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The Green Sheet Online Edition

May 12, 2008 • Issue 08:05:01

No foundation, no success

By Jeff Fortney
Clearent LLC

What do I need to know to be successful? is an important question often asked by new merchant level salespeople (MLSs), as well as industry veterans who are not seeing the financial results they anticipated. It is all too common in the payments industry for ISOs to give new MLSs cursory training and a sales book, then tell them to hit the streets. They start knocking on merchants' doors and find limited, if any, success - mainly due to their lack of industry knowledge.

New MLSs quickly realize they need additional information to be successful. But this often leads them to the wrong information, which does not help them address the most important issues and needs of the merchants they are approaching.

And this can lead to frustration and disenchantment for MLSs, causing them to make a quick exit from the industry.

Hope comes in threes

The good news? There is an answer to this dilemma and it's accessible to all. MLSs need to build a solid foundation of knowledge in three specific areas:

  • Costs to process payments
  • Ability to process payments
  • Merchant retention

Not having an understanding of these three fundamental concerns makes for a weak foundation. A thorough understanding of these three areas helps create and maintain success.

1. Costs to process payments

Several elements are involved in the cost to process. The largest element is the costs assessed by the card brands. These are commonly called interchange and assessments. In building your knowledge foundation, it is not necessary to understand all 200 plus interchange categories. But it is necessary to understand how interchange affects merchants' costs - and how merchants can control those costs.

MLSs need to understand the basics behind the category designations and what merchants can do to improve their chances for a lower processing expense. Merchants can take steps to reduce their processing costs. MLSs who don't understand these steps are less equipped to assist merchants. Thus, they risk losing their merchants' trust - or worse, losing their merchants completely. When guiding merchants through Visa Inc.'s or MasterCard Worldwide's tiered pricing structures, you must know the categories assigned to each tier. If not, you could mislead merchants at the time of sale.

For example, some companies place Visa's CPS Rewards 1 in the qualified category; others place it in the mid-qualified category. Merchants with higher than normal rewards card acceptance percentages could see a higher percentage of mid-qualified transactions. MLSs who explain this at the time of signing will likely receive an angry phone call after the merchants receive their first billing statements.

Along with interchange costs, MLSs must have a basic knowledge of processing expenses. They must know if there is a minimum fee expense, as well as any administrative costs. These are all factors involved in pricing merchants (as well as factors when considering reducing costs in other areas).

2. Ability to process payments

The ability to process is defined as how merchants handle transactions. If MLSs don't understand the merchant's specific card acceptance practices, they may quote rates that aren't applicable. For example, card-not-present MO/TO merchants should not be quoted a rate that only applies to card-present, swiped transactions; they won't receive that lower rate and will likely consider that quote an attempt by the MLS to deceive them.

It is prudent for MLSs to look for ways merchants can improve handling of sales. Are they keying transactions they could otherwise swipe for a lower rate? Do they have the proper equipment to process correctly? Is there a benefit to having two merchant accounts, one for face-to-face (card-present) transactions and another for mail order?

By understanding both interchange and merchants' handling of transactions, MLSs can give merchants fair prices without confusion - again eliminating angry phone calls after the first bill arrives.

3. Merchant retention

Lastly, it is important to gain knowledge in the area of attrition. What causes merchants to leave one ISO for another? What can MLSs proactively do to retain merchants? What reporting tools can merchants use to address issues before they become problems?

Losing a merchant is money out of an ISO's and MLS's pockets, so having a foundation built on retention efforts as well as sales efforts both increases revenue and protects existing income.

Building the next level

Once a sturdy foundation in these three areas is built, it is prudent to gain a basic knowledge of POS terminals (think of it as the cornerstone for the next knowledge tier). However, do not spend extensive time mastering terminal functionality. Just know the basics, and keep the POS manufacturer's terminal help desk phone number handy.

The quality and depth of basic training offered should be a determinant when MLSs choose ISO partners. One ISO may only offer sales training on its products, another only on interchange. It is prudent to partner with a company willing and able to help MLSs build a strong foundation.

After this knowledge foundation has been erected, MLSs will find selling easier, their merchants will be more satisfied and the income of all parties concerned will grow. Isn't that the ultimate benchmark of success? end of article

Jeff Fortney is Director of Business Development with Clearent LLC. He has more than 12 years experience in the payments industry. Contact him at jeff@clearent.com or 972-618-7340.

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