Research has found that consumers tend not to abandon their favorite brand names and retailers when offered lower-priced alternatives. Brand loyalty is a proven and powerful thing. Likewise, the payments industry is built on name recognition. So how do you entice merchants away from the name to which they're drawn? Infinity Payment Systems believes it has made the question moot.
John Thorpe, President and founder of Infinity, got his start as a merchant level salesperson (MLS) at Infinity Data Corp. in Brockton, Mass. After a few months on the job, he set up his own sub-ISO under Infinity Data and hired a staff. Soon it became a family affair.
"Once I knew that it would work and I could do it, I had my wife quit her job, and she came into the office and started helping me," Thorpe said.
After progressing to a 75 percent split on over 1,000 new merchants a year with a sales force of telemarketers and salaried MLSs, Thorpe had a conversation with Brian Mills, the owner and President of Infinity Data. He and Mills agreed Thorpe should do his own customer service and risk management. Mills gave Thorpe permission to use the Infinity name to avoid confusing Thorpe's portfolio of merchants.
Thorpe kept promising his wife, Lisa, who handled Infinity's payroll, that when the company hit a certain amount of sales per month, he'd start cutting his sales force and slow down.
But he kept increasing the upper limit until finally things were leveling off, and it took more MLSs to bring in the same amount of sales.
Hiring a salaried sales crew is something Thorpe said he didn't see other ISOs doing. Though he uses an independent MLS sales channel now, he still recommends the employee model for fledgling ISOs that need help growing portfolios. He also recommends new ISOs avoid borrowing money.
Infinity made a decision to sell off 5,000 of its merchant accounts and now has around 2,000 active accounts, which the company serves from offices in Richmond, Va., and Wilmington, N.C. The company is a registered ISO with Global Payments Inc.; HSBC Bank is its sponsoring bank.
According to Thorpe, Infinity's processing volume has grown 230 percent since 2003, and its agents' renewal commissions have grown 345 percent.
In the equipment sphere, Infinity offers standard credit card terminals, personal computer-based solutions for credit card acceptance and mobile wireless terminals.
One offering building momentum is virtual terminals, which Thorpe said is a strategy for reducing equipment costs. All of Infinity's products are branded. In addition to bankcard processing, the company offers the Infinity Check Processing program, which encompasses check verification, check guarantee and electronic check conversion. Infinity is preparing a merchant cash advance program and intends to increase its focus on Check 21 products and interchange-plus programs.
Infinity's selling range is currently confined to the mid-Atlantic region, but the company has plans to expand nationwide. Infinity markets to small to mid-sized businesses, but does not deal with merchants who key in transactions or Web-based businesses - decisions designed to keep risk levels down.
Infinity gets new business through its merchant referral program, which provides cash back to merchants who supply Infinity with viable referrals. Thorpe expects that this sales approach may shift as he expands his MLS pool and new hires generate referrals via tradeshows or local associations and leverage the company's value-added products to interest prospective merchant customers.
Thorpe said the decision to become an ISO should not be taken lightly. He indicated there are many factors to consider and many hidden costs involved. While MLSs may want a bigger piece of the processing pie, they need to weigh the financial and procedural costs of making the leap to becoming an ISO.
"You really, really have to be ready for it," Thorpe said, adding that the first thing potential ISOs should ask themselves is if they are ready to handle the responsibilities of customer service and risk.
Then there are overhead considerations. Thorpe advised that new ISOs need office space, 24/7 customer service, a reliable phone system and the right staff to handle calls. These expenses, along with the cost of risk management, can pose a serious financial burden to ISOs just starting out.
In terms of sweetening the income pie, Thorpe said offering MLSs an extra 25, 35 or 50 percent on residual income won't matter enough to reps selling 10 deals a month. "Now if you're doing 100 deals a month, and you have a 50 percent deal versus a 100 percent deal, then yeah, of course those numbers are going to mean something after a couple of years," he said.
Thorpe believes when the time and conditions are right, nothing compares to owning your own ISO.
He still has accounts from before he registered as an ISO; he likes being able to click a button to send those customer service calls back to Infinity Data.
But he also enjoys the ability to sell from his own Web site and have his own literature, higher residual income and the satisfaction of knowing he owns his own business. He added that being an ISO also makes selling your portfolio simpler.
According to Thorpe, customer retention begins with "setting up the merchant properly from the beginning and making sure they're not receiving surcharges or fees that are not laid out in the contract." He sees a lot of the competition charging merchants $10 and $15 fees above what the card brands are charging merchant acquirers. And Infinity has never charged its merchants monthly minimum fees, he said.
Infinity spends more time in underwriting deals these days since many merchants are slower to pay their bills because of the present economic situation. "We're not going to decline somebody for something that has happened in the last few months, or the last six months or the last year, unless it's something very serious, like a judgment," Thorpe said.
Infinity "tries to understand what some of the merchants are going through and maybe why they had some of these bad marks," he added.
Infinity also stays in touch with its merchants, notifying them of new programs. When merchants call with questions, Infinity offers to do rate reviews for them, Thorpe said. The company checks in with the top 20 percent of its portfolio once a year via e-mails, letters or Christmas cards.
"If you do the right job in the beginning and be fair with the merchant and not try and make a lot of money on surcharges, then I think your retention would be helped right there alone," Thorpe said. "Because if you're making $40 to $50 per month on a merchant, and the other company comes in and says they can save them $200 per month, how can that happen if you're working on a true interchange cost?"
Infinity's MLSs are constantly going over the company's interchange chart. Thorpe said reps need to be drilled with the interchange and surcharge rates and how they work with different merchant types. When attempting to get merchants to switch providers, Infinity has its agents compare Infinity's contract against merchants' existing contracts.
Thorpe revealed that Infinity is offering new MLSs a 100-percent-of-residual deal, which decreases to 75 percent after the first year.
"We don't make anything on the first year, but I think, right now, it's important to retain the salespeople that we are hiring because it's so hard to get that residual income up and running, and there's no money in the upfront sale like there used to be," he said. He added that three years ago the company was making $300,000 a year in equipment lease income; it was down to just $22,000 in 2008.
Infinity is also offering new MLSs the opportunity to receive their estimated commission for the first six months in advance.
There may be no such thing as a free lunch, but Infinity's carrot extended to new MLSs appears highly enticing. And the company goes one step further. No payments industry experience required.
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Phone: 800-706-7591, ext. 201
6622 Gordon Rd.
Wilmington, NC 28411
Web site: www.infinitypaymentsystems.com