By Bill Pirtle
When you work as a merchant level salesperson (MLS), your ISO's risk department will reject the occasional account. Agents often lament these rejections. The job of the risk or underwriting department (Risk) is to protect the acquirer, and ISO, from loss. Things they evaluate include volume, average ticket, chargeback history, credit score and seasonal sales cycles.
Let's say you sign a restaurant in June. You have three months of statements and determine the average ticket is about $150 with highs of $2,000. The average per day is about $5,000, which is $150,000 per month. In November, Risk notes volume, average tickets and highs are increasing. Then, fearing fraud, Risk places a hold on the account after a weekend with three $20,000 transactions. The restaurant, assuming it is still being paid, continues to accept large-dollar transactions. A week after the first such transaction, the restaurant realizes it is bouncing checks to suppliers and employees. By early December, the restaurant goes under.
So, what happened? The MLS failed to ask the restaurateur about seasonal sales increases. Several regulars threw their work Christmas/holiday parties at the restaurant – 200 people with open bar. Risk didn't know about the seasonal parties and reacted to protect the processor. Agents have a choice. They can whine about perceived lost residuals or they can work with Risk to provide complete information, whether it results in an application's rejection or approval.
Risk bases decisions on information it has on hand. If an agent works to understand, gather and share the information Risk needs promptly, rejections or holds can be avoided.
Risk is not the enemy. Don't play games to help businesses attain approval. MLSs looking only at the short-term goal of new residuals open their ISOs to the possibility of severe losses – and their own loss of complete residual streams.
I recently helped an agent close a roofing company. We showed the company how to improve volume and average ticket with an invoicing solution for commercial clients to get money in days rather than months. The day I installed the merchant, my agent forwarded an email from Risk, which imposed a hold because the merchant's first transaction was almost $20,000.
I immediately emailed the marketing materials, application, and three statements submitted for the merchant, along with a list of recommendations to the merchant to increase transactions and volume. The following morning, I was thanked for the response time and depth of information, and was told the hold was pulled.
Agents love $20,000 transactions and $5 million in volume. These transactions cause concern for ISOs and Risk. Say the agent charged 50 basis points profit. The total profit on the transaction would be $100. If the MLS makes 70 percent, the earnings for the ISO would be $30 for a $20,000 transaction. What happens if the transaction is fraudulent? What if the merchant did 10 or 100 such transactions before fraud was detected? If a merchant cannot repay this, the ISO is on the hook.
Ask merchants good questions. Ask about seasonal sales and things your ISO requests. If you observe something troubling, mention this on the application. Promptly reply to Risk's requests. Give more information than requested if you know it.
Once your ISO and Risk know you are thorough and will provide information knowing it might cause them to reject an application, you'll have their trust, which can mean the difference between a no on an application and being contacted for additional information that can get the merchant approved.
Recently, I received a call from an underwriter who informed me a million-dollar client I'd signed showed a tax lien. I found out the tax was paid and got the merchant to send in the receipts. The underwriter could have emailed me, and it could have taken days longer to resolve. But the underwriter knew I liked to be thorough and complete.
Next time you hear from Risk, treat it as an opportunity to preserve your residual stream and a chance to build trust and goodwill for future applications.
Bill Pirtle is the author of the training book Credit Card Processing for Sales Agents. He is the district manager for Clearent in the Detroit/Ann Arbor/Toledo market. His email is firstname.lastname@example.org. He can also be reached at 248-444-8009 or on LinkedIn.
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