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The Green Sheet Online Edition

July 09, 2007 • Issue 07:07:01

Street SmartsSM

Ruminations on ISO registration

By Dee Karawadra
Impact PaySystem

Executives of super ISOs make registering as an ISO look glamorous with their private jets, Lamborghinis and condos in Miami. But is registering really going to get you where they are?

I recently broached this subject on GS Online's MLS Forum and received a good deal of feedback. Clearly, many MLS Forum members have entertained the idea of becoming registered ISOs.

Registration pros

There are many advantages to becoming a registered ISO. First, you can brand your company name. This is the most important reason for becoming registered. It allows you to build your company name, not your ISO's name.

Name recognition is a huge incentive for merchant level salespeople (MLSs), especially when sales efforts are focused regionally. You can market your name and write business anywhere as long as you register correctly. And your reputation is built upon your service.

MLS Forum member Wisdompower stated, "I am interested in branding my own name. If it weren't for that and the fact that I have other businesses, I wouldn't even think of registering. You can find a powerful deal without registering."

Brand recognition helps you achieve credibility with merchants, referral partners, agents and processing ISOs.

Merchants feel they have someone who will be accountable for issues that arise. They are more confident that you will stick around, unlike fly-by-night salesmen. And the pride you take in building your own empire will show in your sales calls and service.

Additionally, referral partners know you are the decision-maker who can, if needed, provide custom pricing or meet other special requirements. Also, financial institutions and card Associations are reassured if their cust-omers/members are taken care of by you and not through an 800 number routed to Asia.

MLS Forum member Bankcardrep1 wrote, "I have one bank right now, and frankly it's kind of cheesy that I can't use my name."

When trying to recruit sales agents, being registered is a major plus. Agents are hesitant to work with unregistered MLSs. They are also leery of deals unregistered MLSs provide and are uncertain if they will receive a true split or a split of a split.

Many MLSs go straight to registered ISOs instead of going through middlemen in hopes of getting the best buy rates. One famous poster on the MLS Forum just registered with the card Associations.

He has been recruiting for many years, but according to him, registering got him the necessary seal of approval and has helped with recruiting.

ISOs that provide processing services need a commitment from MLSs, and registering through a sponsored bank gives them this commitment. It can often bring a better deal in terms of pricing and support from the processing ISO.

Registering also demonstrates commitment to the industry. And branding your company name shows your willingness to accept responsibility for your agents' actions and ability to support your customers.

Registration cons

I can tell you firsthand, being an ISO is not easy. You have to wear many hats _ from plumber to network administrator. You could be stuck with underwriting, apps-scrubbing, data entry, customer service, tech support, risk management and much more. This is in addition to covering such overhead expenses as office space and equipment.

This all takes capital. Dustin Siner (dsiner on the MLS Forum) said, "Many companies bring on overhead faster than the residual stream grows and quickly run out of cash."

A $10,000 registration fee for the card Associations is not all you are going to need initially. You will need cash for other registration expenses.

Depending on the processor with which you register, you may be liable for registering with each debit network. These fees can range from $500 to $1,500 each. Many new registrants are not aware of this, and it hits them on the back-end. It can be an unpleasant surprise.

Decisions, decisions

Whether to register is something each MLS has to decide individually. For a successful MLS, this could be the next stepping stone.

"Becoming an ISO could mean just registering your brand with Visa/MasterCard and outsourcing everything to a super ISO or processor.

"Then it just becomes a cost-benefit analysis on whether or not it's worth $10K up front and $4,000/year to maintain your own brand," Siner wrote.

Wisdompower replied, "That is exactly what I plan on doing. ... I just want my company to be a sales engine submitting apps."

What about the myth that you have to be registered to get a great deal? If you have superb numbers to back you up, you can get the same deal as a registered ISO.

You can also get an ISO or processor to pay your registration fees with a minimum commitment on your part.

Michael Nardy (empire on the MLS Forum) stated that many super ISOs or processors "offer very competitive deals and will pay your registration fees for the right deal count or volume."

The deciding question is do you want to be an operations office or a sales office? As an operations office, you depend on agents and referral partners to bring you deals.

You need a support staff, office and a great deal with a processor, so you can share the benefits with your agents and referral partners.

If you have concerns about the service level of your ISO and think you can treat your customers better than it does, registering make sense: You will control the underwriting and help desk.

As a sales office, your focus should be sales. You can hire salaried sales reps because they do not care if you are registered.

And you can typically work very well from a home office. Many agents may lose their sales focus to the demands of daily operations.

As a sales office, you can leave all those struggles to your ISO or processor and spend valuable time with your sales reps training them, motivating them and helping close deals. This will help build your portfolio faster.

Sure, you may not get a 100% deal. But if the number of deals you are producing justifies it, you can easily get a 70/30 or better split.

Should you give away 30% for lower overhead and the use of someone else's name?

That is a question you'll have to answer. My answer: If I had known then what I know now, I would be a sales office.

Safari njema (safe journey). end of article

Dee Karawadra is the founder, Chief Executive Officer and President of Impact PaySystem, based in Memphis, Tenn. He and his team have a wealth of knowledge on the merchant services industry, with a niche in the petroleum market. Dee's experience on the street as an agent has guided him in laying a foundation for an agent program that is both straightforward and lucrative for his agents. Contact him at 877-251-0778 or dee@impactpaysystem.com.

The Green Sheet Inc. is now a proud affiliate of Bankcard Life, a premier community that provides industry-leading training and resources for payment professionals. Click here for more information.

Notice to readers: These are archived articles. Contact names or information may be out of date. We regret any inconvenience.

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