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The evolution of electronic payments – Part 2

The Green Sheet was started in those early days to give
salespeople the requisite knowledge and understanding to
sell card processing. At the time, salespeople were allowed
to speak only to their sponsor banks and were prohibited
from speaking directly with the card companies, which at
the time, were card associations owned by banks.
It still takes a small army of salespeople to knock on doors
and solicit merchant accounts. The sales process is different
now, of course. Merchants use POS software instead of
stand-alone countertop terminals and are savvier about
transaction processing. Also, reps used to sell based on
By Brandes Elitch price. Today, they compete by adding value.
CrossCheck Inc. Continued innovation inevitable

t the end of Part 1 of this two-part series, pub- Processors continue to consolidate. At some point, only a
lished Oct. 14, 2019, in issue 19:10:01) I men- handful will control the majority of merchant accounts.
tioned the challenge banks faced in getting And the major banks will build direct sales channels to
A merchants set up to accept credit card transac- their merchants. Everyone is looking to software developers
tions electronically when the technology became available. to build new hooks into merchants, particularly the general
They had no sales force capable of such a task, so what ledger systems they use to run their businesses.
happened?
The smallest merchants who traditionally didn't take
The independent sales organization (ISO) emerged. credit cards now can use Square, and the card brands
The salespeople were not bank employees, but the bank have legitimized payment facilitators, which allow micro
authorized them to sell on their behalf. Typically, ISOs merchants to accept card payments but settle funds in
worked on 100 percent commission. payfac accounts rather than individual merchant accounts.
Independent software vendors resell merchant processing
Their income was derived from how much they could integrated into their product suites, so merchants have one
sell above the "buy rate" banks gave them and – equally point of contact, and things can work seamlessly.
important – on other ways to extract money from merchants.
One common practice was putting terminals and printers So many talented people are working in the finech space
on five-year, non-cancelable leases at $39.95 a month – and that new products and services are inevitable. If you wonder
selling lease paper. The hardware probably cost less than how much change one person can make, consider the late
$500 to purchase. Fernando Corbato. He fostered the digital revolution by
developing shared computer operating systems, and he
ISOs deserve credit for getting merchants up and running introduced computer access control via passwords.
on POS terminals. It was a massive effort. There was no
internet. Imagine setting up a large retail store that had 50 When Corbato began his career, calculations were done
departments with cash registers and POS terminals: every with a slide rule or mechanical calculator. Early computer
one required a telephone line. users stood in line for a turn to run a program with batched
punch cards. Corbato played a major role in introducing
The ISO's essential role time-sharing, which permitted multiple, simultaneous
access to the same device. Could a person working today
For all but the largest enterprises, it was the ISOs ‒ the third change the landscape as thoroughly as Corbato did? My
parties selling merchant accounts on behalf of sponsor hunch is that if people like that exist, you'll find them at
banks ‒ that provided merchants a view into the world of Money20/20.
payments. Banks' cash management specialists called on
companies with a few hundred million dollars in revenue.
Their products were check based: lockbox, positive pay, Brandes Elitch, director of partner acquisition for CrossCheck Inc., has
account reconciliation, wire transfer, and later, PC-based been a cash management practitioner for several Fortune 500 compa-
ACH origination. nies, sold cash management services for major banks and served as a
consultant to bankcard acquirers. A certified cash manager and accred-
For small and midsize enterprises, cash management ited ACH professional, Brandes has a Master's in Business Administration
officers were nowhere in sight, and the branch employees from New York University and a Juris Doctor from Santa Clara University.
had no real understanding of cash management. The ISOs He can be reached at brandese@cross-check.com.
checked in with merchants regularly.
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