This is the second article in a two-part series in which members of The Green Sheet Advisory Board share perspectives on the following five sets of questions:
1. Looking back on 2022, what developments at your company are you most pleased about? What actions brought them to fruition? What did you learn from them? Are you staying the course in 2023, going in a new direction or charting a course in between? Please explain.
2. What emerging technology has caught your eye that holds great potential for the payments/fintech ecosystem? Why is that? Will it be a significant factor in the coming year or do you expect its full potential to be realized down the road?
3. How well is the industry doing in terms of protecting data and stopping fraud? What can we do better in 2023?
4. With the upheaval at Twitter being big news during the last quarter of 2022, we'd like to know what role social media plays at your company. What platforms do you and your colleagues find most effective and why? Are you launching any new social media initiatives in 2023?
5. A decade ago, the CEO of a top acquirer predicted that transformation within the industry would bring about the demise of ISOs and MLSs sooner rather than later. Do you think this prediction will eventually become true or do you see a strong future for the feet on the street? Why or why not? What can agents do to help ensure their survival in the coming year and beyond? The first portion of responses appeared in our Jan. 9, 2023 issue. We thank all who took time to participate in this exploration.
Time flies; 2022 is now over. I always find it amusing when our employees and agents say, 'I can't believe it's already Memorial Day,' and then 'I can't believe it's already Thanksgiving' and recently, of course, 'It's the end of the year.'
Just to be a little different, I'll answer the questions in reverse order.
5. In 2012, I sold my first ISO, Charge Card Systems, because I truly felt the ISO/MLS model was over; the overused phrase "a race to zero" in terms of margin compression occurring and the value proposition of the agent was losing value. I had the same thoughts as the CEO of the executive acquirer mentioned in your preamble of your story which was the impetus to sell my company.
How wrong was I? The payments industry continues to reinvent itself. However, without pivoting, our company, your company and our salespeople will become extinct. The word "pivot" is so critical to your future professional success. Another analogous word is "entrepreneurial," and this entrepreneurial spirit provides us the spirit to identify new opportunities within our industry.
I do believe the traditional salesperson who has not stayed current with technology trends, fintech models, and other integrated payment solutions will have a challenging future in our business. All industry professionals, whether management, salespeople or operational personnel, must feel uncomfortable to become successful. Get out of your comfort zone; push yourself to learn more, or you will continue to sell basic payment processing, which has become more difficult and harder to justify a significant basis point mark-up (which provides much of our compensation)
One sales technique that I have preached for 30+ years to my teams is to become an expert in a niche market. This one easy technique will help to keep your future bright. Pick one industry vertical, and I don't care what it is. Learn that industry; meet every VIP in that industry; attend every trade show and conference in that vertical. Create partnerships with technology firms in that niche. Don't deviate. Be disciplined. It's harder to do than it appears. Case in point: what happens when you get a sales call from a merchant outside your chosen vertical? As hard as this sounds, say no (or pass this lead on to a fellow sales agent and earn a referral fee). You must immerse yourself in one vertical.
In my first ISO, our company was a generalist as we had over 500+ agents and represented merchants in a variety of industries. I should have listened to my advice mentioned in the prior paragraph. Upon my sale to Card Connect, I lived by my above sentiments and formed three ISOs all specializing in niche markets. LexCharge Inc., www.lexcharge.com, which created a business around the legal profession, within a few years of its launch was sold to a large organization rolling up services for the legal industry.
ToolBox Payment Inc., www.toolboxgo.com, created an integrated payments company with a mobile app for the home services contractor (that is, plumber, HVAC contractor, electrician, etc.). In addition to credit card processing, the app enables a contractor to run his company from his back pocket with a multitude of services. (At the time of this writing, I am in the final stages of discussions to sell ToolBox to one of the largest payment companies in the country.) Keep The Fees LLC, www.keepthefees.com, a payments company dedicated to the tattoo industry and shop owners. While the company started only offering credit card processing, KTF now provides five other integrated services including a specialized POS system.
It's important to listen to your merchants, your agents and all the personnel within your company.
I have learned through my experiences that a very powerful question to ask your team is, "What do you think?" or "Where do you see opportunities in the coming year?" Having carefully listened for six months, we just launched our first "non payments" service to our merchants, which is helping our clients claim their Employee Retention Credits. Our new company, ERC Advisors USA, is a direct reflection of identifying an opportunity where our salespeople can earn ancillary revenue based on the trusted relationship with their merchants.
As we enter 2023, spend time finding your "blind spot" where, with some love, attention and expertise (please understand that you can always find expertise by partnering with others), you can provide other services to your valued clients. If you continue to offer the same payment services, you will become, unfortunately, a dinosaur in our industry.
Another simple yet overlooked technique to ensure survival in the years ahead is communication. I am guilty as charged as in my first company, I worked so hard to win and board a merchant; however, I was so busy that I forgot to stay in touch with my valued clients. Although our attrition was below industry norms, we did lose merchants and some were very meaningful to our bottom line profitability. I've learned from my mistakes, and I now have implemented a real strategy for much better communication. Simple strategy – call your merchants every few months to say hello. And, if you want to be really crazy in this technology world, write a hand-written note to thank your clients for their continued partnership with you.
