The Green Sheet Online Edition
April 23, 2007 • Issue 07:04:02
MLS certification: Boon or bane?
The topic has been debated for years: Is agent certification or licensing a silver bullet? Will it rid the payment processing industry of unethical practices and errors caused by lack of proper training? Or is it a potential bureaucratic tar baby?
Proponents of certification make several points when stating their case:
- The payments industry is an anomaly in the financial services world. It doesn't certify merchant level salespeople (MLSs), yet its members have access to large amounts of very sensitive information.
- A few bad apples have stained the reputation of the industry. Certification could polish the industry's image.
- A certification program would make it more difficult for the dishonest to prosper or go unnoticed.
- Being certified could score marketing points for both MLSs and their ISOs.
- If the industry doesn't self-regulate, the government may step in and regulate for us _ with less understanding of the industry and how it works.
Opponents say the industry needs less regulation, not more. Following is their rationale:
- Certification programs that are not regulated by the government have no teeth, and thus could be meaningless.
- The very idea of certification is, by nature, anti-capitalistic.
- New MLSs already go months without income. Requiring a longer training period _ and quite possibly an expensive training program _ before they can make deals will keep talented salespeople from entering the field.
- No organization, other than the government, has enough clout in this industry to pull off such a program.
So, the controversy goes on. The vision of a comprehensive system for sharing best practices and mitigating problems still shines. But no organizing body has officially stepped forward to tackle this sticky behemoth.
NAOPP steps up
However, the National Association of Payment Professionals has begun researching the development of a certification program.
Under the direction of NAOPP Vice President Craig Lesser, the organization has discussed specific details to include in the program, investigated alternatives available to assist with administration and researched some of the legal issues involved.
"In 2003, when NAOPP was formed, the original members wanted to create an organization to serve the needs of the MLS and to serve the industry as a whole," said Vicki M. Daughdrill, NAOPP's Executive Director.
"They felt there was a need for a source for education to advance the quality and professionalism of individuals engaged in the payment processing industry," she added. "Certification is the logical outcome of an established education and testing program."
Creating a program that can train MLSs in the best practices of all facets of a business as complicated as ours is a gargantuan challenge. Ironing out administrative details is a daunting task.
So is addressing potential legal ramifications such a program could have on the certifying organization.
A program of this scope could also prove to be expensive. If costs were recouped through the applicants, certification fees could be perceived as too burdensome for novice MLSs and too large and unnecessary for established, successful ISOs and MLSs (assuming licensing was not required).
"Without there being any way to regulate certification and, after certification, issues, it is a worthless piece of paper for someone to have," said Allen Kopelman, Chief Executive Officer of Nationwide Payment Systems.
"If it was recognized by the National Restaurant Association or the National Retail [Federation] or other business associations, then it would mean something," he added.
"The MLS would want to have it because the members of these associations would advertise that you should only get merchant accounts from certified salespeople."
Although no one, as yet, has completed a cost analysis, some theorize that no organization in this industry has pockets deep enough to take on the costs and liabilities of a certification program.
A compelling argument for certification is that all ISOs and MLSs suffer because some merchants perceive the payments industry to be lacking in integrity. Although the vast majority of MLSs are honest, many feel they have been contaminated by the actions of the few who are not.
A good reputation can be damaged with remarkable speed; a sullied reputation can take years to overcome.
Other businesses have also been tainted by the actions of an unscrupulous few: Used car salespeople and lawyers come to mind. But corrupt ISOs and MLSs can have a lasting effect on their victims' livelihoods.
If a merchant catches one rep in a lie _ or even suspects a lie or exaggeration _ this can taint the merchant's relationships with all MLSs for years. So, negative perceptions in the merchant community can be deep-seated and even irrational.
Like choosing a cell phone provider, selecting a payment processor can be very difficult: Apples to apples comparisons can rarely be done because payment options, fees and even interchange rates may vary considerably.
Add the various features and requirements of payment processing technology, and it is easy to see why busy merchants often sense they don't fully understand what they are purchasing.
