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  • Writer's pictureDeeAnn Bennett

"Is Proprietary Software Taking Over The Credit Card Processing Industry?"

Updated: Jun 14, 2018

I am finding more and more businesses are using proprietary software. What is proprietary software you might ask? Well, it's a software that is specifically created for a certain type of vertical. For example, you might have a gym software that allows a gym owner to take payments for memberships OR you might have a dental software that runs your practice for appointment scheduling and payments.

Many software companies realized that if they have a niche market, why not make the client use them and ONLY THEM for payment/credit card processing? There are many problems with this but here are some of my observations over the past 14 years in regards to this subject:

  1. No Competition = Higher Rates - I recently came across a software company that was charging an effective rate (monthly merchant service fees divided by processing volume) of over 4.30% + a $49.99 monthly subscription fee to use this "specialized" software. In this case, no matter how good the software is, who wants to pay nearly 5% on their merchant services fees? No business I know. And the larger volumes that you process, the more expensive it gets. For example, if you processed $1,000,000 per year in credit cards and let's say it costs your processor 2.30% out of a 4.30% effective rate, that is a processor profit of 2.00%! That is $20,000 per year straight in the pocket of the software company!! Uh, no thank you! Your software isn't that good!

  2. Your Software Can Be Replaced - Whether software companies know it or not, they CAN and WILL be replaced if they continue to gouge business owners. The great thing about our entrepreneurial spirit in this country is that someone WILL come up with something better when there is a need. Competition is a good thing! For the example above, there was a software out there that charged half of the monthly fee to my client and in fact, they had better features than the other software company! Also, I was able to lower that 4.30% significantly for this business.

  3. Software Companies Know Very Little About Credit Card Processing - Since proprietary software locks in a business owner, typically, there are very few software companies that employ people that are experts at credit card processing. Since this is such a cash cow for them, they don't have to know a lot. The mentality is "there is more where that came from". I saw this mind-set early on in my career with the large big box banks that I competed against. They would have a business banker refer all new business checking account clients over to the "merchant services" division and because business owners trusted thier bank, they signed up almost instantly with no questions asked. I used to joke and say that these bank reps would just offer "do you want fries with that?" and a merchant account would be opened. Although business owners have become more savvy thanks to the education from honest veteran merchant service reps, it still happens often today. Buyer beware!

My advice is that if you are looking at a specialized software for your business, the first question you should ask is "Can I use the credit card processor that I want?" I would also make sure that you read everything in the merchant services agreement as far as recurring fees, contract length, cancellation fees, annual fees, PCI fees, who will service my account, what kind of support do you offer, etc... It's better to find out up front what you are getting yourself into BEFORE you agree to use the software!

At Ark, we are always happy to research a software that you are looking into so that we can tell you if it's proprietary or not and whether there are alternatives to that software out on the open market. DeeAnn Bennett is the President of Ark Payment Solutions and a 14+ year veteran of the merchant services industry. You can reach DeeAnn at 702-257-8295 OR


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