Acquiring your next ticketing software is not that simple. There are a lot of components to look at to ensure it’s THE one for you and your business before committing to a several year contract. “How much will it cost me?” is often the final decisive question. As the pricing differs from one ticketing solution to another with monthly subscriptions, per ticket fees and integrated or non-integrated payment services, making comparisons can be difficult. One often overlooked fee that can have a great impact on your business is the payment processing fee.
In this article, we will explain all you need to know about payment processing fees so that you’ll have a clearer overview of what you’re actually paying for.
Payment fees explained
Allowing online ticket sales is great, but it also means payments will have to be made online, and that leads to some important questions about the core of your business.
- How much will online transactions cost me?
- How will I manage different payment methods individually?
- What impact will it have on my business?
- Should I use a payment services provider?
- Should I use my own payment processing provider or let my ticketing provider take care of it?
There are a lot of questions to be answered but we will make it simple and explain everything you need to know about payment services options.
First things first, let’s start with a little bit of theory.
What happens when a transaction is made?
A transaction is simply a money flow going from the customer’s bank to the merchant’s bank where intermediaries take their share of the cake. A transaction is made of 4 different costs:
- Interchange fees: small fee paid to card providers such as card-issuing banks for the benefits of providing electronic payments - fix for every transaction
- Card scheme fees: fee charged by the card scheme for using their network when a payment is made. The two largest card scheme brands are Visa and MasterCard - fix for every transaction
- Processor costs: margin added by the Payment Services Provider (the system enabling the transaction) for providing card processing services - varies according to the provider
- 3D Secure/Customer Authentication: fee to increase security for online transactions by authenticating the transaction maker and avoid fraud. Each card provider has its own branded authentication process such as Visa 3-D Secure, American Express SafeKey andMasterCard Identity Check
What is a merchant acquirer?
A merchant acquirer is a bank or financial institution that processes payments for businesses. They enable them to accept and process payments from card issuing companies. The acquirer acts as a payment facilitator that completes and takes responsibility for payments. The acquirer also deals with chargeback and transaction disputes (see below for more information about chargeback).
What is a Payment Services Provider (PSP)?
A payment services provider is a system that works as a mediator to allow transactions to be processed from various channels such as debit and credit cards, bank transfers and digital payments without you having to have an agreement with various financial institutions. They process payments and carry out transactions on behalf of the merchant acquirer. Using a PSP is more and more relevant as new payment methods are emerging all the time.
You’ll be surprised to know that there are over 200 payment methods available worldwide. With both domestic and international demand for your business, it’s important to provide local as well as international payment methods to your customers. Of course, they will all come with a different cost. For example, PayPal is known to be a quite expensive payment method. Managing the cost of each payment method might be hard and you might even lose money if you don’t monitor it closely. By using a Payment Services Provider, you can access different pricing models that will help you control the cost of your transactions.
Domestic vs international payment methods
You probably know that international payment methods are usually more expensive than local ones and you might wonder why? Here again it’s simple, an international transaction is more risky and more expensive due to:
- Cross-border fee: it’s a fee added by the card scheme on top of the initial fee they take
- Interchange fee: when the transaction is international, the interchange fee tends to be higher to cover the risk mentioned above.
Online vs onsite payments
If we go back to a world without digitalisation, where visitors would come to your cash desk and hand you the money for their entry tickets, we can say that there wasn't much risk for your money. Nowadays, with more than 20% of transactions made online worldwide, the risks of fraud, chargeback or cancellations have increased. Those risks need to be taken into account. This explains why online transactions come with a higher cost than onsite transactions.
Payment Services Providers pricing models
Payment processing companies usually offer 2 or 3 types of pricing models to make your life easier.
- Tiered pricing or blended model: in this model, a fixed rate is paid for each transaction no matter which payment method is used.
- Interchange ++ or Cost plus model: in this model, you pay a mark up on every transaction additionally to the initial cost for the payment provider. This means that the fee will vary according to the payment methods as each payment method issuer has a different interchange cost. It’s therefore considered as more transparent as you see what you actually pay for. See below for more information about interchange fees.
- Flat rate pricing model: this model is a kind of membership where you pay for all services provided by the payment processor and not for specific transaction costs.
What is chargeback and what impact can it have on your business?
