Processor Management
Before managing processor relationships, understand:
- Your payments metrics and effective processing rate
- Chargeback metrics and how they affect processor risk appetite
- Holds and reserves mechanics
- Reading statements to understand your costs
- Processor relationship: They're a business partner with their own risk appetite—incentives don't always align
- Reply to warning emails immediately—silence makes them nervous
- Worth switching if: >0.3% effective rate difference, reliability issues, poor support, exiting your vertical
- Negotiation leverage: meaningful at $100K+/month, substantial at $2M+/month
- Configure velocity rules and capture metadata for disputes
Your processor is not your friend, but they're not your enemy either. They're a business partner with their own risk appetite, and their incentives don't always align with yours.
Don't churn processors just to save 5 basis points. Focus on support quality and features first. The savings aren't worth the migration headache at your volume.
Emails You'll Get and What They Mean
"We've noticed increased chargebacks..."
Translation: Your chargeback ratio is approaching their threshold. They're giving you a warning before taking action.
Reply template:
Thank you for flagging this. We've identified [specific cause] and are implementing [specific fix]. We expect to see improvement within [timeframe]. Happy to schedule a call to discuss our remediation plan.
Do not: Ignore this email. Silence makes them nervous.
"Your account is under review..."
Translation: Something triggered their risk system. Could be volume spike, chargeback increase, or industry-level concern.
Reply template:
Thanks for reaching out. We're available to provide any documentation you need. Could you clarify what specific information would be helpful? We can provide [transaction data / authorization records / business documentation] within [timeframe].
Do not: Panic-withdraw all your money. That confirms their suspicion.
"We're adjusting your reserve..."
Translation: They're holding more of your money. This is bad but not fatal.
Reply template:
We understand the need to adjust risk parameters. Could you help us understand what metrics or changes would allow us to revisit this reserve level in [3-6 months]? We'd like to have clear targets to work toward.
See Holds and Reserves for what to do next.
"We're terminating your account..."
Translation: They've decided you're not worth the risk.
Immediate actions:
- Ask (in writing) when final payout will occur
- Ask if you're being placed on MATCH/TMF
- Start looking for a new processor immediately
- Consult a payments attorney if significant funds are held
Good Reasons to Switch Processors
- Significantly better rates at your current volume (>0.3% effective rate difference)
- Better features you'll actually use (multi-currency, specific payment methods)
- Reliability issues (frequent outages, slow settlements)
- Poor support when you have real problems
- They're exiting your vertical
Bad Reasons to Switch Processors
- Marginally better rates (under 0.1% difference at low volume)
- Shiny new features you don't need
- Sales pitch promises without checking references
- One bad support interaction
- FOMO about what competitors use
Negotiation Tactics
Know Your Numbers
Before any negotiation, calculate:
- Your effective rate (total fees / total volume)
- Your chargeback ratio
- Your average transaction size
- Your monthly volume trend
What's Negotiable
| Usually Negotiable | Sometimes Negotiable | Rarely Negotiable |
|---|---|---|
| Processing rate (basis points) | Monthly fees | Interchange (pass-through) |
| Per-transaction fee | Chargeback fees | Network fees |
| Reserve percentage | Payout timing | PCI compliance fees |
| Contract length | Early termination fee |
Worked Example
Your current state:
- $100K/month volume
- 3.1% effective rate (blended)
- Low-risk ecommerce
You get quotes around 2.7% from competitors.
That 0.4% difference on $100K/month = $400/month savings.
Over a year: $4,800. Worth a conversation with your current processor before switching.
What to say:
We've been happy with [Processor], but we're doing a routine rate review. We've received competitive quotes around 2.7% for our volume and risk profile. Is there room to revisit our pricing?
Most processors would rather cut rates than lose a good merchant.
What to Watch For
- Tiered pricing that looks good on low tickets but kills you on higher ones
- "Qualified" rate that most transactions don't qualify for
- Hidden fees (batch fees, statement fees, PCI non-compliance fees)
- Rate lock that expires and reverts to higher rates
Red Flags
If they pause payouts and refuse to explain why in writing, start planning your exit. Good processors communicate. Silent processors are building a case.
If frontline support can't answer basic questions, ask for risk or underwriting specifically. Those are the teams that actually decide things.
If they mention MATCH listing, assume that processor relationship is over. Focus on getting money released and finding a specialist acquirer.
