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January 13, 2014 • Issue 14:01:01

Switch it up this year:

Investigate aggregation

hen Square Inc. debuted its mobile payment
dongle in 2010, some industry pundits did
not expect the startup to succeed. However,
W the Jack Dorsey co-founded company is still
around and as prominent as ever in the public's eye. And
it seems a certainty that the aggregation business model,
popularized by Square, is here to stay.
Certainly, aggregation has technological and business
challenges for anyone who wants to adopt it, but it
promises increased efficiencies for merchant service
providers (MSPs) and a significant class of small and
midsize merchants. As the new year dawns, ISOs can do
themselves a favor and investigate aggregation to see if
it fits within their merchant portfolios and adds value to
their product offerings.
But merchant aggregation is different. It is where an
Aggregating merchants MSP pools merchants into one account instead of giving
Payments consultant Todd Ablowitz, President of Double each merchant a separate account. This, of course, is an
Diamond Group, distinguishes merchant aggregation over simplification of the process, but its advantages are
from transaction aggregation. An example of transaction evident. Merchant boarding is quicker on the front-end,
aggregation is when several small-dollar transactions and MSPs can more efficiently manage merchants on the
from an individual cardholder are added up and then back-end. "It simplifies things up and down the line,"
processed as a single payment when a certain total dollar Ablowitz said. "There is no doubt about it."
amount is reached. Apple Inc. employs this process
when its users make 99-cent music downloads via iTunes When an ISO becomes an aggregator, the ISO, in effect,
accounts, Ablowitz said. becomes the merchant of record in relation to the ISO's
sponsor bank. The ISO's merchants then become sub
merchants, with their transactions processed and settled
Contributed articles inside by: through one account.

But not every merchant can be aggregated. The card
Brandes Elitch ......................................................................................32 brands have set up a $100,000 cutoff point for individual
Dale S. Laszig ...................................................................................... 44 merchants. Businesses that exceed that yearly payment
Nancy Drexler ..................................................................................... 49 processing threshold cannot be aggregated and must have
Ben Golder ........................................................................................... 50 their own merchant accounts.
Adam Moss ...........................................................................................51
Adam Atlas ............................................................................................52 Ablowitz summarized the puzzle pieces an ISO needs to
become an aggregator. "You need to have a gateway, or
TOC on page 3 have a front-end processing platform or both," he said.
"You need to manage the aggregated merchant account,

Continued on page 38