A chargeback is a transaction amount that is returned to a payment card after a customer successfully disputes an item on their account statement or transactions report.
Reasons for chargeback:
- Consumer disputes: cardholders may have been charged by a merchant for items they never received.
- Processing errors: a merchant could have duplicated a charge by mistake.
- Authorisation: the payment wasn’t authorised or authorisation was declined.
- Fraud: a cardholder’s card information may have been compromised.
When a chargeback request is made to the bank, there is first an investigatory process to find the source of the transaction before giving the funds back to the customer. If the transaction cannot be found or accounted for then the bank pays the customer. The funds are returned to the customer by the bank and not the business itself. If the bank finds the business in the wrong later then it may be asked to repay the bank. It’s a process that takes a lot of time and fees associated with chargeback can have an important impact on your revenue.
How can you avoid chargeback?
Even though you can of course defend a chargeback, it’s easier to avoid them in the first place. Here are a few tips on how you can avoid chargeback:
- Prevent fraud by using authentication systems
- Be open to communication by providing quick answers to your customers
- Make your refund policy cristal clear
- Ensure your bank account details are clear and accurate
- Ensure the people know which company will be charging them especially when there’s an intermediary
Why choose a payment processor over another?
As we mentioned before, some ticketing providers will offer you their own integrated payment processor. Is it better than having your own? It depends.
- Is the payment fee rate more attractive?
- Are they taking care of all the risks mentioned above (fraud, chargeback, cancellations)
- How often do they pay you the money?
- Do they bring any accounting benefits?
Those are the important questions you should check before committing yourself.
Why trust Smeetz to be your Payment Services Provider?
Smeetz | Ticketing and dynamic pricing is the future of a unified, data-driven and dynamic pricing-oriented commerce for attractions and cultural venues. Since 2018, we have already helped more than 150 attractions and cultural venues internationally on the path of ticketing and revenue optimisation.
As we know payment fees and processes are an important part of your activity and often quite confusing, transparency and simplicity are our watchwords when it comes to our payment services offerings.
What is Smeetz pay?
Smeetz Pay is Smeetz’s integrated Payment Services Provider. It’s powered by Adyen, a global leader in payment infrastructure. This means that we take care of every transaction occurring in your Smeetz account via all your sales channels (e-commerce, mobile, and point-of-sales) and payment methods. We deal with the fees and we process payments so that the money from your ticket sales lands in your account without you having to worry.
Why use Smeetz pay instead of your own provider?
Smeetz Pay is integrated with your commerce platform meaning that your accounting and your business are one. It has the following advantages:
- One provider for all payment methods: you don’t need to deal with numerous agreements to access your customers’ preferred payment methods simply, you have them all with Smeetz Pay.
- Competitive rate: we offer you a competitive rate that is customised based on the amount you sell through each payment method.
- Minimise the risks: we vastly reduce the risk of fraud, chargeback and cancellations that other companies usually don’t cover.
- Simplified accounting: with Smeetz Pay, we provide you with complete booking statements that make your accounting a breeze.
- Easier reconciliation: with our detailed booking statement, you can retrace each and every transaction and know exactly what ticket it is linked to.
- Daily/Weekly/Monthly payments: with Smeetz Pay, we ensure payments are done on the frequency you prefer.
What payment methods Smeetz Pay offers
How payment fees work with Smeetz Pay
With Smeetz pay, you can choose between two models of pricing:
- With the blended model, you pay a fixed cost and have a greater visibility over the amount of payment fees you pay and their impact on your business.
- With the cost plus model, you pay a cost that varies according to the price of each transaction and this ensures more transparency for your business.
How booking statements will help you?
Smeetz’s Booking statements are accounting records sent on a weekly or a monthly basis and show at a glance how much money you’re about to receive in your account as well as:
- how much gross sales you made,
- how much net sales you made,
- the amount of fees,
- any discounts that have been used,
- any cancellation values.
Should you need any further details, this statement also recaps all transactions that happened during the week/month. Be careful, this document should not be used for analytical purposes but for accounting only. For data analytics and how to take advantage of them, please refer to the blog How analytics can help you take more data-driven decisions to grow your business.
Want to talk to us about using the Smeetz system for your business? Feel free to contact our team at email@example.com to be invited to a 1-to-1 demo!