The Green Sheet Online Edition
January 28, 2013 • Issue 13:01:02
Working directly with an acquiring bank
Can you please direct me toward some resources on cost and process for starting a merchant processing company? Not just an ISO/MSP [member service provider] but working directly with an acquiring bank.
Halo Merchant Services
We referred your question to Andy Meadows, Vice President, Sales at SignaPay Ltd. He provided the following response:
There are really two parts to this discussion. The first is registration with the card companies (Visa Inc. and MasterCard Worldwide). Any payment processing organization that wants to market its unique brand must register with the card brands in order to do so.
From a high-level perspective, the upfront cost associated with registration is approximately $15,000. Then there is a recurring annual cost of approximately $7,500 to maintain registration every year thereafter.
There may be some other arbitrary costs associated with the registration process, but those are usually nominal. This is, in essence, your 'ticket to the dance.'
The second piece of this discussion, based upon the specific mention of wanting to be 'Not just an ISO/MSP but working directly with an acquiring bank' is obtaining a sponsor bank relationship.
This relationship provides a payment processing company with its own unique bank identification number (BIN) in which to board its merchant accounts under.
Certain strategic advantages such as portability of the portfolio and enhanced reporting differentiation from the front-end and back-end processing platforms come along with this relationship.
However, so do additional responsibilities such as an increased budget for marketing and customer service, as well as full liability on the merchant portfolio.
With this, there is an intensive application and approval process that a sponsor bank would require. The payment processing company would have to provide extensive information on the business history, full financial disclosure, personal information on the business owners, etc.
At this point, reserve accounts will more than likely be required. This is where the bulk of upfront capital will come into play for the sponsor bank relationship.
Furthermore, it's common that a processor has a sponsor bank for the credit card processing portion of their portfolio, as well as a separate sponsor bank for the debit card processing side of their business.
Ongoing costs for these two separate relationships will likely vary.
For more detailed information and discussions, please feel free to call me at 800-944-1399, ext. 5540. I'm always happy to provide a deeper dive into this, and any other, topic.
Thank you, Andy, for providing such a detailed, illuminating answer to this question. And thank you, Jax, for opening a conversation about a topic of interest to many payment professionals seeking to grow their businesses.
Notes of appreciation
In an email message to Staff Writer Ann Train, Chris DuPont, Merchant Account Analyst at Merchant Statement Analysis, wrote, "I appreciate the way you encapsulated all the points we discussed into a fast moving piece."
This was for the Merchant Statement Analysis company profile titled "Better approach to statement analysis," The Green Sheet, Jan. 14, 2013, issue 13:01:01.
This profile, and others published within the last three years, can be accessed at www.greensheet.com/company_profiles.php.
Ruston Miles, Senior Vice President & General Manager, E-Commerce Division at Bluefin Payment Systems, recently commented on "Secrets of the Inc. honorees," The Green Sheet, Nov. 26, 2012, issue 12:11:02, as follows:
I recently read a great article from November on Inc. 500/5000 payments industry companies and wanted to point out that Bluefin Payment Systems was No. 6 overall on the Inc. 500.
I understand that the list wasn't meant to be exhaustive, but having two ISOs in the top 10 is even stronger for the point the article is making. In case we weren't on your radar, I just wanted to let you know who we are.
We were only able to include perspectives from a cross-section of honorees in the article, but we did publish a list of payment companies on the Inc. 500/5000 list on Dec. 24, 2012, in issue 12:12:02.
It is in our online archives at www.greensheet.com/emagazine.php?story_id=3382.
Many thanks to both Chris and Ruston for getting in touch with us.
Notice to readers: These are archived articles. Contact names or information may be out of date. We regret any inconvenience.