The payments industry is going through a metamorphosis. In 2008, the credit crisis, the changing regulatory environment and new security compliance requirements created a three-punch combination that may have, at times, felt like a knockout blow. But economic challenges due to merchant budget worries and decreased consumer spending could be a boon for aggressive payment professionals who are willing to take risks.
For ISOs and merchant level salespeople (MLSs), opportunities for new value added services and vertical markets in 2009 abound. A new year brings new resolve; a time to take advantage of this uncertain economic climate and not be daunted. Times are tough, but industry experts aren't suggesting we're teetering on the edge of any financial abyss.
So as you, as ISOs and MLSs, gear up for the new year, this is a perfect time to rethink and revamp sales and marketing methodologies, to shake things up. Paul Martaus, President of consulting firm Martaus & Associates, said the entrepreneurial spirit of ISOs and MLSs is so strong that whatever issues arise, they always find a way to work around them.
As we move into 2009, that spirit and drive to thrive can overcome any challenges the payments industry may face over the next 12 months. Risks have to be taken, for sure, but the greatest risks can reap the greatest rewards - higher revenue streams, expanded market footprints and continued merchant stickiness.
"We really have to go back to the drawing board with regard to positioning ourselves to be ready for the future," said Nancy Drexler, Vice President of Marketing for SignaPay Ltd. "The economy is changing; the world is getting more complex and is just now starting to impact our business. But more importantly, it affects the mindset of our customers, and our marketing strategies need to adjust to that."
New marketing strategies call for breaking out of traditional sales modes, using technology or philosophies that may be unfamiliar, foreign, or seem overwhelming. The Web has become something humanity can't imagine living without. And using the Internet as a sales tool is a potential marketing bonanza. It is a means to break out of normal routines and comfort zones.
"Social networking is the telemarketing of the 21st century," Drexler said of the Web-based phenomenon. "Telemarketing is still a viable and vital sales tool in the payments industry. I mean, it's still huge, but the growth of social networking can't be ignored. It's beginning to gain a solid foothold as a marketing vehicle." Drexler believes that within 10 years, social networking will replace telemarketing altogether.
According to Jesse Torres, board member at The Center for Financial Executive Education, social networking users are no longer predominantly Gen Y; it is a heterogeneous group that is becoming increasingly more diverse. "Social network marketing is about creating and nurturing conversations with [merchants] in order to determine how to best serve their needs while developing trust and respect," Torres said.
However, payment professionals caution that this type of marketing, while successful in reaching new prospects, takes patience and consistency.
"A lot of merchants are just looking for someone to follow, they're looking for a leader to give them guidance," said Paul Lonsford, MLS for Texas-based First Data Independent Sales. "With social networking, you can actually do that with your client base, but it takes time to build a following.
"Once you get it, though, you've created a strong client base with an immense sense of loyalty. And I love that I can use a vehicle like Twitter to update them on the industry or related payment processing information. I don't have a huge following yet, but I keep sending out information, and it continues to help grow my business." In the past four years, Lonsford has consistently been in the top 10 sales offices for FDIS.
Brian Crozier, co-founder of alternative payment solutions provider UseMyBank Services Inc., believes social networking Web sites are here to stay. "I tell you one little trick I've learned," Crozier said. "Google has a service you can subscribe to for free called Google News Alerts. They keep you up to date on what is going on in the industry, what you are interested in. Any time the key words I submit come up in articles, I'm notified right away by e-mail. I also get links to sites and merchants I never would have found otherwise. It's amazing how many merchants you can find that you never knew existed."
Michael Pratt, Chief Marketing Officer for Panini North America Inc., said social networking is vital if companies plan to appeal to customer segments that are either businesses interacting in a consumer capacity or consumer markets themselves. "If you look at things like Facebook, MySpace or Twitter, they are very real in terms of their dynamic growth and as ways for people to change the way they interact with each other," Pratt said. "Online networking has become small bits of digestible, rapid-fire news in real time. That said, laying the groundwork and participating in these forums is a slower way to gain advocacy, but I believe it will produce longer-term benefits as we move forward."
Regardless of technological evolution, sales and marketing at its core will always be about people. For smaller ISOs whose businesses are regional, personal attention and consistent contact with merchants still remain the foundation of their marketing and sales efforts.
