5 Ways To Lower Card Processing Costs: A Guide for Businesses & E-Commerce Merchants

The Rising Costs of Card Processing

Cards have been a popular mode of payment in Europe, and though their popularity has been somewhat waning, they still play a major part in e-commerce payments. In 2021, cards came in behind digital wallets as the most preferred payment method in Europe. Current statistics show that credit and debit card usage in Europe is at 42%, with consumers in the UK being the highest users of credit and debit cards.

However, after Brexit, there has been news brewing about hikes in card fee rates in Europe. Both Visa and Mastercard plan to increase card fee rates on UK-EU transactions from April 2022. In addition, from July 2022, card scheme fees (paid to Visa/ Mastercard, etc.) are set to go up. Domestic payments made using UK-issued credit cards will also become more expensive.

With these changes, merchants in Europe can expect their card processing costs to go up.

In fact, as per global payments consultancy CMSPI estimates, card processing fee hikes could cost merchants in the EU about €202 million more every year to accept cross-border card payments. Some reports say that fee changes have risen up to 475% in some cases after the UK’s exit from the EU.

But as long as there is an appetite for card usage amongst consumers, merchants cannot completely stop using cards. So, how do you still accept cards while reducing your overall costs related to card processing?

Five Ways To Lower Card Processing Costs

Here we have laid out a few tricks that will help you to circumvent these hikes in card processing charges and still offer the best payment experience to your customers.

1. Avoid higher risk transactions and improve security

E-commerce transactions that fall under card-not-present type of payments carry a higher level of risk. The card processing fees for such transactions are higher. Orders placed over mail or phone are also classed as high-risk and attract higher processing costs. In Europe, Visa and Mastercard charge 0.2% for debit and 0.3% for credit card-present payments. Hence, you could stop accepting mail or phone orders that come with this added risk.

Beef up your security systems to reduce falling under a “high-risk” merchant category. On all card-not-present transactions, capture as much information as possible, such as the cardholder’s complete billing address, along with details on the transactions. Use Address Verification System (AVS) to match the billing address on orders to the address on file to ensure a card is not compromised. Use CVV verification – it is a security feature that is not mandatory in Europe but very effective in fighting fraud. The CVV number, or CVC number, in some countries, is the 3- or 4-digit number found on the back of the Visa, MasterCard, and Discover card. You can find it as a 4-digit code on the front of an American Express card.

Another way to go is to use EMV card readers. EMV is a global security standard for card payments that use smart chips to encrypt bank information and are more secure than the old magnetic-stripe cards.

2. Swipe Whenever Possible

Card-present transactions are usually seen as lower risk when compared to the card-not-present variety. Face-to-face transactions, where the card and cardholder are physically present, are less risky for merchants and card-issuing banks. These have lower interchange fees (see Visa interchange rates here), which reduces your overall card processing costs. Hence, encourage your customers to pay in-person at the store and swipe, or dip, their card rather than ordering online or over the phone.

Also, swipe customers’ cards rather than typing in the details. The sales that you make by swiping cards using an EMV card reader (this requires the card to have an EMV smart chip) are harder to dispute, giving you more protection from chargebacks.

3. Use A2A Payments To Avoid Card Processing Costs

Account 2 Account payments are another way to avoid expensive card processing fees. A2A payments are electronic bank transfers that happen in real-time hence are quite convenient. They cost less, and payments are quicker. iDEAL in The Netherlands is an example of a well-established A2A payments scheme.

As Europe’s open banking infrastructure matures, A2A payments are finding more acceptance amongst merchants and consumers. According to the Worldpay Global Payments Report, over 20% of e-commerce payments in Europe will use A2A payments by 2023. A2A payments do not have interchange fees, unlike credit and debit cards, and are cheaper for merchants to accept and operate. All merchants should consider using A2A and other real-time payment systems.

4. Become PCI Compliant

The Payment Card Industry Data Security Standard (PCI DSS) is a security standard created by Visa, MasterCard, American Express, and Discover. It is crucial in storing card data and processing card payments securely. All businesses that handle cardholder information have to be PCI compliant.

If you are a merchant who accesses cardholder data, you should follow the PCI DSS norms, even if you use a third-party processor. Not complying can lead to costly fees and fines, not to mention a higher threat from fraud. Speak to your payment service provider (PSP) on how to be PCI compliant.

5. Ask Your Payments Service Provider

If you are keen to lower your card processing costs but not sure how consulting a PSP would be a good place to start. They can help you understand the nuances of card processing and get competitive pricing according to your business needs and budget. The right PSP can counsel you on alternative payment methods, fraud prevention, compliance, or something as simple as a loyalty-based discount.

How Can Novalnet Help?

As a global PSP, many of Europe’s leading brands trust us with their payments. We can guide you on how to make your payments more efficient. We help you accept payments globally in 125+ currencies in 150+ automated country-specific payment methods. Set up your payments within minutes with minimal coding using our instant payment plug-ins. With our AI-based risk management solutions and advanced analytics, you can design the best payment experiences for your customers, all in a fully secure environment.

Reach out to us to know more about payment automation and how to use it to grow your business.

Jose Augustine

Jose Augustine is the Chief Business Development Officer at Novalnet with extensive experience in European payment industry and a knowledge powerhouse.