By Alex Nouri
The transaction processing industry is fragmented and (unfortunately) unregulated. To minimize pitfalls, a merchant level salesperson should be diligent in evaluating new business relationships. This article offers advice and specific questions to pose when researching a potential partner.
First, google for reviews about the company, determine who the owners are and gather complete background information. Next, evaluate the company's phone system. Some well-advertised businesses are nothing more than one-man operations. Call tech support a few times. If the hold time is always very long, more than five minutes, find out why. Be leery of long hold times.
Determine whether underwriting, tech support, customer service, deployment and risk management are in-house or outsourced. Don't sign up with one whose departments are all outsourced because service will suffer drastically. Ask whether tech support staff builds files or whether a different group does it. If it's the latter, that's a red flag because the file-building staff leave at the end of the business day, and you or your merchants may have no one to build files after hours if need be.
If calls are routed to the platform's tech support in the evening, ask if they have access to the file, meaning they host or share the file with the acquirer and can build new files or modify existing ones. If the answer is no, do not develop this relationship.
The acquirer may save pennies per month by hosting files on its own server and not giving the platform provider full access, thereby resulting in limited access to the file by the platform's tech support staff. This will cause many headaches if and when you need service on the evenings or weekends. The result could be disastrous for you and your merchants. A capable, responsive acquirer cross trains its in-house tech support staff and makes sure the after-hours tech support providers have full access to files.
Call the company's customer service department a few times to determine the hold time. Ask whether changes to files must be faxed or whether you can call or email them. Faxing is archaic and inefficient. Find out if reps will respond to your emails and within how much time. Do they honor requests for refunds to merchants immediately and ACH the funds within 24 to 48 hours? If not, consider this a red flag. The earlier merchants receive refunds, the happier they are, which enhances both their perceptions of your customer service and your retention rate.
Determine whether the company has an agent support staff for customer service issues and how big it is. Ask whether the staff responds immediately or whether you have to wait for hours, or even 24 hours. The more immediate, the better. Receiving a response and resolution in less than 45 minutes should be the norm. Also, ask if the acquirer can send you a real-time, automated email if you or your merchants call tech support, customer service, deployment, marketing or risk management.
Having immediate access to information about your merchants' needs and calls is crucial. You can place follow-up calls to merchants, who will appreciate your concern and hands-on approach. This will increase merchants' trust in you, reinforce your bonds and increase your retention rate. This will also differentiate you from your competition.
A number of the largest acquirers use legacy systems incapable of easy modifications and are thus inherently unable to generate follow-up support emails. And they have no plans to make changes anytime soon. Such inflexibility stifles competition, creativity and innovation, resulting in inefficiencies that can lead to significant financial losses. Remember, there's no direct correlation between company size and competence or capability.
Ask for samples of real-time emails from all departments, including shipping. Find out whether these departments can communicate with one another or whether they are just disconnected bubbles in a vacuum.
Ask how many platforms for authorization the acquirer uses. The more platforms, the better. If the company uses only one or its own proprietary platform, consider that a disadvantage.
What are the rates and fees to you? Many acquirers massage the data, particularly on transaction fees. For example, a company's true transaction fee may be just 1 to 2 cents or even below one penny on interchange plus, but it may mark it up to 5 to 8 cents as cost to you. Ask for the lowest transaction cost possible and for raw data. If an acquirer has nothing to lose, it should have no problem being transparent.
Ask for the company's policy and pricing on Payment Card Industry Data Security Standard compliance certification. Is it provided in-house or outsourced? Does it offer data breach insurance and for how much? Can you share in these fees? Depending on your position in the industry, you may be able to offer protection directly through a provider with insurance up to $100,000, and mark it up to $30 per month as "life insurance" for the business, thereby increasing your bottom line.
How long does it take for underwriting and approval of low-risk retail and restaurant merchants and for the files to be built? It could take from 20 minutes to 48 hours – an eternity! Less time means the acquirer is very efficient, which means more money in your pocket. Your focus should be on sales; you shouldn't have to wait days for a less capable partner to prepare your files.
Also, will the business ship you welcome kits if you want to handle account installation? Merchants often misplace welcome kits shipped directly to them. Showing up for an installation and not finding the kits will cost you doubly in wasted time.
Request a sample agent agreement that hasn't already been filled out. The pricing section is important: the more flexibility you have for mark-ups, the better. If you cannot markup mid-qualified and non-qualified categories, do not sign up because that will lower your profit margin by up to a whopping 25 percent. For assistance on negotiating an agent agreement, read my prior article in The Green Sheet at www.greensheet.com/emagazine.php?story_id=4046.
View a sample merchant statement. Require that all interchange categories be listed. Pay attention to the first few pages, and see if it's easy to add or subtract the transaction volume amounts for different card brands. The easier the numbers are to work with, the more time you will save and the happier your merchants will be. Merchants want simplicity in their statements.
Ask for a sample agent residual report and for a webinar demonstrating the agent portal. Residual reports should provide many details all on one page, not one page per merchant. The former will save you a lot of time when comparing a given month's reports to your expectations. Also, are you able to assign different access levels to agents under you – that is, view merchants only (useful when signing up an association that doesn't need to view its members' transactions), view all transactions, change merchants' info, etc.
Determine whether the agent portal posts and updates in real-time information on retrieval requests and chargebacks. And ask for a webinar of the merchant transaction processing portal. Are transactions posted in real time? How user friendly is it? Was it created in-house or is it a private-labeled solution? If it's the latter, it may be more difficult to improve upon without incurring unreasonable extra costs, which often means stagnation. Partner with a company that has a progressive, aggressive attitude on technology utilization. Flexibility and innovation Ask whether you can pay for equipment orders via your residual commissions. Does the company have a PIN pad swap program, and what is the cost? What's the encryption cost? When will you receive your residual commissions? The earlier, the better. Make sure the agent contract states it, too. Does the company offer a POS system? If yes, how good is it? Will you have to sacrifice a percentage of your residuals for it?
Also, determine if the company has ongoing new and future special services planned, or whether it's just another company processing transactions.
I hope this article gives you an insider's view into the acquiring world and helps you understand the value of making investments and improvements in technology, processes, human capital, and training and cross training – all of which result in greater efficiency and profitability.
Alex Nouri has been the President of EFT Direct, an acquiring and consulting firm based in Ann Arbor, Mich., since 2000. He is the author of two imminent books on the subjects of helping merchants as well as helping all echelons of the transaction processing industry make better decisions and streamline their operations by becoming more efficient, reach greater profitability, and prepare for future. He can be reached at email@example.com and via phone at 734-477-7700.
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