Every business owner has felt the sting of those pesky payment processing fees – the ones that nibble away at each sale. They may appear as a few cents here or a small percentage there, but over time, hidden fees can quietly erode your profit margins. Jed Morley, CEO of Platinum Payment Systems, has made it his mission to help businesses avoid getting ripped off by such fees. As a payments expert (and someone who literally built a company around better processing deals), Morley’s insights on interchange optimization are pure gold for entrepreneurs looking to save money.
In this article, we unpack Morley’s advice on minimizing transaction costs and optimizing interchange fees – the fees set by card networks that make up the bulk of what you pay per transaction. Drawing from his podcast appearances and interviews, we’ll learn how to identify unnecessary charges, negotiate better rates, and even use payments as a competitive advantage. If you’ve ever wondered “Where are all these fees going, and can I reduce them?”, this guide is for you.
The Real Cost of “Cheap” Payment Processing
Identifying and Eliminating Hidden Fees
The phrase “hidden fees” covers things that aren’t obvious until you dig into your processing statements. Jed Morley often advises entrepreneurs to do a payment processing audit – something PlatPay even offers for free – to uncover sneaky charges. Here are common culprits:
Gateway Fees: If you use an e-commerce gateway, there might be monthly fees or per-transaction gateway fees on top of interchange. These can sometimes be negotiated or shopped.
Batch Fees: Some processors charge a fee each day you batch out your transactions.
PCI Non-Compliance Fees: If you haven’t attested to PCI compliance, processors might charge extra each month. Becoming compliant or using a processor that includes this can save you $20–$30/month right off the bat.
Chargeback Fees: When a dispute occurs, many providers charge $15–$25 administrative fee regardless of the outcome. Reducing chargebacks (through better customer service and descriptors) can avoid these. Morley’s company had a sister firm that handled “thousands of chargebacks monthly,” so he’s intimately familiar with how those fees add up. His advice: “Ensure resolving the issue with you is more convenient than resorting to their bank for a dispute.”
Cross-Border Fees: If you process international cards, there might be extra % fees. Morley’s solution for one client was a multi-currency gateway that processed locally, avoiding some of those fees. Ask if your processor has domestic acquiring in markets where you have many customers.
Now, how do you eliminate these? Negotiation and provider selection. Morley’s stance is that businesses often have more leverage than they think, especially as your volume grows. In a Money Ripples podcast, host Chris Miles notes how “small fees on everything take away dollars you need to grow your business” – prompting Morley to reveal tactics to cut those costs.
Morley’s strategy includes:
Consolidating Volume: If you’re splitting transactions between multiple providers or accounts, you might miss volume discounts. Consolidate with one good provider and negotiate a volume tier. Morley, whose firm processes for a wide range of banks, often uses PlatPay’s large volume as a bargaining chip to secure better interchange rates for clients.
Interchange-Plus Pricing: Opt for interchange-plus rather than flat-rate pricing if your ticket sizes or card mix can benefit. Interchange-plus means you pay the exact interchange fee + a fixed markup. It’s more transparent. Morley’s preference is usually interchange-plus because then you can see if a provider’s markup is reasonable.
Ask for Fee Waivers: Some fees are simply “junk fees.” If a processor really wants your business, they might waive setup fees, monthly fees, batch fees, etc. It never hurts to ask. Morley has noted that having a “personal direct relationship” with processors or banks can help advocate for merchants on such terms. Working with a payment consultant or broker (or a company like PlatPay) can bring those relationships to the table.
Use Your Statement: In one of his podcast chats, Morley suggests sending your recent processing statements to a prospective provider for review. “Literally, you send us your statements… it’s not to look at it and say, how can I price you? It’s really: What are the ways that you’re taking money that I can show you the safest, quickest way to [optimize]…” (Fulfilled Podcast, 15:10). A thorough analysis might reveal you’re being downgraded on certain transactions (e.g., due to missing data or using a rewards card). Fixing those issues can automatically lower fees.
One example: A business was keyed as a high-risk merchant and had a rolling reserve (the processor held 10% of their funds). By demonstrating better financials and history, Morley helped them eliminate the reserve and negotiated faster funding (from 3-day to next-day), which for the business owner was “like a raise,” improving cash flow. Morley noted, “If you have good credit, good business history… there’s a lot of risk factors we help you understand how you can get better terms and rates.” (Fulfilled Podcast, 16:52)
Turning Payments into a Profit Center
Here’s a paradigm shift Jed Morley advocates: rather than viewing processing fees as a necessary evil, see if you can transform payments into a revenue source. This is the idea of interchange optimization at its peak – when you’ve squeezed out inefficiencies to the point that processing might even bolster your bottom line.
