Below are some details of what cash discounting is and how you can successfully sell this merchant service.
Be a believer in the value-add
The best way to be a great seller of cash discount merchant services is to see it as adding value for merchants truly. You need to understand the details of the program well to be a believer in the product. Learning the details of cash discounting or the latest regulation impacting merchants in certain states can help in crafting your pitch and responses to client questions.
This is going to be essential when merchants start asking questions about this product. Understand that this is a relatively new product. In many states, it is still prohibited. The states that allow it require merchants to inform their customers of the merchants’ intention of cash discounting visibly and in advance of any transactions. You need to be aware of the granularities and be forthcoming with the type of compliance merchants would be subject to and be proactive in addressing those needs.
Increased Margins and sales opportunity
Since the charges are passed directly to the merchant’s client, there is an opportunity for higher rates than traditional transactions, leading to increased profit margins for resellers.
Another benefit of cash discounting is the potential to lease proprietary terminals that would need to be specially programmed to process a relatively new form of payment processing. The leases shouldn’t be excessive nor aim to lock in merchants into lengthy multi-year non-cancelable contracts. The terminal lease or rental costs should be such that they are seen as a small investment towards significantly reducing processing fees for merchants.
Cater to a specific type of merchant
This may go together with becoming a believer in cash discounting services. There are some industries in which merchants don’t entertain the option of credit card sales, i.e., used car showrooms. Their customers may find that option very useful, and they may be willing to pay for it. This could be a significant value-add in certain parts of the economy where transactions are traditionally done via cash or check. By offering cash discount merchant services to such businesses, resellers may be helping them facilitate more sales as there are more and more customers looking for the safety and security of contactless transactions or the convenience of having to carry around less cash.
Partner with your merchants
As a seller of merchant services, not just cash discount merchant services, I have the mindset of partnering with merchants rather than seeing a means to a quick sale. That mindset is much likelier to build trust and loyalty and establish a pipeline of potential future business. It goes together with the first two tips to build cash discounting expertise and look to provide a specifically curated solution for clients’ needs.
Once you understand the product and take a partner-like approach in understanding the merchants you work with, you’ll be that much more of a believer and confident that cash discounting can add value to a merchant’s day-to-day workflow.
It also means that as a partner, you will understand when cash discounting is a good fit for merchants, especially if the merchant has enough debit card transactions, to which cash discounting does not apply.
That is the beauty of partnering with businesses; you can have some great success stories and leverage that among similar merchants to showcase how merchants’ business’s success is your ultimate success.
Be ready for the questions
This is a relatively new practice that is being introduced to merchants to reduce their processing fees significantly. Merchants are going to have many questions about how it can all work. Will existing processing terminals accommodate cash discounting, or will they need to purchase/lease new POS equipment? If not, are there technology alternatives that can sync with existing terminals?
It is prudent to share details with merchants of a product for which regulation and compliance are ongoing and very fluid. It is crucial to understand and successfully convey how cash discounting is different from Surcharging. There are still many states that still prohibit the latter while the former is all clear. The same applies to payment networks where Visa will not allow surcharges processing but cannot inhibit merchants from offering cash discounting. An acquiring bank may have questions about merchants utilizing cash discounting.
There are also requirements by states on having sufficient and visible notifications in advance of cash discounting policies. There are also caps on interchanges fees that are applicable for cash discounting that vary by state. You won’t have all the answers, and it is always best to advise merchants to consult a lawyer for specific inquiries that carry legal ramifications.
Cash discounting is a relatively new service for payment processing. For the right merchants, it can be godsent and be the win-win-win solution for the merchant reseller, the merchant, and merchant clients. It is best to partner with businesses to see what best suits their needs, foster that partnership over time, and closely work with merchants in offering concierge-level service and advice when offering any merchant service, let alone cash discounting.