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November 11, 2019 • Issue 19:11:01

Multiple ways to help merchants through natural disasters

By Patti Murphy

When a disaster hits – like a hurricane, flood or wildfire – everyone in the affected area suffers. But some suffer more than others. Business owners, in addition to dealing with the consequences for their homes and families, face the unenviable task of getting their shops back on line and recouping lost revenues.

This can be daunting. A 2018 survey by Visa revealed the cost of rebuilding a small business following a natural disaster can exceed $859,000. The Federal Emergency Management Administration estimates that 40 percent of small businesses never reopen after a disaster, and 25 percent of those that do reopen fail within a year, because revenue losses are too substantial to overcome.

In 2017 the United States experienced 16 natural disasters – hurricanes in the East, massive flooding in the Midwest and Southwest, and wildfires in the West among them – causing an estimated $306 billion in damages, according to the National Oceanic and Atmospheric Administration. Three hurricanes alone – Harvey, Irma and Maria – cost local economies on the U.S. mainland $265 billion, NOAA said. Adding damages from other mainland disasters and those sustained in Puerto Rico and the U.S. Virgin Islands brought the total to more than $500 billion.

A Federal Reserve report paints a stark picture of efforts by small businesses to rebound following these disasters, which were concentrated in nine states: North Carolina, South Carolina, Georgia, Florida, Michigan, Mississippi, Arkansas, Texas and California. The report revealed that small businesses in these states were hardest hit: 40 percent of small firms in the states studied reported losses due to natural disasters. Disasters struck small enterprises across the age and income spectrum, but Hispanic-owned businesses and those in the retail, leisure and hospitality sectors were hardest hit financially, the Fed reported.

Among affected businesses, 45 percent suffered asset losses up to $25,000, and 19 percent lost more than $25,000, according to the Fed. But foregone revenues, not assets, were the largest source of losses for small business. Sixty-one percent had revenue losses of up to $25,000 and 35 percent lost more than $25,000.

"Small businesses are primary drivers of job growth, and their ability to rebound from disasters is critical to regional economic recovery," said Claire Kramer Mills, assistant vice president at the New York Fed.

Samuel Storey, community development senior research analyst at the Federal Reserve Bank of Richmond, added, "This report shows that while small businesses experienced significant asset damages, their pain was doubly felt due to lost revenue and employment gains as well. Also, we found that certain communities were more vulnerable to experiencing natural disasters and suffering related losses."

Keeping revenue pumps primed

Acquirers, ISOs and merchant level salespeople (MLSs) can play pivotal roles helping small business minimize the impact disasters have on revenues. In 2017, when Hurricane Maria devastated Puerto Rico and much of the U.S. Virgin Islands, San Juan-based Dynamics Payments immediately went about helping local merchants get back to business. It worked out an agreement with CardFlight, which offers SwipeSimple, a turnkey mobile solution, waiving monthly and setup fees so merchants could start accepting card payments from supported mobile devices and web browsers once mobile networks were back on line.

In 2012, when Super Storm Sandy wreaked havoc along the East Coast, Simpay, a Philadelphia-based ISO known at the time as Alpha Card Services, had numerous affected clients. With many facing devastating blows to business, Simpay sprang into action helping clients to get up and running, and assuring them they didn't have to worry about paying for new hardware until their insurance claims were settled, stated Lazaros Kalemis, the company's founder and CEO.

"We didn't get paid for 14 weeks, but they were in business," Kalemis said. "We're building long term relationships, so we bend over backwards to help them. What we do to help really helps to attach them to us."

Max Miller, founder and CEO of Paybotic, said he's keeping a close eye on wildfires currently raging in California and problems those may create for clients. Paybotic, which specializes in serving high-risk merchants, counts as clients several cannabis dispensaries in the state.

"I anticipate some of our merchants will be affected," Miller said. "We can provide wireless terminals and mobile gateways. We'll be dispatching them as fast as we can." Help in the aftermath of disasters is especially important, and in some situations there are sufficient warnings to prepare for those eventualities.

"Obviously, when there's a big storm, like a hurricane, there's some advance warning," Kalemis said. "So we go through our database to see if we have any clients in areas expected to be impacted. We check what services they use, and we reach out to them." This outreach might include sending out credit card terminals (even old-fashioned knuckle busters), making alternative processing arrangements, even submitting client payrolls ahead of established ACH deadlines.

Kalemis related an example from earlier this year when a hurricane threatened the Florida panhandle. One of Simpay's clients, an open-air bar, was right in the path of the storm. "What we did was call them before the storm hit and told them to pack away their POS system and store it someplace where it couldn't get damaged," Kalemis said. "We sent out credit card terminals they could use instead, and told them we'd batch out the transactions on our end."

Then, once the storm passed, and merchants were open again, they could continue to use the terminals, and if necessary call in transaction data until electricity and cell service resumed in the region. Simpay will also suppress all billing to clients impacted by a disaster until the merchant informs Simpay that they're back on their feet, Kalemis noted.