How? Two possibilities:
Negotiating Revenue Share or Rebates:
Large merchants or those using certain platforms can sometimes get a cut of the interchange. For instance, some SaaS platforms that facilitate payments take a revenue share; with enough volume, you could negotiate a similar scheme. Morley’s PlatPay often functions on a model where they pass through interchange and add a small markup. But if a client is big enough, perhaps that markup can be partially returned as an incentive.While Morley hasn’t explicitly said “we share revenue,” his comments hint at creating win-win pricing. “We make a fraction of a percent… on every transaction,” he says – implying there is room in that model for custom arrangements.
Embedded Finance Opportunities:
As detailed in the previous article on embedded finance, offering financial services (like your own gift cards, loyalty rewards, or financing) can create new revenue streams. For example, if you implement a branded buy-now-pay-later option through a provider, you might receive a referral fee for each loan. Jed Morley urges businesses to consider these ancillaries: “Embed financial services… to unlock new revenue streams.”A real-world scenario: A SaaS company integrated payments via PlatPay and decided to mark up the processing fee slightly for their end-users as a convenience fee (with transparency). The end-users were willing to pay for the integrated experience, and the SaaS company turned payments into a modest revenue line. Morley’s enabling technology plus the SaaS’s customer base created a revenue share model.
Of course, any such approach must be balanced with competitiveness – you don’t want to gouge customers. But it illustrates the concept that with optimal interchange (especially if you can get interchange++ pricing down to near-cost), you have flexibility to benefit from payments rather than just suffer the costs.
Jed Morley’s Checklist for Lower Payment Costs
To summarize Jed Morley’s key tactics for slashing payment fees:
Audit Your Statements: Identify all fees and their purpose. Knowledge is power – you might find fees you can eliminate or reduce.
Benchmark and Compare: Don’t settle with your current setup year after year. Morley often helps clients compare alternatives. Even if you stay put, you might use a competitor’s quote as leverage for a discount.
Improve Your Profile: Work on factors that affect your risk profile (better credit, avoid excessive chargebacks by improving service, keep processing history clean). A stronger profile qualifies you for lower rates and fewer holds. “Rapid growth can kill a business [if processing can’t keep up]… planning ahead is crucial,” Morley says – notifying processors of growth and demonstrating control can prevent risk premiums.
Leverage Volume: As you grow, renegotiate. Many providers won’t automatically lower your rates – you must ask. If your monthly volume doubled, demand a better tier.
Consider a Payments Partner: Especially for midsized businesses, partnering with a payments expert or consultant like Morley can uncover hidden savings. They might restructure your account or route transactions through cheaper networks (did you know some debit card networks are cheaper than Visa/Mastercard? These are things a good partner optimizes).
Educate Yourself: Morley often educates clients on interchange tables – which card types cost more, etc. With that knowledge, you might adjust your accepted payment methods or encourage cost-effective ones (e.g., ACH payments for large invoices instead of credit cards).
In a Money Ripples episode (March 1, 2024), Chris Miles summed up the value of these efforts: by reducing fees, you free up cash flow to invest back into your business. Those savings could fund a marketing campaign or new hire. It’s a reminder that optimizing payments isn’t just a back-office chore; it directly affects your growth potential.
Takeaways
Don’t let payment fees silently chip away at your hard-earned revenue. Jed Morley’s approach to interchange optimization teaches us to be proactive: regularly audit, negotiate, and optimize every aspect of payment processing. You might uncover savings of 0.5% or more of revenue – which is huge on the bottom line.
Remember, the goal isn’t just the lowest sticker rate, but the best net effective rate after considering service quality and risk. By treating payments as a strategic component (and perhaps even a profit center), you can turn what was once a necessary cost into a competitive advantage.
In Morley’s words, “we look at all those risk factors… and help you understand how you can get better terms and rates” – so start looking at yours, and don’t stop until you’ve squeezed out every unnecessary penny.
About PlatPay
About PlatPay: PlatPay lets brands track, reduce, and offset payment-related CO₂ in real time. Discover Jed Morley’s ESG philosophy in his ValiantCEO profile.