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The Green Sheet Online Edition

August 27, 2007 • Issue 07:08:02

Primo processor practices

By Adam Atlas
Attorney at Law

Sometimes I run across contracts that evidence a high degree of goodwill on the part of processors. I think it's time to appreciate those responsible for creating policies that make life a little easier for you, as ISOs and merchant level salespeople (MLSs).

You cannot expect to benefit from all five of the following exemplary business practices. However, under the right circumstances, you can benefit from many of them.

1. Willingness to negotiate

Take-it-or-leave-it deals are usually bad for both parties to an agreement. Every business relationship requires a measure of customization.

A processor or processing ISO willing to negotiate the terms of an ISO or MLS agreement is signaling, from the inception of your relationship, that it is willing to accommodate some of your specific concerns and interests.

If you encounter a processor that is rigid from the start, do you think it will be cooperative if something goes wrong after you are working together?

Inevitably, conflicts arise in business relationships. When selecting a processor, get a feel for each candidate's flexibility on contractual issues, and factor that into your decision.

2. Access to decision-makers

Processors with the best negotiation techniques (from the point of view of ISOs and MLSs) make a concerted effort to appoint decision-makers within their organizations who are accessible and empowered.

Make sure you don't have to run proposed changes up five layers of command to get a seal of approval from a five-star general.

Selecting, hiring and retaining the talent required to have decision-makers at the ready is difficult. I applaud processor executives who consistently rise to the challenge of keeping talent on board.

3. Commitment to service

Some processors promise their ISOs that they will perform under merchant agreements up to a specified industry standard. Others do not. Seek companies that will make this promise to you.

Someone outside of our industry would be shocked at the absence of such a commitment. It is common practice for salespeople to impose a certain level of performance on those who deliver their products.

4. Right to assign residuals

A number of processing entities permit their respective ISOs and MLSs to assign rights in residuals to a third party. These rights, when granted, are usually subject to a right of first refusal in favor of the processor.

Remember, unless you are planning to service your merchants forever, you have to consider an exit strategy. A common way for MLSs to exit their relationships is to assign their residual rights to a third party.

If you want to do this, you must consider ongoing service obligations to your merchants, as well as the fit between the purchasing entity and the processor. Nonetheless, it is common for MLSs to be granted some rights with respect to assigning their residuals.

5. Right to move merchants

Rarely available before the end of a contract's initial term, the right to move merchants is perhaps the most difficult right to attain in our industry. But, a number of ISOs and MLSs have successfully negotiated this into their agreements.

Some processors charge an exit fee. Some demand a right of first refusal. Others impose unnecessary burdens on agents by requiring them to submit new applications for all the merchants they wish to move.

If you are given the right to move your merchants, make sure to read the conditions that apply. They may be so burdensome as to make the right ineffective.

The agreements processors offer reflect their respective corporate cultures and values. If you're given no room for negotiation, you have to wonder whether you're dealing with the best entity available.

There is fierce competition among processors for the merchants you solicit. Don't settle for partners that will not make an effort to accommodate your specific concerns and interests. And send your business to the ones that do. end of article

In publishing The Green Sheet, neither the author nor the publisher is engaged in rendering legal, accounting or other professional services. If you require legal advice or other expert assistance, seek the services of a competent professional. For further information on this article, e-mail Adam Atlas, Attorney at Law, at atlas@adamatlas.com or call him at 514-842-0886.

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.

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