Bring Payment Processing In-House

Sheetz, Inc.'s in-house credit card processing application yields a six-month payback.

When it comes to using IT solutions to improve business processes, retailers have a difficult choice to make. On the one hand, they have to do what's necessary to improve customer service and cut costs. On the other hand, they can't stray too far from their core competencies (i.e. selling merchandise) and lose touch with their customers. Sheetz, Inc. is a $3.8 billion c-store retailer with 340 stores and more than 11,000 employees.

Before it made the decision to upgrade its payment processing system a few years ago, Sheetz did a thorough study to determine whether outsourcing its payment processing or bringing it in-house was the better choice. "About 85% of payment processing expenses come from interchange fees [i.e. the transaction cost a retailer incurs from credit card authorizers such as MasterCard and Visa], which can't be changed," says Rich Steckroth, director of business development at Sheetz. "The other 15% of payment processing fees, which is incurred from processing services and switch costs, can be controlled." Following Sheetz' analysis, it concluded it could bring payment processing in-house and recover its investment within a year.