According to Forbes, more than $490 billion in total payments were made using credit cards in the fourth quarter of 2014 alone—ranking it the highest-ever quarter of credit card volume. As more diners visit restaurants and pay with cards, owners are on the lookout for less expensive merchant service companies.
A typical credit card processing bill is divided into three components: interchange, which is the cost of processing and is the same across the board at every merchant services company; the variable percentage markup, also known as a discount or tiered rate or basis point, which a company negotiates with its bank and can be based on transaction volume; and ancillary fees, which can include a broad range from PCI compliance and reporting fees to equipment and customer service fees.
After working two years at a merchant service provider and hearing customers complain of fluctuating fees and overly complex payments, Suneera Madhani left to start her own company. Fattmerchant launched in early 2014 and is subscription-based, so clients need not sign up for long-term contracts or face additional fees on their contracts.
If a restaurant signs up with Fattmerchant, the only fee it is charged is the monthly subscription, which costs $29, $79, or $99 per month depending on the plan.
"We're trying to change the way the industry works," Madhani says. "Unfortunately, at the end of the day, the card brands are the ones that are going to control costs. We can't control what Visa and Mastercard are going to put out there for interchange. There is still a direct cost everybody has to pay.
“But [transparency] is the direction this industry is going, and that's why we're growing so fast and why our model is working: Customers are looking for that change, for the transparency. Our customers love knowing that every month, they're going to pay the same amount."
Madhani says about 30 percent of Fattmerchant's client base are restaurateurs in the small- to medium-business segment. They range from pizzerias to upscale steakhouses, and Madhani describes these operators as "independent decision makers."
She differentiates her company from Square, another popular agent of change in the merchant services industry, because Square restaurant owners pay a 2.75 percent flat fee for payment processing.
"That's too much left on the table," Madhani explains. "The average restaurant interchange should be closer to 1.5 percent. That's our goal. We don't make any money on how low their rates are. We educate the merchant so that the overall effective rate is as low as we can get it."
Coming up with the name Fattmerchant came down to realizing what the company's goals were, Madhani says. She and her co-founder sat down and wrote down all the words that would apply to their company and they came back with fast, affordable, transaction, and technology. "We make your wallet fat," she adds.
By Sonya Chudgar