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merchant account. This was considered a serious rules for an ISO comes from merchants with less than $1 million
violation by the card brands. It was called "factoring," and in annual volume, and for merchants with less than $5
it would quickly get you on the Member Alert to Control million in annual sales, their volume is increasing at 4
High Risk Merchants (MATCH) list. percent a year.

But Square changed all this. And the card brands changed Very large enterprises typically negotiate with the card
their approach to allow payfacs to provide settlement to brands directly or with a dozen of the largest acquiring
individual merchants without each merchant having their banks. This leaves the SMBs as about the only segment
own merchant account. About 8 or 9 million merchants where ISOs can make a decent margin on the services they
have their own tax ID number and employees, but another provide. While SMBs are small-volume shops compared
10 or 20 million or more have home-based businesses, to larger merchants, they need help and guidance when
want to sell something to someone and need to accept it comes to growing their businesses, and who better than
credit cards to do so. ISOs to provide that?

Payfacs provide all the benefits of a merchant account, It will require a more consultative approach to the sales
but the money settles in the payfac's account initially. process, not just saying, "Give me a few months of your
One commentator noted that the space between the ISO, statements, and I will see if I can give you a better price."
value-added reseller and independent software vendor is Not every salesperson will be able to do this because
blurring and predicted that by next year $1.5 trillion will it means you have to really get inside of a merchant's
settle via payfacs, and eventually payfacs could control business, understand how it works and identify areas for
half of the payment volume in the country. improvement. This is hard work, but many experienced
ISOs can do it.
One of the most interesting comments I heard is that ISOs
are competing against each other in a race to the bottom Preparing for the future
regarding pricing of merchant services. One statistic One of the most interesting discussions pertained to
mentioned at the show was that 90 percent of net revenue mergers and acquisitions, which might be top of mind

EventsCalendar

July 10 -12, 2019 October 15 -17, 2019
https://opalgroup.net/conference/ August 20 -21, 2019
financial-innovation-payments-sum- http://www.theprepaidexpo.com/ https://www.natmc.org/nac2019-at-
mit-2019/ tendee-registration.html

August 20 -21, 2019
MWAA 17th Annual Conference https://www.eventbrite.com/e/pay-sympo- October 27 -30, 2019
July 17 - 18, 2019 sium-exposition-the-next-decade-of-pay-
http://midwestacquirers.com/ ments-registration-48310960383 https://us.money2020.com/

July 29 -31, 2019 September 18 -19, 2019 December 8 -10, 2019
https://cxfinance.wbresearch.com/ https://westernstatesacquirers.net/ https://opalgroup.net/
conferences/#all-divisions

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