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The Green Sheet Online Edition

January 25, 2010 • Issue 10:01:02


Getting started 101

I'm new to the industry and want to clarify some really basic things. First, what is transaction authorization and how does it differ from processing and settlement? And second, and this one is probably more important, how do I become an ISO or MLS? I've done some reading and talking with a friend who's in the business, and I have a business name, but I haven't actually gotten started yet.

Gale McDonough
EnsurePay Group Inc.


Regarding your first question, authorization, in the context of card payments, involves a communication between the issuing bank and the merchant's bank verifying that the cardholder has available credit or available funds in his or her demand deposit account to cover the transaction. The card issuing bank then sets aside the funds, and an authorization code is assigned to the transaction.

Settlement refers to the final accounting during which debit and credits are posted to the appropriate accounts at the issuing and acquiring banks. Processing is a catch-all phrase that refers to the management of transaction flows. Some processing companies handle everything involved with a card transaction while others merely move transaction data between different parties (for example, card acquirers, card issuers and the clearing-and-settlement systems). As for your second question, whether you're forming an ISO or just want to work on your own as an MLS, there is one basic requirement before you can sell Visa Inc. or MasterCard Worldwide credit and debit card processing: You must sign a written agreement to be a sales agent of an ISO or a bank that is registered as a member service provider (MSP) with Visa or MasterCard.

MSPs can hire independent contractors, but contractors must represent themselves as working for the MSP and receive all compensation for bankcard services from that MSP. Anything short of that is considered subcontracting, a violation of Visa and Master Card rules.

If, as an independent contractor, you work under your own corporate name or employ more than one person, you must register as an MSP with the card brands. That means you will need to register EnsurePay Group Inc. with Visa or MasterCard to do business under that name, which will mean a $10,000 investment to do so. You might consider working with an established, registered ISO first. Our Resource Guide, published in each issue of The Green Sheet and GSQ, as well as online at www.greensheet.com, lists banks and ISOs that are looking for agents under such categories as "Banks looking for agents," "ISO relationships available," "ISOs/Processors seeking sales employees," and "ISOs looking for agent."

Congratulations on picking an industry on solid footing to thrive in the decade to come.


From GS Online's MLS Forum
The premier online network for payment pros

Following is a question presented by GS Online Forum member oldpro:

I would like to know how many people are really making it in this business. How many reps, not ISOs or offices, are making a living, especially if you are new to the business? What I am talking about is how many reps are making $25,000 to $30,000 and above. And if you are, how are you making it? ... What is your focus on? How are you being paid: upfront bonus, conversion, leases, equipment sales, salary, or strictly residual? And if you are not making it, what is your biggest obstacle to overcome, aside from not putting in the time and effort? ... I want to hear from the 40-hour, dedicated, feet-on-the-street or phone rep trying to make it.

Here are excerpts from one of the responses oldpro received. To read all of the responses in full, please visit the MLS Forum. If you haven't already registered, visit www.greensheet.com, click Register Today! in the upper right-hand corner, and proceed from there.

    My app count and income dropped at the beginning of last year. I spent the year struggling to find the way I want to approach merchants. I found that with margins shrinking and hundreds of new reps saying they could save tons of money for each merchant (most of the time it was a lie), the merchants were resistant to even speaking about their merchant services. I spent months coming up with my own programs to help the merchants with different areas of their business and wrapped the merchant services with these other services. It has worked very well. Most of the merchants give me 20 minutes of their time, and I leave with a new contract or a great future possibility. I charge for my services and normally match rates for their processing. I make money upfront on the sale and, of course, residuals. Funny - our industry is full of reps, not many sales reps though. Margins are continually shrinking, and this is the approach, "Mr. Merchant, Please allow me the chance to cut my and my ISO's profit to nothing so I can convert your merchant account. The next guy goes in and cuts it lower; eventually we end at cost; the merchant wins; the card brands aren't lowering their fees; the only ones paying for this are the reps and ISOs. I find this a ridiculous business model and wonder how our industry will survive at this rate.

    - rcr38

end of article

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