By Ken Musante
Eureka Payments LLC
In March 2010, I left my long-time employment with an acquirer to join a street level ISO. I have since learned much about acquirers. For example, as a merchant level salesperson (MLS) and customer of acquirers, I find that acquirers openly share their contracts and processes with me. Acquirers are understandably reluctant to share compensation strategies or service details with other acquirers.
Further, street-level ISOs do not communicate certain things with acquirers. And street-level ISOs are much closer to merchants. They get a better read on the merchants' pulse and perspective than acquirers.
However, acquirers obtain information directly from the card networks and processors. Street-level ISOs and MLSs rely on acquirers to announce and explain changes but typically do not get information directly from the card brands. We are dependent on The Green Sheet and the Forum to confirm industry changes and validate details.
My lengthy experience as an acquirer and my tenure as a street-level ISO position me uniquely to understand how acquirers could best serve my current brethren in a way that is efficient and profitable for all.
To find out what other MLSs believe are critical service strategies, I posted the following on GS Online's MLS Forum:
"Since joining a small street-level ISO earlier this year, I have gotten a good perspective of what makes a good acquirer. My business strategy is focused on processing merchants, so I'm concerned about the service provided my merchants and longevity rather than the speed for approval. However, if you could list your three top priorities for an ISO, what would they be, and why?
"Acquirers tout their pricing and automation in their advertisements, but I'm more concerned about their ability to accept a wide variety of POS systems and VARs. I need to accept every type of merchant, and I need many different wireless options. Though speed for approval is important, I'm more concerned about the predictability of the response time so I can manage customer expectations.
"My three, and in this order, are: 1. Do what you say when you say it. 2. Respond to all my merchant inquiries within 24 hours or less. 3. Don't change the fees to my merchants without my consultation."
CCGUY chimed in first by posting, "1. Acquirers need to understand that MLSs focus on sales and retention. 2. Answers need to be provided on any application submitted within 24 hours or less. 3. Any issues with merchants, fees, fee changes, risk issues and closing accounts (need to be communicated to the MLS), etc.
"4. Good communication with an 'account rep' and/or 'decision makers.' 5. Making sure that the acquirer, from the beginning, understands your business and you understand their business model.
"You cannot fit a round peg in a small square hole, and if they change they need to communicate with you. Having good communication is of the utmost importance."
FASTTRANSACT agreed that communication is key and that turnaround time is important. "On the other hand, with the increase of fraudulent merchants and unprofitable accounts being submitted, which is better?" she asked. "Approve the account within 24 hours, do due diligence and then shut merchant off two weeks later, or take the time to properly underwrite an account - say turnaround is 72 hours?
"MLSs need to educate themselves on risk and underwriting criteria for the ISOs they submit business to. They need to be the first line of defense in making sure the criteria are met. They should always ask themselves this question first, would I personally take risk on this account? If the answer is no, then walk away.
"MLSs focus too much on what is in it for them rather than what is in it for us (us meaning the MLS/ISO relationship).
"So my wish list would be: 1. Better educated MLS. 2. Better communication between the ISO and the MLS in a two-way street environment. 3. Honoring the contract - merchant and agent - again in a two-way street.
"Then, of course, there are the ISOs who don't give a flying hoot about their merchants and/or MLS and are in it just to line their own pockets.
"This whole industry needs to be reevaluated and have some general operating procedures and protocols put in place by an enforcing body. There are too many blind people at the top in all channels, and too many are too busy advancing their own careers without any forethought on the impact their actions will have on the downhill slide."
DEE MALIK listed the following: "1. Do what you say that you are going to do. 2. Have an ISA/MLS agreement that respects me as a professional. That would include a contract that is clear on what happens to my residuals if you sell your company, and one in which minimums are small or nonexistent among other things.
"3. Don't leave important changes out in the way that you do business that, if I would have known of the change before I signed, then I likely would not have signed on as an ISA/MLS with your company. 4. This is the technology business, technology changes, how are you making sure that we are on top of important changes.
"5. Have a system such that you don't accept (board) 'unprofitable' deals, and if you are finding that the people that you have welcomed as partners continue to send you those type of deals, retrain them, let them go or at least have a 'come to Jesus meeting' with them.
"Once I lose trust in the partner that I have signed on with, it cannot be regained." DEE MALIK further pointed out that MLSs should also behave in accordance with his list and this type of behavior should be the norm, not the exception.
CLEARENT provided important points to consider. "Make sure you are signing with a processor/acquirer," he advised. "If you are not doing so, make sure you know everything about the relationship between your chosen ISO and their acquirer/processor.
"Too many times I have seen people get everything they wanted with their ISO, only to discover (sadly) that their ISO's relationship with their acquirer/processor allowed for changes or treatment that prevented the ISO from honoring their commitments, and often it wasn't because of anything the ISO said or did.
"So ... ask questions, and add that one simple question: 'Define your direct relationship.' ... Then ask, what happens if interchange goes up or down; if your acquirer raises their fees; if you don't make your minimum production; if [there is] any instance where you can have your residuals held, and what that would be; if you have liability, what happens to a loss and its effect on me.
And, last but not least, if you sell your portfolio, what happens to my residuals?"
I agree with CLEARENT. Signing with a sub-ISO or any entity not directly contracting with the bank is more apt to lead to problems than if you were to sign directly with a bank or an ISO directly connected to a bank.
To add to this article, I spoke with my long-time friend, Xavier Ayala, Vice President and Director of National Sales and Marketing at Moneris Solutions.
He observed that many MLSs don't properly plan before contacting acquirers; consequently, it is often a bad fit because the MLSs have not first defined what is important to them to eliminate processors that don't meet their basic requirements.
Before interviewing acquirers, MLSs should create a list of services they are seeking and a separate list of attributes they wish to avoid, as well as develop a clear business plan so they are in a position to best compare acquirers.
Ayala added that you should not put all your eggs in one basket because, even if you have found the perfect acquiring relationship, things could change, and you must be able to adapt.
Finally, he stressed that the more an acquirer focuses on relationships, the better a partner the acquirer is likely to be. Representatives at your acquirer should focus on helping to get things done when you need them.
While it's hard to define a "relationship driven acquirer" by using a punch list, it is clear that relationship building that includes advocating for MLSs and their merchants is a critical attribute.
I was surprised to learn how patently one-sided some acquirer contracts are. Some required exclusivity; others required the MLS to represent actions the merchant would take; others required a noncompete clause. When I mentioned this to a long-time MLS, he revealed that all he ever looked at was the pricing exhibit.
This may explain why acquirers advertise their pricing instead of their service or contractual terms. Acquirers don't get credit for having transparent contracts with high service standards; these attributes are not sufficiently appealing to generate inquiries from agents.
Please share your thoughts and ideas for the next article. Until then, when in doubt, sell something.
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