By Tom Byrnes
LedgerPay
If you're an ISO or a merchant, one of the necessary elements of the business you're in is a relationship with a payment processor. While the rest of the technology landscape has shifted to cloud-based platforms over the last decade, processors have clung to their legacy stacks and operated in much the same way they have for the last 30-plus years.
It's easy to see why. Good economic times or bad, payment processing continues to be profitable. People and institutions still need to move money around, and processors sit at the nexus of a global constellation of the financial players who facilitate those transfers. Basically, if you're in the payment processing business, the rule of thumb comes down to that old adage: If it isn't broken, why fix it? But if you are an ISO, that may not be what you want to hear.
Although they are reliable, the design of most processing stacks creates a host of day-to-day business challenges for ISOs of all sizes. The biggest of these is the ripple effects of a non-standard architecture model. Many processors have multiple platforms, any number of which may not be compatible.
This makes cross-platform communication difficult at best, a feature that surfaces as different requirements for everything from bank sponsorships to POS integrations. Plus, it requires ISOs to learn and manage separate systems and interfaces, increasing expense and risk, while making it difficult to integrate into other service providers. Since no clear standard for onboarding exists, every processor also mandates a different process, and that makes it difficult to efficiently board and manage merchants.
The biggest issue for ISOs may be the ability to access and manage merchant data. Since you get paid based on merchant transactions, having timely, accurate data is the lifeblood of your business. Yet if you want to have a merchant report or data feed directly into an ERP system, it's highly unlikely that you can get that data when and how you want it.
Typically, you will get a package of summarized reports that the processor will issue when they choose to issue it—not when you need or want it. If you require a different flow or format to improve your operations, that becomes a "custom request" that entails extra fees and an extended delivery time.
In contrast to this, cloud computing has been around for approximately two decades, and there are reams of data pointing to the business efficiencies, cost-benefits, added security and competitive advantages it holds. According to a recent study by the International Data Group, 69 percent of businesses are already using cloud technology in one capacity or another, and 18 percent say they plan to implement cloud-computing solutions at some point.
Having a cloud-based processor means you get to take advantage of all of the latest advances in technology, and this can have a huge impact on an ISO's back-office operations. Since it's based on a unified architecture, incompatibility issues vanish. The same is true with setting and managing merchant pricing. This has traditionally been obscured by legacy processors using arcane codes that can lead to misinterpretation and result in unforeseen effects on actual pricing on merchants that you might not see at the end of the month.
In addition to being faster, easier to scale due to a lack of data centers, and customizable, a cloud-based platform lets merchants enjoy increased payment flexibility by being able to accept mobile payments, online and counter-top payments through a single integrated POS system. It also represents a major breakthrough in data accessibility and transparency. Getting reports and changing pricing on a merchant portfolio can now be done in real time, and any form of data can be exported into an in-house CRM, ERP or accounting system—minus the service requests and extra fees.
Beyond this, the cloud is capable of supporting a number of automated management tools that ISOs depend on every day. Things like automated agent residuals, chargeback reconciliation and calculating agent residuals so they can be paid on a daily basis can all streamline operational overhead. This attracts a better team of agents while allowing ISOs to excel at what they do best: selling more merchant accounts!
Tom Byrnes is vice president of marketing for LedgerPay. You can reach him by email at Tom.Byrnes@quisitive.com.
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