The State of Restaurant Digital Payments in 2024 + 10 Expert Tips on How to Negotiate Credit Card Processing Rates

Industry Insights

Adriana Desmond

NOV 30, 2023


  • Jump to:

Introduction: The Changing Landscape of Payment Processing in the Restaurant Industry

The payment processing landscape is evolving in restaurants, especially over the past few years, having seen the vast majority of multi-unit brands layering digital payments on top of traditional in-store dining and takeaway. The digital payments market is expected to grow at an annual rate of 11.8%, and will overtake cash and cards by 2025, with mobile payments being the primary form of payment for consumers. 

QR Code payments are predicted to grow by 250% by 2025, and accepting digital wallet payments is make or break for restaurants in 2023, with 45% of consumers stating they would choose a brand with mobile payment availability over one that does not. 

With the addition of digital platform payment processing, operators have seen increased rates and limited options—often having to choose different processing partners for in-store and online transactions. This causes multiple issues, a few being managing multiple merchants, forgoing negotiated credit card processing rates, and being locked into the preferred processor of their first-party ordering tech provider. 

Satisfaction with merchant service providers fell 18 points in 2022, with the leading reason for dissatisfaction being high rates and technical difficulties at the POS being second. 

In 2023, the industry saw restaurant ordering tech providers launching native payment processing, requiring restaurants that are using the companies’ online ordering solutions to lock into their payment programs and rates. 

In this article, we’ll discuss the challenges restaurants face with technology providers, how payment-processing-agnostic providers are the way to go, and how to negotiate credit card processing rates in 2024.

The Problem with Limited Payment Processing Options

Restaurants facing limitations in selecting their own payment processor for digital orders face several issues: 

  • Higher rates (+ markup on top of CC rate)

  • Disparate systems between in-store and online/mobile payments 

  • Operational complexity 

  • Chargeback challenges and lack of chargeback support

What is the average credit card processing fee for restaurants? In 2023, the average credit card processing fee was between 1.5%-3.5%, according to Forbes. Considering the average restaurant profit margin sits at about 3-5%, even a small markup on credit card fees can greatly impact margins. 

For this reason, it is imperative that restaurant technology providers consider the impact of locking customers into payment gateways and that restaurant operators look at processor-agnostic options while evaluating their online ordering tech stack. 

When given the opportunity to choose between processors, operators are awarded flexibility, control, and protection of their profit margins. In 2024, restaurants deserve the opportunity to select their preferred vendor.

The Benefits of a Processor-Agnostic Approach + The Importance of Mobile Pay

When selecting a partner in off-premise ordering technology such as online ordering, mobile ordering, and digital catering, restaurants should look for a tech provider offering a processor-agnostic platform and an online ordering solution fully integrated with popular mobile payment forms such as Apple Pay & Google Pay. 

With 55% of consumers rating contactless payment as one of the top three factors influencing their restaurant choices, having the option in-store is table stakes for restaurants. 

Solution providers, like Lunchbox OPEN Payments, offer restaurants the option to choose from a list of integrated payment processors, including PAR Pay, WorldPay, and Payco, to name a few, or its own native Lunchbox Payments solution powered by Finix

Through the OPEN Payments platform, restaurants can integrate their existing preferred payment partner into the Lunchbox suite of digital ordering solutions. The solution offers a few key benefits:

  • Restaurants can negotiate and keep their existing rates 

  • Unified payment solution between ordering channels 

  • Fully PCI-compliant processing 

  • Control and full visibility into interchange rates

  • Apple Pay and Google Pay-enabled solutions

  • QR Code in-store payments through Scan-To-Pay (available on Lunchbox App Ordering) 

This approach focuses on flexibility, cost-effectiveness, and operational ease for the restaurant brand. 

In addition to being payments-agnostic, Lunchbox OPEN allows restaurants to accept Apple Pay and Google Pay through online ordering, mobile ordering, its Scan-To-Pay feature (contactless in-store payment integrated with mobile rewards and loyalty), and online catering. 

Table Source: (Meetanshi)

Impact of High Fees and How to Avoid Them: + 10 Expert Tips on Negotiating Credit Card Processing Rates

When it comes to running a successful restaurant, managing expenses is as crucial as serving great food. One often overlooked area is the cost of credit card processing fees. These fees can significantly eat into your profits, especially if your payment processors mark them up. However, with the right strategies, you can negotiate better rates and keep more of your hard-earned money. Here are some expert tips:

1. Understand Your Current Fees

  • Audit Your Statements: Review your current credit card processing statements thoroughly. Understand the different types of fees you're being charged, such as interchange fees, assessment fees, and any additional processor surcharges.

  • Know the Industry Standards: Research to understand what constitutes a competitive rate in the industry. This knowledge will empower you during negotiations.

2. Leverage Your Transaction Volume

  • Highlight Your Volume: If your restaurant processes a high volume of transactions, use this as leverage. Payment processors often offer better rates for higher volumes as it means more business for them.

  • Consider Future Growth: Discuss your expansion plans if you're a growing business. Processors may offer lower rates for the potential of increased future transactions.

3. Ask for Interchange-Plus Pricing

  • Opt for Transparency: Request interchange-plus pricing, which breaks down the exact interchange fee charged by the card networks and the processor’s markup. This model is often more transparent and cheaper than tiered pricing.

4. Be Ready to Negotiate Markups

  • Negotiate the Markup: Focus on negotiating the processor's markup, as interchange fees are non-negotiable. Even a small reduction in the markup can lead to significant savings.

5. Watch Out for Hidden Fees

  • Identify and Challenge Hidden Fees: Look out for and question any unnecessary fees or surcharges. Ask your processor to waive or reduce them.

6. Get Multiple Quotes

  • Shop Around: Don’t hesitate to get quotes from multiple processors. This not only gives you a sense of what’s available in the market but also provides you with more bargaining power.

7. Highlight Competitor Offers

  • Use Competitor Rates as Leverage: If you receive a more competitive offer from another processor, use it as a bargaining chip to negotiate lower rates with your current processor.

8. Consider Bundled Services

  • Explore Bundling: Some processors offer bundled services, like POS systems or business analytics tools, at a discounted rate. Evaluate if these bundles provide value and savings for your business.

9. Review and Renegotiate Regularly

  • Regular Reviews: Make it a habit to review your processing fees regularly. Market rates change, and what was a good deal a year ago might not be competitive now.

10. Don’t Hesitate to Switch

  • Be Open to Switching: If your current processor is unwilling to negotiate, don’t be afraid to switch to a more cost-effective provider. The savings can be substantial over time.

By implementing these strategies, you can effectively negotiate better rates for your credit card processing, reducing operational costs and boosting your bottom line. Remember, every penny saved in fees is an extra penny in profit for your restaurant.

Conclusion: Why Choice Matters in Payment Processing

In conclusion, the restaurant industry's landscape of payment processing is undergoing significant transformation, driven by the rapid adoption of digital and mobile payments. As restaurants navigate this shift, understanding the importance of processor-agnostic solutions and the impact of high fees is critical. By choosing a flexible payment processing partner, restaurants can not only provide better customer service through popular methods like Apple Pay and Google Pay but also protect their profit margins from unnecessary fees and charges. Furthermore, with the practical tips provided for negotiating credit card processing rates, restaurant operators are well-equipped to make informed decisions that align with their business needs and growth plans. Embracing these changes and strategies will be crucial for restaurants looking to thrive in a digitally dominated future. Ultimately, the goal is to create a seamless, cost-effective payment experience for both the customer and the restaurant, ensuring sustainability and success in the dynamic world of restaurant payments.

  Subscribe to our newsletter  Subscribe to our newsletter