Neal Tichelkamp, President and CEO of Ladera Business Solutions in Jefferson City, Mo., said community involvement is the key to his company's success. The reason, he believes, is that his merchants see Ladera's sales agents and management team as personally invested in their own success. "We're a very regionalized sales office, so we get involved with our local businesses, schools, hospitals, the Special Olympics, food banks," Tichelkamp said. "We also do volunteer work as much as we can because we feel like that does a few things.
"One, it gets the Ladera name out there and builds confidence in it. Two, it's good for the people you are helping. And third, it's tremendously good for our employees because it gets them involved, puts a friendly face to a name, and builds camaraderie. We've gotten some of our best merchant and partner relationships from this - and it's brought us a lot of additional revenue as a result."
Lonsford recalled that when he was new in sales, he was taught to sell an "ancient" way. In his opinion, the process of cold calling, getting appointments and making presentations was "worn out and tired." He found the best inspiration to generate leads was to try something different, to "go with my gut and against traditional sales models."
Lonsford became a student of direct response marketing. "I do a lot of Internet marketing, and I wanted to do something out of the ordinary," Lonsford said. "I looked for ways to find lots of people and best leverage my time. How can I cover more territory in less time? So I started doing video marketing.
"It's getting great response. The Web stream is cool because it lets people see who I am. I'm no longer just a Web page; I'm a person. Now when prospects talk to you they've got a face to attach to the voice on the phone. They feel like they already know me prior to that first communication. By marketing with the video, the presentation is perfected and I don't have to repeat myself a hundred times.
"It's like anything new, though. You've got to build the buzz first, make what you do memorable to merchants. I think virtual direct response is a growing segment. Additionally, you can put some pretty amazing video out there for less than $500 in equipment. And, hey, we're a two-man office and still doing 100 to 150 accounts a month, in no small part because of the video."
Social networking, video streams and community volunteering: These are all compelling ways to market your company and its products and services. But what if you are just beginning to build a portfolio, and you have neither the financial resources nor the manpower to implement these marketing tools?
"If you're a start up or a newbie and you're going to stay in the payments industry, it is well worth the time and money to join a payments association," Crozier said. "Attend conferences, be part of the whole atmosphere. We were fortunate enough to join NACHA a few years ago. Through them, we've been able to meet people who have helped us do a tremendous amount of business."
Security compliance rules keep increasing; consequently, some ISOs and MLSs are using this issue as a means for getting merchants' attention. "We started looking in places for merchants and for leads that we never looked in before, like PCI [Payment Card Industry] compliance," Tichelkamp said. "We've been using the self-assessment questionnaire as a lead in to sell equipment. It's worked very well for us."
Scott Henry, Director of North American Product Marketing for VeriFone, believes companies need to consider the benefits of selling security solutions. "I think the feet on the street and the ISOs can really step up in their organizations by taking it upon themselves to use these offerings as a stage to gain a wider audience," Henry said. "Proper staff education regarding all compliance issues and regulations is key as well," he added. "Merchants are looking for knowledge experts; they can't take these issues upon themselves, so obviously there is potential to gain significant additional market share. It's a market ISOs and MLSs need to keep a keen eye on."
Using unique sales and marketing methods is crucial to continued portfolio growth in today's world. However, value added services are becoming as important, if not more so, in the opinion of some industry veterans. One such value add is now five years old, but a number of payment experts believe it is poised to break out in 2009. For many, remote deposit capture (RDC) is an enticing offering. Smaller merchants and professional businesses "represent a huge opportunity for vendors in the check imaging market, especially through ISO reseller channels" said David Foss, General Manager of Jack Henry and Associates Inc.'s ProfitStars unit.
Foss said there are millions of microbusinesses (companies that process three to five checks per day) ripe for check imaging services and flatbed scanners that require no updated software and are perfect for small businesses as part of their multifunction payment processing. According to Pratt, more than 20 million businesses in the United States have annual revenues of less than $1 million, but only about 500,000 of those have RDC.
Sales opportunities exist with professional offices - legal, dental, medical, nonprofit organizations, municipalities, business-to-business (B2B) transactions - still locked into traditional billing with receivables taking up to 120 days for payment. And RDC specialists are confident about the technology's future incorporation into small and mid-sized businesses.