When merchants hire lawyers, they may eye their bills carefully. But they assume their lawyers are working on their behalf. Also, most merchants need to consult attorneys only occasionally.
Merchants assume their dealings with MLSs are inherently risky. Purchasing mistakes pertaining to payment processing are often hard to detect and can thus affect retailers' businesses indefinitely.
Also, merchants do not view MLSs as working for them. They sometimes suspect MLSs are not being truthful. And for retail and hospitality merchants in particular, going without processing is not a viable option.
So merchants feel trapped into purchasing something they don't fully understand from people they don't totally trust.
Fast Transact Inc. President Anna Solomon said, "With the recent security breaches of a major ISO, with T.J. Maxx stores and others that may not have made it to the news, merchants are losing confidence in the industry as a whole.
"Chargebacks are on the rise; identity theft is increasing; and bankruptcy is rampant. The issuing banks have driven debt financing to the max, and the government is now looking into regulating the issuing side. It won't take long to find the acquiring side in the same boat if we don't take the necessary steps to self-regulate."
To combat this problem, the Electronic Transactions Association approved in January 2006 the ETA Code of Conduct.
The code promotes ethical conduct as follows: "ETA members shall not place their needs and desires above those of the merchant in the performance and work for that merchant" and "will treat colleagues and competitors with respect, regardless of race, religion, disability, age or national origin."
The Code further states that all ETA members will "take affirmative steps to comply with all industry [security] standards ... and immediately notify the proper authorities and the proper industry personnel should they suspect a compromise or breach in security protocols."
But some critics have said that the code is too general to be enforced. This would be true, they say, even if the ETA had an enforcement arm in place and a more effective deterrent to dishonest behavior than simply canceling the offending party's ETA membership.
Helping the ISO
Solomon believes MLS certification would aid agent recruitment and help ISOs prevent hiring disasters: "We run background checks on all of our employees," she said.
"Considering the confidential personal information they have to handle, we want to make sure that it is protected the minute it leaves a merchant's hand.
"A few months back we had a rep apply to us. We ran a background check: outstanding warrant for arrest, wire fraud, collections and liens up the ying yang, changed location every six months.
"This is a nightmare waiting to happen. What amazed me was he was already an agent for someone else and was looking for a new home and probably found it."
Solomon also favors ISO certification. "That would include a review of their internal systems on how they store the information received from a merchant," she said. "All employees would have background checks so that internal fraud would be at a minimum risk.
"It would include a check that only licensed MLSs are representing them."
In the long run, she added, both ISO and MLS certification would be beneficial to ISOs.
She noted that certification would reduce the number of unqualified MLSs harassing merchants, create more trust and less competition, and raise margins because competing on price alone would no longer be necessary.
Certification would also lessen the chance of fraud, and it would reduce the likelihood of government intervention.
Elevating the MLS
Like ISOs, MLSs could benefit from certification: The number of unqualified and dishonest reps spreading false information would be reduced.
"Every day it seems we run into a merchant who has been misled or outright lied to," Solomon said. "Is it poor training or just outright taking advantage of a merchant?
"For example, last week we were competing with another provider for an account, and the other MLS told the merchant that Visa was shutting us down in 90 days because we were not compliant.
"And then we wonder what is wrong with this industry!
"There are MLSs out there telling merchants that their current processor is ripping them off, taking advantage of them because they are a minority. It is unbelievable what some MLSs will say to get the account."
Certified MLSs would have a competitive edge over their noncertified counterparts in dealings with ISOs as well as merchants.
And certification could transform interactions between MLSs and their merchant clients from adversarial to consultative. Agent certification could help merchants see MLSs as more than salespeople.
Certified MLSs might be better recognized as having a body of specialized knowledge that could be tapped _ much like accountants, real estate agents or lawyers.
"While many would like to remain in denial and feel that regulation would be anti-capitalistic, we are spiraling downward because of some bad-apple ISO practices," Solomon said.
"I truly believe that if we work together to create the standards and uphold each other in maintaining them, we can continue to flourish," she added. "If we don't, it will be done for us. The writing is on the wall."
Imagine, the fate of the payments industry could be resting in your hands.
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