Switching Processors
Before You Switch
- Calculate total cost of current processor (including all fees)
- Get 2-3 competitive quotes
- Check references from similar businesses
- Read the contract (especially termination clauses)
- Plan for parallel running period
The Migration
- Don't turn off the old processor until the new one is fully tested
- Migrate subscriptions carefully - customers hate re-entering cards
- Keep old processor active for chargebacks on old transactions
- Update your billing descriptor to match across processors
After You Switch
- Monitor auth rates closely for first 2 weeks
- Watch for unexpected declines (BIN routing issues)
- Keep old processor relationship alive for 6+ months (chargebacks on old transactions)
Volume Thresholds for Leverage
| Monthly Volume | Your Leverage |
|---|---|
| Under $25K | Minimal. Use aggregators (Stripe, Square). |
| $25K-$100K | Some. Can negotiate fees, not rates. |
| $100K-$500K | Meaningful. Worth shopping around. |
| $500K-$2M | Significant. Direct processor relationships make sense. |
| Over $2M | Substantial. Multiple processor strategy, custom pricing. |
Metadata and Rule Configuration
Your processor likely offers rule configuration for fraud screening, velocity limits, and transaction handling. Getting these right prevents losses and false declines.
Common Processor Rules to Configure
| Rule Type | Purpose | Default Often Wrong |
|---|---|---|
| Velocity limits | Cap transactions per card/customer/time | Often too loose |
| Amount limits | Max per transaction | Often too high |
| AVS rules | How to handle AVS mismatches | Often too strict |
| CVV rules | Whether to accept CVV failures | Usually correct |
| BIN blocking | Block certain card types/countries | Usually none |
| Geographic rules | IP vs billing country match | Often not configured |
Velocity Rule Configuration
| Rule | Starting Point | Adjust Based On |
|---|---|---|
| Transactions per card per day | 3-5 | Typical customer behavior |
| Amount per card per day | 2x AOV | Normal purchase patterns |
| Transactions per IP per hour | 10-20 | Expected traffic sources |
| Failed attempts per card per day | 3 | Card testing attacks |
Metadata to Capture
Store this with every transaction for debugging and disputes:
| Field | Why |
|---|---|
| IP address | Fraud investigation, geolocation |
| Device fingerprint | Link transactions to devices |
| User agent | Bot detection, device type |
| Session ID | Tie to checkout behavior |
| Customer account ID | Link to account history |
| Shipping address | Delivery verification |
| AVS/CVV response | Dispute evidence |
| 3DS authentication data | Liability shift proof |
Rule Testing Protocol
Before deploying a new rule:
- Shadow mode first. Run the rule without blocking. See what would have been blocked.
- Analyze flagged transactions. What percentage were actually fraud? What percentage were good customers?
- Calculate false positive rate. If more than 1-2% of flagged transactions are legitimate, rule is too aggressive.
- Deploy gradually. Start with 10% of traffic, monitor, expand.
- Set rollback plan. Know how to turn it off quickly if problems emerge.
Rule Documentation
For each rule, document:
| Element | What to Record |
|---|---|
| Rule name | Clear, descriptive |
| Business justification | Why this rule exists |
| Expected behavior | What it blocks, what it allows |
| Created date | When implemented |
| Last reviewed | When last validated |
| Owner | Who to contact |
| Success criteria | How to know it's working |
"What rule configuration options do you offer? Can I see what rules are currently active on my account? How do I add custom rules?"
Next Steps
Got a scary email?
- Decode the message - Chargebacks, review, reserve, termination
- Respond immediately - Silence makes them nervous
- Request specific criteria - What metrics to hit
Considering switching?
- Check good vs bad reasons - Is it worth the hassle?
- Know your leverage by volume - $100K+/mo matters
- Follow negotiation tactics - Know your numbers
Configuring processor rules?
- Review common rules - Velocity, AVS, CVV, geographic
- Capture metadata - IP, device, session for disputes
- Follow testing protocol - Shadow mode first
Related
- Holds and Reserves - When they hold your money
- Reading Your Processor Statement - Understanding what you're paying
- Payment Change Checklist - Testing after processor changes
- Fraud Prevention - Rules and configuration for fraud
- Velocity Rules - Configuring fraud rules
- Device Fingerprinting - Tracking devices
- Network Programs - Chargeback thresholds
- Chargeback Metrics - Tracking dispute rates
- Auth Optimization - Improving approval rates
- Payments Metrics - Monitoring payment health
- Buying Payments - Choosing processors
- Dispute Monitoring - Compliance programs