In 2017, a class-action lawsuit was brought against Worldpay Inc. alleging that 200,000 merchants were overcharged with unexpected markups and additional fees. Worldpay settled that lawsuit for $52 million, but it’s recently come to light that, despite the settlement, Worldpay may not have changed the practices that led to that legal trouble in the first place. That’s putting some Worldpay merchants on edge, and making it more important than ever that merchants don’t skim over the details of the fine print, both to avoid unpleasant surprises, and to know when merchant charges have been levied inappropriately.
What, Exactly, Is Getting Lost in the Fine Print?
In essence, Worldpay is telling merchants that it charges two types of fees – the fees charged by the card issuers for handling the transaction, and Worldpay’s own transaction fees. But in addition to those two fees, Worldpay is also marking up the processor fees and rolling it into the Worldpay transaction fees. That wouldn’t be a problem, except that many merchants don’t know it’s happening, and the markup isn’t consistent, with different merchants getting nailed for different markup percentages. The additional markup is most common on cards that offer rewards like travel points or cashback, and Worldpay officially reserves the right to charge as much as 1.95% extra on those transactions – a huge amount. It’s all in the fine print, but it’s convoluted.
How These Kinds Opaque Billing Practices Impact Merchants
The primary way Worldpay’s convoluted fee structures and opaque billing practices impact merchants is an increase in fees that cut into profit margins. Rates are an important area of competition in the payment processing industry, and inflating fees without warning is a behavior few merchants would willingly accept. But an equally disturbing consequence is the introduction of uncertainty. With inconsistent markups applying to certain businesses and not others, and certain transactions and not others, some merchants have been opening their bills to find significantly higher numbers than they were expecting – sometimes with hundreds of dollars in unexpected charges tacked on, seemingly without explanation. That’s a big problem, especially for merchants that operate on tight margins and depend on fee consistency to enable their long-term planning. Operating a small business is stressful enough at the best of times, and minimizing surprises is invaluable for merchants in establishing peace of mind.
How to Avoid Uncertainty in Merchant Fees
Worldpay merchants looking to ensure they aren’t blindsided by additional fees should start by ensuring they’re intimately familiar with the fine print in their service agreements. But that fine print is designed to be opaque for a reason, and reading it doesn’t guarantee merchants won’t be caught off guard by their next bill. The next logical step is to switch to a payment processor with more transparent billing practices. That could mean signing on with a company that offers flat fees like PayPal or Square, but those flat fees are often too high to make them worth the additional transparency. A better option is to go with a merchant services provider that offers lower fixed or variable fees, with fully transparent billing practices.
BAMS is one such provider, offering some of the industry’s lowest transaction processing fees alongside fully transparent billing thanks to the company’s interchange-plus pricing model. Interchange plus utilizes the interchange rates published by the credit card companies along with a fixed markup to determine fee structures. That benefits merchants in two ways: first, it means their fee structures are based on publicly available information, published by card issuers for all to see – it doesn’t get much more transparent than that. Secondly, it ensures that merchants aren’t overcharged for lower-cost transactions made with cards that carry low interchange rates.
For more information on how BAMS can help reduce your company’s monthly merchant services bill, visit BAMS.com to sign up for our unique five step price comparison. We’ll go through your existing bill line-by-line to identify every area in which you can save by becoming a BAMS merchant today!