The love-hate relationship between merchants and their payments processors has always swung more toward the hate end of the pendulum. Confusing contracts, inflexible terms and hidden fees have made many merchants rue the day they started accepting plastic.
"When I first signed up it was a royal pain trying to find out what the actual applicable fees were," says Adam Lieb, CEO of The Gaming Synergies Network in Newport Beach, Calif., which operates several video-game websites.
FeeFighters, which operates a website that presents quotes for processing services, is trying to tilt the pendulum in the opposite direction.
Merchants enter basic information about their businesses into the website, such as how much in card sales they expect to do in a month, what card brands they accept and whether they sell through bricks-and-mortar stores, online or both. Based on the input, the site spits back quotes from different processors and acquirers, along with brief details about how the quotes were calculated.
It sounds like a dating site, but FeeFighters co-founder Sean Harper says the Chicago-based company aspires to be more of a price-comparison site—the Travelocity of payments processing. "One of the problems for merchants that are trying to compare different offers between credit card processors is there are a whole bunch of ways that these prices can be quoted," Harper says.
Industry norm is to not break out specific components of the fees, and actual costs to merchants sometimes differ from the price quotes provided by processors. "The problem with the merchant processing industry and the reason FeeFighters exists ... is a lack of transparency," says Lieb, who used the service to find a new processor in April. He says his company, which sells video games and gaming equipment, had been paying its old processor double what he expected based on the quotes he had received.
On FeeFighters, prices must be based on interchange-plus or flat-rate models, considered more merchant-friendly because they make it easier to see what is being charged.
Merchants do not have to create profiles or pay to use FeeFighters. But they do have to go through the typical underwriting and contract-signing process. About 20 processors and merchant acquirers use the site, Harper says. FeeFighters, the operating name for Transparent Financial Services, makes money when a processor or acquirer signs a contract with a merchant.
FeeFighters takes a cut based on the contract terms and and shares in the revenue that processors gets from customers. Harper says FeeFighters earns about "a couple hundred bucks" for each client that a processor signs through the site.
Around since 2009, Fee Fighters isn't the only service that lets merchants comparison shop for the best processing deal. A handful of other website operators, including Payments-R-Us, BlindBid.com and CardFellow, offer similar services.
Their arrival might be prescient given the new regulations regarding debit card purchases. Harper says the Dodd-Frank Act's Durbin amendment, which prescribed fee caps on interchange, would likely have a neutral effect on FeeFighters' business, though he expects it to drive interest in the site because merchants will want to ensure that their processors are passing savings along to them.
Adil Moussa, a senior analyst with Aite Group in Boston, says a site like FeeFighters can be a good way for merchants to eyeball prices. But he notes that better deals may be had outside the confines of any one service. "The [most] significant source of account acquisition," Moussa says, "is still referrals."
