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Table of Contents

Lead Story

MLS certification: Boon or bane?


Industry Update

Prepaid cards make for big stored value - Part II

KKR can't resist First Data 'cash-flow machine'


In the words of John Shepherd-Barron, the ATM's creator

John Shepherd-Barron

MAC: The friendly fraudbusters


TJX turbulence: Time to board the PCI ship

Patti Murphy
The Takoma Group

Paying the payments dues

Ken Musante
Humboldt Merchant Services

Apple is a small potato here

Ben Goretsky
USA ePay


Street SmartsSM:
Proficient prospecting

Dee Karawadra
Impact PaySystem

The concern du jour? PCI

Ross Federgreen

The ABCs of portfolio sales

Adam Atlas
Attorney at Law

Anyone up for a chat?

Joel and Rachael Rydbeck
Nubrek Inc.

A blue route to green pastures

Biff Matthews
CardWare International

Company Profile

National Bankcard Systems

New Products

ET: Phone home via ATMConnect

Hypercom Corp.

ISOs' secret interchange weapon

Planet Financial Services


Sales stars are people stars



Resource Guide


A Bigger Thing

The Green Sheet Online Edition

April 23, 2007  •  Issue 07:04:02

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Paying the payments dues

By Ken Musante

Every industry has barriers to entry. In banking, for example, a new financial institution's board of directors and charter must be approved by governmental agencies. There are also ongoing compliance requirements, including the level of capital necessary to remain in business.

Consequently, even a company as powerful as Wal-Mart Stores Inc. can be effectively shut out of the banking industry. (It recently backed out of an attempt to enter U.S. banking.)

Another substantial entry bar is certification or accreditation. No one can simply decide to become a doctor and set up a medical office on the spot. The profession requires advanced and specialized education along with certification.

Other businesses have far fewer initial hoops to navigate. For example, multilevel marketing companies that sell such wares as jewelry, food containers, make-up and nutritional supplements have among the lowest barriers to entry.

There is little or no capital investment. No college degrees or long-term advance planning are required (although the jobs themselves entail substantial planning). One can literally become a distributor within a couple of hours.

Escalating entry requirements

Until recently, it was much the same for people entering the payments industry. Over the past several years, however, the barriers to entry in the merchant processing space have grown rapidly and become more numerous.

We have always had regulatory hurdles. And Visa U.S.A. and MasterCard Worldwide sponsorship will continue to be an obstacle for many.

Sales professionals need to understand and comply with card Association rules and adapt to them as they are updated. More recently, this reality has been reinforced and expanded.

The danger caused by card breaches has led to enhanced scrutiny. There is now a greater chance that merchants, ISOs, agents and processors that are not compliant with all card Association rules and regulations will be fined.

Additionally, banks are performing ever more diligence and requiring greater revenue for sponsorship. Certainly, regulatory muscle has been widened and strengthened.Also, the capital needed to enter our industry has been transformed from a Louisiana levy to the Hoover Dam. In the past, merchant level salespeople (MLSs) could start out with no money.

Today, leases (and the working cash they provide) are far less prevalent. New sales professionals must have a capital reserve sufficient to carry them financially until their residuals accrue to a level where they provide a livable income.

The third barrier is knowledge. This hurdle has expanded faster than the first two. Just a few years ago a sales professional needed only to understand dial-up terminals and a couple of interchange tiers.

Today sales professionals must be advanced technicians. They must:

Moreover, each communications method has an ever expanding array of hardware and software to master.Interchange has always been complex. Today it could baffle two-thirds of Mensa International's members.

Unique interchange programs have been installed for our largest retailers, small-ticket retailers, municipalities, utilities, Internet merchants, supermarkets, warehouse merchants, cash advance merchants, petroleum resellers, and travel and entertainment merchants.

This is in addition to the myriad rates based on card types: Unique programs exist for debit, rewards/premium, corporate, business and prepaid cards. These are in addition to all the other expanding payment forms.

Challenge = opportunity

These stiffer regulatory, capital and knowledge requirements mean becoming an MLS today is more challenging than when most of us started in the payments industry. Recognize, too, that profit margins are thinner, and competition is tougher.

But before you get depressed, remember that nearly every problem is also an opportunity. Much of what I've discussed in this article may actually be good news. Stay tuned; I will explain why _ in my next article.

Ken Musante is President of Humboldt Merchant Services. Contact him by e-mail at or by phone at 707-269-3200.

Notice to readers: These are archived articles. Contact names or information may be out of date. We regret any inconvenience.

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