4. Social media – my VCR if I had one (for those old enough to remember them) would still be blinking, as I'm the worst at social media. However, hire a professional or sales agency to help with your social strategy. For example, our Keep The Fees business (which I just mentioned focuses on the tattoo industry) is all about beautiful art and graphics. Our tattoo shop clients are true artists and are beyond proud to display their work on our social media feed. Each month, shop owners directly Instagram us that they want to sign up with Keep The Fees.
One caveat emptor (using this expression from my college days): you must be consistent with your social media presence as it may take months to develop an authority position of trust within your niche.
Over the years, I have tried Facebook advertising and other organic paid strategies with little success. My acquisition cost became expensive, and I found that many merchants were shopping around and speaking to various ISOs, and our close ratios were small relative to our capital outlay.
3. Protecting Data – I wish I were smart enough to maturely answer this question. I have no clue and am happy to learn from others.
1 and 2. As I look back on 2022, I'm pleased about the prospects of four opportunities that should have exponential growth in the coming year: a. I'm incredibly excited for the ToolBox acquisition, as I know the new management team (friends of mine for 20+ years) will help grow this concept started a few years ago into a meaningful solution. b. KeepTheFees—what started out over a cup of coffee with a tattoo artist friend of mine two years ago will in my mind become the leading payments company in the world for this niche market; c. ERC Advisors USA—I recently started this company and already am working with many ISO, MLS to create a new compensation stream and provide real money to their merchants; d. Alternative Merchant Processing—my high-risk business of 15+ years continues to grow as our bank relationships provide a home for these hard to place merchants.
1. I'm most pleased about all the developments we've made with our proprietary dashboard, which is both merchant and partner facing, along with being used internally by our team. Our enhancements have made underwriting and onboarding faster, most importantly, and we have some great things in the works for 2023 that will allow us to board merchants almost as quickly as a payfac, but under the FSP model.
We've done a great job at making our partner-facing dashboard more robust, so it acts a lot more like a CRM where agents can manage everything from end-to-end and even white label it, which enables a turnkey payments solution for sales organizations looking to scale.
We will also focus a lot on our payment gateway and overall API library next year, which is all proprietary as well. Making improvements to our API and other gateway capabilities, such as multi-currency processing, will allow us to secure new ISV partnerships and other opportunities such as enterprise merchants and covering more complex use cases.
We wouldn't be where we're at without an amazing team though. We started to offer remote positions, which has allowed us to attract top talent, and overall have grown our team significantly in the last year. We're hiring in all departments, so we're excited to grow our team to over 100 people next year, which is pretty awesome to see as a family-owned and operated business.
2. There are a lot of emerging technologies that I am keeping my eye on and excited to see how they evolve. Between biometric authentication, AI, embedded finance, machine learning and real-time payments, I think we'll see these all become more significant next year. For us as an FSP and from an implementation standpoint, real-time payments are very interesting along with embedded finance.
There are many use cases for RTP, and with the Fed launching FedNow in July, it will definitely be a significant factor, as there's already been a lot of adoption with The Clearing House's RTP network. Also, I think there will be a lot of consolidation in the fintech space which will accelerate the convergence of embedded finance solutions with more traditional banking products.
3. I think our industry does a great job at creating the technology to protect cardholder data and stop fraud. The challenge seems to be educating merchants on why this technology is valuable, why they need it and then helping them implement such tools. I see a lot of business owners only look at the cost and time of implementation rather than all the benefits of having a more secure payments infrastructure.
PCI is a great example. There are many MLSs and ISOs who'd rather collect PCI non-compliance fees than spend the time educating merchants on why PCI matters and walking them through becoming compliant. We need to be proactive rather than reactive so we can better protect our merchants from data breaches, fraud and card testing. It's not like the technology doesn't exist.
Next year we can do better by increasing our efforts to educate ourselves along with our merchants, so they don't feel like we are trying to upsell them on a product or service. We should also be thinking about collaborating more with cyber security companies and even our PCI vendors to get more of our merchants PCI compliant.
4. We have always stuck to LinkedIn as our main social media outlet. This has been the best channel for us, and it's becoming more significant as our company has grown. Other social media channels like Instagram and TikTok seem to do better for DTC brands, not so much B2B companies. Twitter seems to be pretty popular though for entrepreneurs and other thought leaders, so perhaps that's another channel we'll look at, but we'll really continue focusing on LinkedIn in 2023.
5. I think there will always be a place for ISOs and MLSs in this industry. There's simply too much business out there, and a lot of merchants like dealing with people (that is, an ISO or MLS). This is a very relationship-driven business, and oftentimes merchants have questions or want someone to walk them through the process. It's going to be about how you adapt and pivot to changing market conditions. The payments landscape is very fast-moving and dynamic. If you cannot keep up, you will get left behind.
Our competition as ISOs and MLSs seems to be mostly against payfacs like Stripe who have a major advantage in the onboarding department, but because this is such a sensitive service we provide to businesses, there's always a human element that business owners want. We see merchants switch over to us all the time because of lackluster support they get from their processor. If you can provide excellent service to merchants with added-value services bundled into a seamless user experience, you already are in a good position.
What agents should be doing is staying current with everything going on in the industry. Furthermore, they should be doubling down on their strengths and sticking to what works best for them. As an FSP, developing strategic partnerships and integrations with ISVs will be key these next few years as more software companies get into payments. Not all want to work exclusively with Stripe.
5. Well, how did that prediction turn out? We're still around, and so are a lot of other agents and ISOs. Why? We provide the human connection that many merchants still value. There's not an app for that.
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