How to negotiate the most competitive rates from multiple Sportsbook payment processors.

As a sportsbook operator, one of your biggest expenses is payment processing fees. With profit margins in the industry razor thin, getting the lowest rates possible from your payment processors can make a huge difference to your bottom line. However, negotiating fees is no easy task. Payment processors know they have you over a barrel since without them, you have no business.

In this article, I'll reveal my top strategies for getting sportsbooks the best rates. By the end, you'll be armed with the knowledge to drive a hard bargain and walk away with significantly lower costs. Let's start with understanding some basics.

Know Your Leverage Points

When negotiating, it's crucial to understand your leverage points - the areas you can use to your advantage. For payment processors, two big ones are volume and exclusivity.

Volume is king. Processors want as many transactions as possible going through their systems since that's where they generate revenue. They'll be willing to discount heavily for a large, consistent volume of business. Make it clear from the outset how much monthly processing you expect to do and that you're shopping around for the best per-transaction rates.

Exclusivity is also valuable. Offer to sign a multi-year contract making the processor your sole payment partner if they meet your rate demands. This guarantees them a set amount of business rather than having to fight for market share against competitors. It removes the risk for both sides.

Do Your Research

Before any meeting, research competitors' standard pricing models so you know what's reasonable to ask for. Look at what well-known sportsbooks in your region pay. Some transparency sites publish this data.

Also study each processor's capabilities, uptime records, geographic coverage, integration options, and customer support. Note any weaknesses or limitations that may give you leverage. For example, if a processor has spotty uptime in your target markets, you can threaten to go elsewhere for reliability's sake.

Have Alternatives Lined Up

Never negotiate from a position of weakness with only one option on the table. You need bargaining chips. Reach out to 3-5 other potential processors before discussions. Get preliminary quotes and timelines for onboarding.

Be ready to walk away if your target processor doesn't meet your demands. They need to believe you're serious about considering competitors. Having options prevents you from getting locked into a bad deal. It also forces processors to submit their best offers right off the bat.

Use a Consultant

For a complex negotiation like this, leverage expert guidance. Payment consultants intimately understand the industry and have relationships across processors. They can advise on reasonable asks, analyze proposals, and even participate in discussions on your behalf.

Consultants are well-versed in contract language nuances and gotchas to watch out for. Their presence signals you're serious and informed. Processors are less likely to pull a fast one knowing an expert is scrutinizing the deal points. Consultants typically only charge a small success fee if an agreement is reached.

Ask for Multiple Scenarios

Don't settle for a one-size-fits-all rate schedule. Request customized proposals with tiered pricing based on realistic processing volume scenarios for the next 12-24 months. For example:

- Scenario 1: $500k monthly volume

- Scenario 2: $1m monthly volume

- Scenario 3: $2m monthly volume

This shows processors you have a growth plan and are thinking long-term. It also allows them to offer better rates as volume scales up over time. Pushing for tiered pricing maximizes savings as your business expands.

Negotiate Ancillary Fees

Beyond the core per-transaction rates, focus on minimizing ancillary fees like chargebacks, refunds, account funding/withdrawals, and support. These add up quickly.

For chargebacks, ask processors to cover related investigation costs or reduce their fees, especially for the first 6-12 months to help build your reputation. Negotiate a cap on monthly chargeback fees.

Request free or discounted account funding/withdrawal options, especially for high volumes. Consider bundling support fees into your base rates rather than paying extra. Leave no fee unturned in negotiations.

Get It In Writing

Only finalize terms once all details are formally documented in a contract. Have your lawyer review anything processors send. Don’t rely on verbal commitments—get concessions in black and white.

Include start/end dates, termination clauses, obligations of both parties, rate schedules, minimum processing volumes, review periods, penalties for non-compliance, etc. Lock processors into honoring rates for 12-24 months to prevent mid-contract increases.

Review Periods & Renegotiations

Build in regular review periods, like every 6 months, to assess volume and renegotiate rates if necessary. Processors may be willing to lower pricing as your business grows between contract terms.

Short review cycles let you reassess the market and keep competitors on their toes. It motivates processors to retain your business with the best ongoing value. Never let initial contract terms stand indefinitely without opportunities for savings.

Test Them Out

Once signed, don't hesitate to put negotiated terms to the test. For example, if chargeback rates were reduced, deliberately trigger some to see if the processor honors new pricing.

Gently push processing volumes up and down month to month within agreed minimums/maximums. Monitor how processors react and if rates still apply accurately. This establishes trust while keeping them accountable. It also builds a track record to strengthen your renegotiation position later.

By using these strategies, sportsbook operators can significantly cut payment processing costs. With the right negotiation skills and leverage points, you'll be in the driver's seat getting the best possible rates from the best sportsbook payment processor. Remember - it pays to be informed, have options, and continually optimize deals through open communication. Stay tuned for future articles on optimizing additional business expenses!

#SportsGaming #SportsbookBusiness #SportsbookOwner #BusinessNegotiations #PaymentProcessing