Revolutionizing the Credit Card Processing Industry: Interview with Payment Depot’s Co-Founders

Consumers around the world use credit cards millions of times per day, racking up billions of dollars in transactions – and those are transactions that any business owner would understandably like to get in on! However, the credit card industry is a notoriously complicated sector to do business with, meaning that many businesses end up signing unfair credit card processing deals with banks or processors, which costs them plenty of money over the long run.

In order to clarify how the credit card processing industry actually works, we recently sat down for a talk with Payment Depot co-founders Tony Kawaguchi and Danny Choi. Read on to find out why these two gentlemen have started a revolution in the credit card processing industry and how they plan to help make you a wealthier person…

payment depot

1. What was it about the current state of credit card transactions that motivated you to create Payment Depot?

The credit card processing industry makes billions in profit by taking advantage of small business owners, who mostly feel powerless against these huge banks and processing companies. As business owners ourselves, we saw the burden of various rates, fees, confusing terms, and excessive markups being passed onto businesses. We remembered how Netflix came into the DVD rental market and changed everything by charging a flat rate, so we decided to do the same in the credit card processing industry.

2. What percentage of global credit card transactions go towards processing fees right now, and how do you plan to change it?

Typical processing companies like Merchant Warehouse, Square, Evalon (Costco), and PayPal, all add a 2% markup on top of the Visa/Mastercard fixed costs. This markup adds up to billions of dollars in profit to those processing companies. Many of them claim to charge the lowest percentage to a business owner, but nobody had asked the simple question – Why should businesses have to pay a percentage of their sales to a processing company? So we decided to charge a flat monthly rate of $20 and 25 cents per transaction. For example, a business processing $20,000 a month would save up to $400 a month in processing fees by switching to Payment Depot. It’s really that simple and makes way more sense for business owners. In fact, business owners are so accustomed to being charged a ton of hidden fees that they often don’t believe us when we tell them we don’t charge those fees.

3. What is the difference between Base Costs and Markup Costs, and why is it important for business owners to understand the distinction?

The Visa/Mastercard fixed costs or base costs are unavoidable and are the same for every processor. However, typical processing companies bundle base costs and their markup into a “processing rate.” By doing this they hide the 1-2% markup that they are charging the business owner. At Payment Depot, we decided to pass the base costs directly to the business owners, with no markup. We charge only $20 a month and 25 cents per transaction.

Our business model is lot leaner, simpler, and more fair for merchants. We get a few calls a week from people who think it’s too good to be true, but once they sign up they start telling all their friends. That makes us feel pretty good.

4. You’ve announced your intention to “level the playing field” of credit card processing fees. What do you mean by that?

We looked at the way small businesses were unfairly charged a really high percentage of their sales, while big box stores were not paying any sort of markup from their processing banks, and we knew that we had an opportunity to change the way the industry worked. We knew that if we could offer the same cost to small businesses, we could give them a fighting chance against the big box stores.

What people don’t realize is that the big national chains haven’t been paying the same costs as your local mom and pop restaurant or market. For the small family business, that extra 1-2% we save them can be the difference between turning a profit or not.

5. What was the Durbin Amendment, and what effect did it have on your industry?

Like all new laws, it’s very complicated. The simple truth is that small businesses should be able to pay less to process debit cards, but the reality is that most processing companies haven’t passed that savings on to merchants. Instead they just pocket the extra money. The Durbin Amendment brought debit card fees down to 0.05% + $0.21 but if you look at most processors, they still charge about 2.75% anyway. We think that’s unfair, so we just pass on our direct cost to the business owner without any markup, just 25 cents.

6. You recently produced an infographic explaining how credit card processing fees work. Why did you decide to tell your story in that particular medium?

Credit card processing has been a really confusing industry, and most companies in the industry like it that way. The confusion of rates, percentages, and fees keeps merchants in the dark and allowed them to be unnecessarily overcharged. Infographics have really taken off recently, and we wanted our concept to be clear and concise, in a visual way that can be easily understood. We wanted to change the industry from being confusing to being clear and honest.

7. Where do you plan on taking Payment Depot in the future?

We want to clean up the industry. We want to bring integrity to an industry plagued with dishonesty. We want to make signing up for a merchant account easy. We want to eliminate the “processing rate.” Most of all, we want to help business owners keep more of the money they work so hard to earn.

8. Where should business owners go to learn more about Payment Depot, sign up for it, etc.?

You can visit us on the web at but we’d love to hear from you too. Call us at (877) 876-8776.

The infographic that Tony and Danny mentioned in their interview has been added below for your convenience. Titled “Payment Depot: Leveling the Playing Field,” it uses colorful illustrations and charts to help explain precisely how credit cards processing rates are calculated today, as well as what Payment Depot is doing to reduce them. If you had any remaining questions about credit card processing fees after reading the interview, this infographic should answer them:

payment depot infographic