"We remain very bullish on the outlook for the RDC market," Pratt said. "I think there are compelling benefits to small businesses that they readily recognize in terms of better and faster access to cash flow as well as elimination of cost in areas like stamping, transportation and labor. It's a compelling savings opportunity for businesses and an efficient deposit gathering mechanism for banks."
In an effort to market check processing to a wider audience, NetDeposit Inc. developed a comprehensive RDC payment offering that processes checks, electronic funds transfers, debit and credit transactions.
"We are beginning to package specific products to medical offices, for example, that provide them real benefits beyond RDC, like creating recurring payments or reconciling their claims," said Danne Buchanan, Chief Executive Officer of NetDeposit Inc. "What we have seen in the marketplace are very siloed offerings, with ISOs focusing on one or two verticals and limited payment types.
"We've been working with ISOs to take a much broader approach to payments with additional delivery mechanisms - check electronification, ACH [automated clearing house], Web and mobile transactions - and move into areas they haven't focused on in the past.
"With the B2B market and, to a certain degree, the business to customer space over the Internet, we believe ISOs could do very well here and greatly expand their footprint."
Merchants and consumers alike are always searching for faster, easier and more efficient ways to process payment transactions. In addition to RDC and other emerging value adds such as mobile banking, gift cards, loyalty programs and prepaid, e-commerce is, according to Victor Newsom, Senior Vice President of Operations for prepaid debit processor eCommLink Inc., an untapped mine of revenue generation.
"With the amount of concern and uncertainty in the marketplace, we have an opportunity here to change paradigms and behaviors as a result of environmental conditions that are disrupting normal, comfortable patterns of consumer purchasing behavior," Newsom said. "Internet retailing is vital for merchants to offset unpredictable walk-in traffic."
The U.S. Census Bureau reported e-commerce sales for the third quarter of 2008 nationally accounted for only 3.1 percent of all retail sales. Creative ISOs and MLSs who are willing to introduce e-commerce to the 96.9 percent of the brick-and-mortar market that hasn't embraced it yet could enjoy substantial revenue as a result.
ECommLink's CEO T. Jack Williams said the payments space, from a sales perspective, is entering an age of specialization. As an e-commerce-only payment firm, eCommLink is marketing its prepaid products more aggressively this year as credit lines tighten. "I think now is a great time for the acquiring side to offer more value than they ever have with prepaid services in a market gaining increased attention and acceptance," he said.
"We market prepaid debit products aggressively to the underbanked and the teen market - which I think is going to be huge - but we also can now pursue the more mainstream consumers impacted by the credit crunch. I think the acquiring side needs to look at delivering new, incremental revenue generating programs in the prepaid and e-commerce debit space. To me, that's the Holy Grail of payments," Williams added.
Consumers are looking for the same payment options on the Internet as they have in the physical brick and mortar world. "Merchants are way more receptive now to understanding that if they have more payment options that are secured and certified, they're going to have more people to do business with, and that's going to positively affect their bottom line," Crozier said. "Alternative payment companies have a tremendous opportunity here to gain traction with merchants in this type of economy and with the continuing expansion of Internet space."
Jared Isaacman, CEO of United Bank Card Inc., which processes for 1,500 ISOs, believes state-of-the-art products and services ultimately take precedence over marketing tactics. "We're like a general practitioner at UBC," Isaacman said. "We have a monster ISO network, and every one of them has their own sales techniques."
"Our responsibility comes down to delivering quality products and services that are true market differentiators. Sales people need something unique, and if you have products and services that make sense, then any one of a number of marketing and sales techniques is going to be successful. And with the combination of reliable equipment, first class customer service and personal relationships, you have the best remedy against attrition."
Drexler believes merchants consider payment processing to be a necessary evil. Given that, she never tries to sell a product or service that a merchant is not ready for. "When you consider that these small and mid-size retailers and restaurateurs are struggling to keep their own businesses afloat in this tough economy, the biggest favor we can do for our merchants - and ourselves - is to continue to do whatever it takes to help them accept all types of payments from all customers, simply, seamlessly and at a fair price," Drexler said.
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