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Value-Add vs. Discounting (Nobody Wins a Race to the Bottom)

posted on: Thu Dec 01 2016

In addition to new challenges that payment processors face – such as supporting new payment technologies like mobile wallets – there is the never-ending mandate to acquire new merchants and retain existing ones. This “always-there” pressure results in three unwanted headaches:

  • Increased pricing pressure. With new entrants coming into the payment space daily, someone always seems to be offering lower rates and reduced fees in an effort to buy their way into the market. For established payment processors, price cutting in response to this competition means lower margins. For the new entrants, the increasing costs of onboarding plus lower margins equals a longer payback window that threatens long-term viability. Even though all the participants understand that nobody wins this race to the bottom, no one can seem to resist joining in.
  • Higher interchange costs. Payment processors may accept more underwriting risk and enroll a higher number of “borderline” merchants in an effort to continue growing their portfolio, leading to higher costs from issuers and downward pressure on margins.
  • Greater regulatory compliance requirements. As authorities demand to know more and more about where merchant funds are coming from and where they’re going, the operational costs of complying with mandates can further erode profits.

Kount Central is a solution that offers payment processors relief from all three headaches. Instead of cutting fees, lowering rates or increasing risk, Kount Central allows payment processors, payment gateways, hosted payment pages and ecommerce platforms to add value. Quickly, easily, and profitably so they can win more business and retain customers more easily.

Protect your merchants. Protect your profits. Kount Central enables payment processors, payment gateways, hosted payment pages and ecommerce platforms to offer world-class “fraud-prevention-as-a-service” at the flick of a switch, without them having to undertake expensive and time-consuming IT projects.

For top-tier merchants, this value-add is delivered as a fully-customizable implementation of the Kount Complete anti-fraud platform, yet requires no IT project on the part of the merchant. A $100 million a year merchant can have Kount’s anti-fraud solution turned on in minutes. Even more, they’ll enjoy platform volume pricing that dramatically undercuts individual account pricing. With white glove support from Kount, your prime merchants will value their relationship with you even more.

For medium-to-small merchants, Kount Central provides a modular offering that’s branded with your interface. Merchants can adjust approximately twenty configurable anti-fraud settings -- e.g., block specific countries, increase/decrease velocity thresholds, create positive/negative lists, etc. -- and enjoy a level of flexibility and individual control at incredibly affordable price points.

Finally, Kount Central also lets you deliver a baseline level anti-fraud protection to all your merchants. The resulting reduction in chargebacks, higher order approval rates and fewer manual reviews provide an ROI that is far more impressive than shaving off a few basis points in fees. 

At the same time, Kount Central greatly reduces your exposure to fraud when onboarding new accounts. With continuous monitoring of your entire merchant portfolio, your risk levels are reduced (i.e., lower interchanges costs) and the effort to meet regulatory requirements is streamlined.

Some quick, back-of-the-envelope math demonstrates this powerful ROI story:

$25 million merchant: 500K transactions @ $50/ticket with 5% decline rate and 20% manual review rate @ $2/review (industry averages)

25 basis point fee reduction

Kount Central ROI

$62,500/year less in fees

$400,000/year = $250,000 higher revenue + $150,000 reduction in manual review expense (based on 1% decrease in decline rate and 5% manual review rate typical for new Kount merchants)


But your merchants aren’t the only ones who benefit from Kount Central’s world-class anti-fraud platform. With lower chargebacks and fraud rates throughout your portfolio, your interchange costs could decrease, especially if you’ve been aggressively onboarding higher risk merchants in an attempt to grow the size of your portfolio.
Those are game-changing numbers. Certainly enough to change the conversation from “how much can you discount your price?” to “how much more money can you deliver to my bottom line?!”, an attractive proposition for both prospective new merchants and existing merchants.

Before you join a fruitless race to the bottom, find out how Kount Central can enable you to shift the conversation by offering your merchants more value and greater ROI while you protect and grow your profits. 


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