By Tim Brinkman
Many ISOs and merchant level salespeople (MLSs) want to help businesses that are typically averse to accepting electronic payments bridge the gap between entrenched and newer payment forms. But payment professionals often lack the experience to sell viable processing alternatives to these potential goldmines.
Some are intimidated by the frequent changes to card company regulations. In response, they have elected to stick with what they know, which is selling solutions that have been proven over time to markets they know well. But the reality is that, in doing so, ISOs and MLSs are limiting their potential revenue streams.
A significant opportunity exists among organizations that have historically avoided card acceptance because of their slim operating margins (utility companies and auto leasing companies are good examples). These enterprises recognize that their customers are clamoring for card-based payment options, and they understand that if they cannot provide such options, their customers might seek providers that will better meet their needs.
ISOs are perfectly positioned to help these organizations give their customers what they want. And while the traditional model may not always work for these merchants, there are alternatives that will.
The primary reason many organizations resist accepting card payments is cost. As mentioned in the preceding section, because of their operating margins, many enterprises simply cannot absorb the processing costs associated with card acceptance. For a utility company with margins of only 10 percent, a processing cost of 2.5 percent yields an impact on it pretax income of 25 percent, which makes traditional card acceptance difficult to justify.
These same merchants also have reservations about accepting card payments because they are not able to surcharge and lack the expertise to offer a convenience-fee model.
On the regulatory side, many merchants are unclear regarding the specifics of Visa Inc., MasterCard Worldwide and Discover Financial Services business rules, as well as the Payment Card Industry (PCI) standards. Thus, they are dissuaded from accepting card payments by the cost of compliance.
What these organizations need to recognize - and more importantly, what ISOs and MLSs who take the time to become educated can help them realize - is that, in providing more payment options to customers, they will benefit from an increased revenue stream.
Significant cost savings can be realized simply by accepting electronic payments versus paper checks. In keeping with the utility company example, these companies spend, on average, $7 to $11 per year, per customer, to process paper checks. Processing the same bills electronically through a third-party alternative model costs them nothing. That's right, nothing.
Multiply that savings across hundreds of thousands or even millions of customers, and it adds up quickly to a substantial number. Additionally, as a result of more payment options made available to customers, merchants benefit from the reduction in the number of delinquent payments and defaults.
As payment consultants, ISOs and MLSs must clearly communicate with merchants that there is a legitimate risk that they will be left behind as their competitors in the industry learn about alternative payment methods and start accepting card payments.
It all boils down to honest pricing and understanding the industry well enough to make an educated decision about offering the right solution. ISOs and MLSs have an immediate opportunity to take advantage of this. By acting as payment consultants to their merchants, they can explore untapped markets more successfully and generate revenue gains for themselves. The key is to be able to present the right product, operate it transparently and ensure it is compliant with card industry rules.
A significant opportunity exists today in offering merchants nontraditional solutions because many merchants recognize the growing need to provide card acceptance and want someone to guide them through the process. Payment professionals who recognize this, and take the time to foster these relationships, stand to benefit greatly.
Tim Brinkman is Chief Executive Officer of ChargeSmart, an alternative payment solution enabling card acceptance at no cost to the biller, allowing businesses to meet their customers' card payment preferences without the expensive fees and technical challenges associated with traditional card acceptance programs. For more information, contact Tim at firstname.lastname@example.org or visit the company's website at http://corp.chargesmart.com/.
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