Biting the Hand that Feeds: Processing Fees That Prey on Merchants

As point-of-sale (POS) platforms exit the startup stage and developers begin looking for ways to generate increased revenue, many are turning toward processing fees for using their software. These processing fees go all the way up to .99 cents, and are added to orders that exceed a minimum cost. 

For restaurateurs and businesses across the nation, these fees come as a shock – and an unwelcome one at that. Added fees are a practice that can prey on unfamiliarity with POS platforms and the uncertainty left in the wake of COVID-19.  In the end, restaurants are left to navigate the taxes and frustrations that come from the added fees. 

Meanwhile, restaurant owners and operators grapple with an influx of customer confusion, loss of trust in their business and missed sales. The absurdity of the fees is making national news, even sparking demand for a congressional hearing. But to me, none of this is surprising. 

The truth is, point-of-sale companies can either be payment or product focused. Companies that are payment-focused can implement processing fees at their own discretion. But in doing so, they show a clear disregard for a real partnership with restaurateurs and their operations.

By instituting these fees, point-of-sale companies are undermining restaurant profits every time a customer places an online order. Unfortunately, these fees discourage customers from ordering in the first place. Have you looked at ordering food online lately? Prices have skyrocketed, and even a .99-cent fee is enough to deter many customers. Even for those that don’t mind the fee, most have no idea how their order ends up impacting the restaurant's income.

It’s all so backwards. Point-of-sale software and companies should help restaurateurs, not harm them. 

Now, members of the U.S. House of Representatives are seeking answers as to how some of these companies operate, and for good reason. If these service fees disrupt point-of-sale platform clientele, all for a quick buck, what precedent does that set for the industry? Normalizing this behavior to keep investors happy and regain lost revenue doesn’t help the one party you sought to aid in the first place: merchants and restaurants. 

For many, the .99-cent fee is intended to fund product investments and continue innovation in the company. The reality? Investors want their money, and when sales stagnate, consumers and users are caught in the crosshairs. Companies managing a restaurant’s money should not have the ability to lock in a customer with impossible contracts and then suddenly impose fees that trickle down to the consumer. Imagine a bank raising your mortgage rates just because they can. It’s predatory, and proof that it’s time to pay close attention to these fees.   

It’s also worth noting that many of these companies are not providing users with an adequate rollout of the processing fees. Sure, correspondence and updates are sent out and companies are trialing the fees with some merchants, but the processing fees ultimately upend thousands of businesses using a platform when the fees kick in. 

Overseeing restaurant operations demands every second of your time. From shipments and deliveries to staff scheduling and house operations, you don’t have time to worry about your POS platform, not to mention the headache of moving all your operations to another platform. Often, you turn it on and tune out. You’re not going to closely read every email or notification from your vendor. It’s not ignorance or neglect, it’s just reality. In an ideal situation, it’s a result of complete trust in your POS platform as a partner.

So, when the trust in your technology is broken and the management of your restaurant is circumvented by your vendor, the relationship is scarred. It’s hard to build back. 

It’s a similar situation to the recent changes made at Netflix. In May, Netflix announced that it would no longer allow password sharing, instead requiring a “household” to be established and limiting the service exclusively to the wi-fi network tied to the household. For hundreds of thousands who were using their family account or a shared login, access to a paid service was suddenly lost. 

Netflix announced these updates with a reasonable timeline and gave users ample time to make a plan and adjust to the new policies. But it didn’t change users’ feelings toward the streaming giant. Sure, Netflix announced that they’re seeing more signups than they are lost users, but if you have to disrupt the very foundation of your service just to make sure you’re making ends meet, it might be time to take a step back.

POS companies are either payment or product players; they can’t play on both sides. Businesses with major operations can’t expect payment players to stay agnostic. From sales and support to implementation and product development, their priorities have been made clear. That’s why we decided from the start to stay "payment processor agnostic," allowing us to cater to our customers’ needs and build our business around product value, not processing fees.

Congressional hearings and calls to action against processing fees may have some companies’ tails tucked between their legs for now. But how long will it be until they implement another “quick solution” to revenue loss that leaves merchants, restaurants and customers reaching for their pitchforks? The last thing the POS industry needs is copycat companies looking for get-rich-quick tactics that actively prey on merchants. It’s disrespectful to the industry as a whole – an industry that some of the brightest minds and most dedicated workers have designed with the customer's restaurant experience in mind.

I’ll be interested to see if these fees get restaurants to pay more attention to who they do business with and the hidden costs behind “free” perks. They say the customer is always right, and more times than not, they are. The reaction we've seen shows customers were definitely right — and the limits of their tolerance for POS platforms that put their own self-interest above customer service.