By Bill Pirtle
C3ET Credit Card Consortia for Education & Training Inc.
Over the last year as the Street Smarts columnist, I have received a few calls or emails with each article published. Readers usually want tips on how to become better agents. Here is one tip that I truly believe in: remember your partners.
We all want to call our technical support or customer service reps and show our clients how the phone is answered on the first or second ring. We want underwriting to quickly process our apps, and we want file builds done yesterday so we can start earning our residuals on the account.
Many merchant level salespeople (MLSs) sign up with larger ISOs especially for the benefits I just listed. Many such ISOs offer "free" terminal programs and other incentives. These programs cost money, as does customer service MLSs can be proud of. Larger ISOs can make these programs work through volume, as well as retention strategies.
So, I wanted to share a recent exchange I found in the "Seeking no minimum, no contract processor" discussion thread on GS Online's MLS Forum.
The topic was created by DPPGK, who said, "I was just looking for a processor that offer[s] no contract or no monthly minimum for a merchant but still pay[s] out $200 to $300 upfront to the agent depending on free equipment or reprogram.
I have already found one but am a little wary of working with them for a number of different reasons. Just thought I would reach out to the community and see if anyone has any recommendations. Any advice is appreciated."
JDECKARD replied, "Yup ... I'm looking for someone to give me $200 to $300 for nothing, too."
GMARTIN added, "[I] was trying to come up with a response to this, and was without words. Thanks, John, for articulating my thoughts.
"I can't imagine any reputable company paying an upfront bonus to sign accounts without some sort of way to be sure they will recoup their investment. Any that would offer this, I would also be wary of for a multitude of reasons."
DPPGK then asked for only serious posts that would help find an ISO that can offer this.
That brought a response from JEH1003: "These are the kind of posts that get me in trouble," JEH1003 wrote.
"Listen DPPGK, what everyone is trying to tell you is [that] nobody is going to give you a deal where they pay upfront money without a contract or minimum unless they are scamming you or they are complete idiots.
"So, if you're asking, 'Is there a catch?' The answer is yes, there is a catch, probably several of them. If you're asking, 'Is there anyone who will do this without a catch?' The answer is no; they'd have to be idiots to do what you're asking without a catch. Stop thinking about what you get for a second, and think logically about what [your partner] gets out of the equation.
"Now that you've thought about it, do you see the flaw in what you're asking for? There are no free rides in this business. I know that you are new and just trying to learn, but everyone is trying to help you, and you keep saying, 'I've already found one.'
"You found one that will do the deal, but you haven't found one that will do it without a catch, and you won't. It just doesn't make sense financially and at the end of the day."
GMARTIN followed up, writing, "You've gotten quite a few responses from seasoned experts in our field. Yet you don't want to hear those responses and opinions.
"You sound like a lot of merchants that I deal with that have been burned a number of times by processors because they will only sign with the agent that tells them what they want to hear - no matter if there is any truth to the statements or not. Then they complain about being burned.
"Take the comments above and learn from them. If you want only comments that will tell you what you want to hear, with no catches, from a company that will do right by you, this thread will [have no responses]."
DEE MALIK acknowledged that DPPGK, the original poster, joined the forum in February 2012 and that this was DPPGK's first post. He noted, "As an ISA/MLS, I would be a bit leery if the ISO or ISO/processor didn't have some restrictions including clawbacks (the taking back of payments) in regards to the program that you are seeking.
"What other restrictions to such a program would you agree to? Your post looks like ... you want the bacon (pork) without the fat. Yes, I have seen such a program but they have restrictions which would include clawbacks.
"Frankly, if they didn't have restrictions, then I would be leery of trusting them for the long-term. Of course, you may not be interested in the long-term, and maybe the ISO or ISO rep may not be interested in the long-term. In that case, it is a perfect marriage. However, if you make this kind of post, it looks like you want free candy. In fact, it looks like you only eat Godiva chocolates."
COACH BOB focused on the topic of partnerships. "You may not be familiar with this concept, but I will throw it out there anyway. If you don't understand the concept, maybe someone else can explain. I run my business (First Data ISO, Capitol Payment Systems Inc.) on a groundbreaking concept we like to call 'partnerships.' We try to build programs on an individual basis to fit our partners' needs and their markets. Odd but true.
"So let's say I looked at this and ran the numbers and thought [that] with the right partner - and it would need to be a very special person - I could make it work. So in this imaginary partnership, and it is very imaginary, you forgot to mention what you bring to the relationship.
"What do you offer? Why would anyone want to offer you this? What is your business plan to make this work for all parties long term.? How does it become win/win for all and not just a selfish one-sided hit and run?
"We have heard that you want money upfront for merchants that could seemingly leave tomorrow. So what is your concept to protect and help your new partner? Surprisingly, most ISOs/MSPs are pretty smart people with a formula of their own."
JOHN GALT and I also discussed the topic of monthly minimums. I suggested a $25 monthly minimum would be eliminated at $1,470 in credit card sales a month at a qualified rate of 1.70 percent. JOHN GALT followed up, mentioning that some ISOs base the monthly minimum on profit, not fees.
I have only seen a minimum profit charge where merchants had interchange-plus pricing. At 50 basis points, this would require about $7,000 in monthly sales.
The basic moral we were trying to express was that monthly minimums are not an issue when agents target merchants that process more than the very small merchants that many MLSs will target.
COACH BOB made some great points. Long-term partnerships are forged when both partners flourish. As a brand new member of the MLS Forum, it is likely DPPGK simply does not have the experience to realize the type of relationship DPPGK seeks will not work.
If such a program were available, it surely would be abused by MLSs experienced in churning accounts. Churning is when a rep continually moves a merchant from processor to processor for per-contract bonuses and leases. Churning can be done either by misleading the merchant or by fraudulently reusing information and signatures on multiple applications.
Offering a program where there are no monthly minimums, no merchant contracts, "free" terminals, a $200 to $300 contract bonus and no strings would be a great way to bankrupt your company. How can you afford to pay contract bonuses when you have no guarantee of ever making a profit with this program?
My suggestion to all MLSs is to look for programs in which both partners make money. If your partner made 99 percent of the available profit, how long would you stay with that processor? So why do you think you should be given money if the ISO/processor has no guarantee of making money?
An agent can make decent money by selling terminals and reasonably pricing accounts. Concentrate on making residuals over the long term. Focusing solely on what you can get with no regard for your partner's well being will result in the same thing as it would with a romantic partner: a quick split.
Long-term profitability in this industry requires that you remember your partner.
What you do today determines your tomorrow.
Bill Pirtle is the President of C3ET Credit Card Consortia for Education & Training Inc., a joint venture with Theodore Svoronos of Merchant University. Created to establish a comprehensive training program for ISOs and merchant level salespeople, C3ET is working with industry experts to produce a training guide to be published in early 2012. Bill's email address is firstname.lastname@example.org. He welcomes all connections on Facebook and LinkedIn.
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