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The Cheapest Operation not the Cheapest Processing

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Everyone wants the cheapest payment processing fees – we all want to do business as efficiently as possible to maximize our margins.
But instead of considering the cheapest payment processing you need be looking at creating the cheapest payments operation within your business.


Running a payments operation within your business, regardless of size, is more than just the acceptance of a payment. We speak to many merchants who think that the cheapest payment processing is working for them, but in reality they have the following issues that are costing them more when you look at their operation holistically:
  • Hidden fees from from various parts of the payment processing process
  • Back office processes like reconciliation
  • Lack of integrations into systems like POS, Order Management, ERP etc
  • Not acquiring locally when selling internationally
  • On the wrong pricing model to start with
  • Not using fee reducing technologies like Network Tokens or fraud prevention tools
  • Settling in the wrong currency or not leveraging FX opportunities
  • Acceptance rates
  • Compliance costs

A retail payments operation example of inefficiency

We spoke with a retailer who had tens of physical stores, as well as selling online. Let’s just say their approach to payments acceptance was ‘old skool.’
It turned out that in each one of their stores they had dumb terminals that were not connected to the POS, but they had the cheapest tech. and processing rates – hurray… A sales person would manually enter the payment amount (avg. sale was £700) into the terminal, then at the end of the day they would have to reconcile the days sales into the order management and accounting system, then find the payments on their processing statement and reconcile those on a monthly basis. 🤯
So we asked how much does that business process cost on a monthly basis, they had no idea, but clearly it was more expensive than spending a couple more basis points to get a modern connected solution.

Consider the overall cost of your payments operation

Firstly you want to audit your payment operation, map it out right through to the management accounting work. There will be some black holes that you don’t understand, ask other team members and your payment service provider to help you get clarity on what’s happening and how much it costs your organisation. Once you have the map, ask yourself and your team is this efficient, could we do it better and cheaper?

Fix this first

Whether your point of sale is in-store or online. Get your checkout connected to your Order Management system, so that a payment gets recorded against an order. If you have terminal hardware, make sure they’re smart and connected to POS and OM system. You need to build a picture of an order and the customer.

Second fix

Make sure you have automatic accounting reconciliation for payments, typically you want to do this with a management account approach. Basically, sync your settlement from payments into your accounts, deduct fees as cost of sale.

Then address the current fee structure that you’re paying

Get the statements from your payment gateway and or merchant acquire (processor). I would recommend asking a statement of absolutely every fee you’re paying to these parties including:
  • Hardware rental
  • Payment Gateway fees
  • Interchange fees
  • Any silly breakdowns like PCI fees, or whatever your providers are charging you
What’s the true cost of doing business here?
Ask for volume discounts. Look at domestic vs international transactions, should you be on a blended rate or interchange ++ pricing?

Finally you can look at clever things

Once you’ve fixed your internal processes, have an understanding of the cost of the current operation and negotiated a better fee structure you can finally consider optimisation – which for some can be a massive game changer. Ask Shuttle about these things they can literally make you money if you know what to do.
  • Reducing processing fees with fraud prevention
  • Network tokenisation
  • Local acquiring
  • Improving acceptance rates (in everyone’s interest!)
  • Multi-currency accounts
  • FX forwarding


Many view payments as a necessary evil to do business, it used to be exciting to get paid but now for many sellers it’s become a painful, poorly organised operation. Merchants must look to leverage payments to do business more efficiently at the very least. CFO, COO’s and internal payments team need to make it a priority AND payment service providers need to pull their finger out and help their merchants sell more for less.