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User Fees Are Everywhere—and They’re Complicated

Billing & Payments Insight
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By Rob Eberly, VP, Paymentus

During a recent webinar I was fortunate enough to co-host with enterprise solutions, software planning, and implementations expert Edwin Crow, I asked our audience a simple question:

When was the last time you paid a credit card fee?

If you’ve paid for gas, bought a concert or movie ticket online, paid for dinner at a restaurant or any number of services—you’re familiar with fees. Buying a movie ticket online? You’ll be charged a fee. Getting gas? There’s a fee with your fill-up. Plumber to fix a leaky faucet? Yes, 3% fee if you want to use a card. Fees are everywhere and they’re unavoidable.

Though consumer fees are universal, does that mean that consumers like them? Not necessarily. However, the rising rate of card usage shows that consumers accept them and are willing to pay them if it means they can use their favorite payment method. In fact, a recent PYMNTS.com survey showed that 85% of cardholders accept paying fees to use their cards. For consumers, paying fees is an increasing part of our everyday lives. And it’s all the better given that their payments will arrive quickly and on time.

Understanding Fee Types

There are three prominent user fee types available today: convenience fees, service fees, and surcharges. The charge below provides a detailed explanation of each.

Convenience Fee

  • Charged by a Biller to its customer for the privilege of paying a bill or for a product or service using an alternative payment channel
  • Must be a flat fee

Service Fee

  • A convenience fee program limited to certain merchants operating under government and education merchant codes
  • Can be a percentage fee

Surcharge

  • Fee assessed by a Biller to a customer for the acceptance of a credit card
  • Must be capped at 3% and charged only in states that allow such fees

Compounding the differences between fee types is that rules and regulations concerning fees can vary by state. This leaves billers in the unenviable position of solving the following equation:

Fee Model Options + Card Brand Regulations + State Implications + Customer Satisfaction

It can be a lot, especially for team members whose day-to-day responsibilities are not geared toward keeping up with this highly dynamic environment. These complexities do not have to be a barrier to progress, especially when the cost savings potential is so great.

Our clients are currently seeing savings to the tune of thousands (and in some cases, millions) of dollars per month—depending on the size of the organization. It’s an ROI that very few (if any) initiatives can match. In discussions with clients who have taken advantage of this opportunity, this is where the conversation quickly changes from “we can’t afford to make this change due to the resources required,” to “we can’t afford not to make this change.”

Keep in mind, savings from a fee implementation is just one aspect in your organization’s success. In an upcoming article, we will discuss how organizations can prioritize billing and payment platform modernizations and the customer experience while also achieving significant savings.

The Power of Partnership and User-Fee Expertise

Moving from an absorbed fee or hybrid fee model does not have to be difficult. In a separate article, Kristen Lemoi, Manager of the Paymentus Client Adoption Success Team, shares change management strategies organizations can deploy to ensure the continued success of digital payment options after the introduction of fees.

That’s just part one of our five pillars of superior bottom line support, as we like to call them. The second pillar is our unique user-fee expertise earned over thousands of user-fee model migrations.

Migrating to a fee model has helped us save hundreds of thousands each month, all without sacrificing performance or service. Paymentus helped us navigate each step including engaging and educating our staff first and then our customers. Our customers have reacted positively and we’re continuing to see strong digital adoption rates. This is a win that will continue to pay off for years to come for all parties.”
CFO, Large National Biller

Given the complex nature of implementing fees and the state and card brand regulatory environment, organizations must rely on partners that are immersed in the details of the card processing landscape and can help cater a model to your specific business needs. Accepting card payments does not mean card payment processing needs to be a core of your business. You don’t have to be an expert, you just need to work with them.

Working with fee model experts like Paymentus enables your organization to customize a strategy clearly aligned with your business objectives to maximize your cost savings, relieve budgetary pressures, and improve the customer experience along the way. The formula is powerful. Your move is backed by a team that has helped numerous organizations like yours make a seamless transition, all while adhering to the dynamic changes found within the fee landscape.

Ready to explore this addition by subtraction opportunity? Talk to us. We can help guide you through the complexities inherent within this environment. Request a demo from a Paymentus expert to see how our best-in-class billing and payment solution can deliver the payment choice proven to increase transaction growth.