Two Processors, One Company: 5 Basis Points on One Side, 299 on the Other

The best benchmark a company can have is itself. This dental group was running two payment processors side by side across more than 30 locations, doing identical work on identical transactions. One was priced at 5 basis points. The other was priced at 239 to 299 basis points, plus more than a dollar per transaction, on an average ticket of $100.

Multi site pricingInvented feesPer transaction pricingHealthcare

12.30%

Effective rate on the mispriced accounts, before the audit

$517,130

Annual savings identified

30+

Merchant accounts across the group

$100

Average ticket

The business

A multi site dental services group operating more than 30 merchant accounts and processing roughly $9 million a year. The average ticket was about $100, which is the detail that turns this from a bad deal into an extraordinary one.

Locations had been added over years, some organically and some by acquisition. Each arrival brought its own payment arrangement, and nobody had ever laid them side by side.

The situation

Two processors served the group. On one of them the discount rate was 5 basis points, which is a genuinely good number and roughly what a well negotiated healthcare group should expect. On the other, covering roughly $5.7 million of the group’s volume, the discount rate ran between 239 and 299 basis points, plus a per transaction charge of more than a dollar.

Read that per transaction number against the average ticket. On a $100 sale, a dollar is another 100 basis points on its own, and it is billed on a line that nobody compares against the rate. The two charges together were costing the group more than the face value of a small copay.

	Processor A	Processor B
Discount rate	5 basis points	239 to 299 basis points
Per transaction fee	None material	More than $1.00
Average ticket	$100	$100
Same company	Yes	Yes
Same service	Yes	Yes

What the audit found

Underneath the rate sat a stack of fees with names chosen to sound like network pass through charges. Two of them alone accounted for nearly a quarter of a million dollars a year.

Risk Fees: $142,857 a year. A charge with no counterpart at the card networks, priced as though risk were a service being delivered.
Settlement Funding Fees: $102,163 a year. A fee for moving the group’s own money into the group’s own bank account.
Dues and assessments padding: $5,235 a year. Real network charges, marked up and passed through as though they were not.
Interchange rebates retained: $2,106 a year. Rebates credited by the networks and kept by the processor.

Those four come to $252,361 a year on their own. Alongside them sat $30,131 a year of miscellaneous charges, including bank deposit fees billed on top of the settlement funding fee for the same deposit, and per location analytics and membership charges for reporting the group already had. PCI charges added a further $16,944 a year, including non compliance penalties nobody had been helped to resolve.

The processor never had to hide anything. It simply had to make sure nobody put the two statements next to each other.

weAudit audit note

What it would take

There is no clever restructuring here and no negotiation genius required. The group already holds proof of what its own volume is worth, because half of it is being priced correctly by another provider. The work is consolidating to the terms that already exist inside the company, and removing every fee that has no basis at the card networks.

What it was worth

$166,770 a year on the discount rate
$50,924 a year in per transaction fees
$252,361 a year in invented fees and retained rebates
$30,131 a year in miscellaneous charges
$16,944 a year in PCI charges
$517,130 total annual savings identified across the group

All of it reachable by putting the mispriced accounts on the same 5 basis point terms the rest of the group already had.

Industry context

Multi site organizations almost never pay one price. Locations arrive at different times, through different vendors, under different managers, and each arrangement is reasonable on the day it is signed. Nobody is assigned to compare them afterwards, because payments sit across the seam between operations, finance and IT.

Healthcare practices are particularly exposed. The average ticket is low, transaction counts are high, and per transaction fees do disproportionate damage at that shape. A charge of $1.30 on a $100 copay is 130 basis points on its own, and it appears on the statement as a per item fee rather than as a rate, so it is never compared against the discount rate it dwarfs.

Because the industry is unregulated, there is no obligation on any processor to price two locations of the same company consistently, or to mention that it is not doing so.

Why this case matters

A 12.3 percent effective rate is not a pricing error. Nobody arrives at 12.3 percent by accident on a $9 million account. It is what happens when a merchant has no way to check, and no reason to suspect, because the statement arrives every month looking exactly like it did the month before.

If your company has grown by acquisition, or has locations that opened in different years, you are almost certainly not paying one price. The spread inside a single company is routinely larger than the spread between a good processor and a bad one.

How to check this on your own statement

1. List every merchant account you have

Not every location. Every merchant identification number. Groups routinely discover accounts they had forgotten, including ones left open after a site closed or a system changed.

2. Calculate an effective rate for each one

Total fees divided by total volume, per account, for the same month. Put them in a single column and sort. The spread inside your own company is the finding, and no external benchmark is needed to see it.

3. Convert every per transaction fee into basis points

Divide the per transaction charge by your average ticket. A $1.20 fee on a $100 ticket is 120 basis points. Until you do this conversion, per item pricing hides in a different unit of measurement from the rate it should be compared against.

4. Search every statement for the same fee names

If a charge appears on one account and not another, ask what service it corresponds to. If the answer is not a published card network fee, it is the processor’s margin under a different name.

Questions we get about this

How does a 12 percent effective rate go unnoticed?

Because nothing on the statement says 12 percent. It says a discount rate, some per item charges, and a handful of monthly fees, spread across more than 30 accounts and reconciled as one aggregate line in the general ledger. The effective rate is a number the merchant has to calculate, and nobody is prompted to.

Is this the processor’s fault or ours?

Neither framing helps. The arrangement was legal, disclosed in the sense that every charge appeared on a statement, and never examined. What matters is that a company with two processors already owns the comparison it needs.

We acquired most of our locations. Is that relevant?

It is the single strongest predictor we see. Acquisition brings payment arrangements with it, and those arrangements are almost never part of integration planning. If you have grown by acquisition, assume the spread exists until you have measured it.