Darren Schulman, president at 6th Avenue Capital, said his firm embraces a similar strategy with funding clients experiencing business interruptions due to natural disasters. "The first thing we do when a natural disaster hits is call them," he said.

But it's not just weather that gives merchants problems. "Sometimes, it's because the business is inaccessible," Schulman said, perhaps because of road construction out front. "When we know about things like that [because they call to tell us] we give them a delay or lower their payments," he said. "We're there, helping them in the good times. We have to be there when things are bad, too."

Taking a multifaceted approach

Mary Uslander, senior vice president at First Data Corp., now Fiserv, described the acquirer's strategy for dealing with disasters as multipronged, entailing not only outreach to clients before and after an event, but ensuring support staff potentially in the path of an oncoming event are safe and available to help clients in the aftermath. It also hosts an emergency preparedness web page, with checklists.

The company actively monitors clients, identifying by ZIP code any that might be affected by an impending disaster, and uploads those client's merchant IDs to its interactive voice response system. When a call comes in from one of those clients it gets routed to the front of the queue for immediate help.

"We're constantly updating our data" based on input from NOAA and FEMA, and dispatching support personnel to affected areas, Uslander said. "We have a multipronged approach to getting ready and to working with local communities on the ground."

First Data houses an operations center in Coral Springs, Fla., which was in the path of several powerful hurricanes in late summer 2017, including Hurricane Irma, which made history as the most powerful Atlantic hurricane ever recorded. "We had our people pack up and caravan north" to offices that would be spared damages, Uslander related. "We were able to get them fully functional so they could work to support our merchants."

Disasters like Hurricanes Harvey (which impacted Louisiana and East Texas) and Irma in 2017 represented a turning point of sorts for First Data. "That was a really tough summer, and we saw it as an opportunity to put in place procedures and approaches to helping clients" impacted by disasters, she said. "Now we have a playbook. There are a lot of different things we can do depending upon the situation and the severity of the disaster."

Like many other merchant services companies, First Data maintains close contact with NOAA, FEMA and local agencies to stay abreast of impending disasters, like hurricanes, and begins client outreach as early as possible. "We tell them 'we know this is coming, and you may not be impacted, but in case you are, you should follow these best practices,'" Uslander said. "We try to be as proactive as we can to help small business merchants get up and running again." In some cases, First Data will even waive some fees for impacted merchants.

In the early days, being at the ready for First Data entailed setting up shop in temporary quarters in disaster zones. "We actually had a Clover van going out into communities and handing out devices," Uslander said. "We distributed them to existing clients and to non-customers and offered to sign up [those businesses] for merchant accounts."

Back in 2017, the payment devices de jour were dongles and Bluetooth devices, but now the preferred approach is to provide virtual terminal capabilities. Clients using Clover terminals can go online and log into their Clover dashboards and manually key in card numbers. Merchants can also purchase Clover Go from any Apple app store that works with any mobile device to support contactless or swiped card transactions. Clients without Clover devices can be provided links to enable online payment acceptance, Uslander said.

Planning is key

Whether you're an acquirer, ISO or MLS selling merchant services, preparedness is the best strategy for dealing with disaster situations in your own shop as well as at customer locations. Here are suggestions for what to consider.

  • Develop contingency plans and checklists of what to do when faced with the threat of disasters. Action plans should include unplugging and packing up office equipment and supplies, and getting them to safe spaces ahead of an impending disaster, and advising merchants to do the same with their POS equipment. Merchants should also close any open batches. Backups are important. Back up all customer files to the cloud, and advise merchant clients to do the same. Document procedures and cross-train employees so, for example, when customer service reps are knocked out of commission by a disaster other workers can step in and pick-up the workload.
  • Make copies of critical documents and store the originals in off-site locations. Ditto for licenses, software and licensing information.
  • Invest in emergency generators and/or uninterruptible power supply systems, and consider advising clients to do the same. These can keep a business operational long enough to safely shut down computers, POS devices and other electronics.
  • Have replacement equipment – mobile POS devices or even knuckle busters – at the ready for clients to use when electricity is cut off to affected areas. Make plans for off-site working arrangements for staff, if necessary.
  • Keep open lines of communications with NOAA, emergency management agencies and local utilities concerning storms, wildfires and other disasters. Take proactive steps to know which clients might be impacted and let them know how to get in touch. This should be an ongoing process from the lead up to through the aftermath of a disaster.
  • Run practice drills to ensure your plans are considered and workable.

end of article

Patti Murphy is senior editor at The Green Sheet and president of ProScribes Inc. Follow her on Twitter @GS_PayMaven.

The Green Sheet Inc. is now a proud affiliate of Bankcard Life, a premier community that provides industry-leading training and resources for payment professionals. Click here for more information.

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