By Ken Musante
The movie 2012 portends the end of the world on Dec. 20, 2012, in sync with predictions of the Mayan calendar, which is coincidentally the exact date that some have predicted the end of ISOs.
It is assumed ISOs will become extinct not because of an exploding sun but because of our own success. We have sold all there is to sell. Future sales will be done by an employee-based sales force like Heartland Payments System Inc.'s model or other internal sales staff that can more efficiently sell payment services. Do you agree or disagree? And, of course, why?
I posted the above on the MLS Forum. I have a vested interest in the outcome as I stated in my last article; I just left my former employer to join a startup ISO. I'm betting on the future of ISOs. I have studied the matter closely but I was very interested in the why part. I got some great stuff.
First, I am pleased to be in good company. My longtime friend Steven Peisner agreed with me. He wrote, "Twenty-five years ago, when I entered this industry, the principals of the company for which I was working said, 'In three to five years every merchant will have one of these electronic machines and we'll be out of business!' Let's make hay while the sun is shining...
"Twenty-five years later, believe it or not, I still from time to time come across merchants that are still not accepting credit cards as a payment option.
"Today, merchants not accepting can mostly be found in the professional fields, ie. medical or dental offices, attorneys, accountants et cetera, and even now and then other types of retailers.
"I would agree that the 'internal sales rep' has definitely had an impact on retail sales, but I would disagree that ISOs and their MLSs will become extinct because there are still those business owners that prefer to do business the old fashioned way - face to face."
The Dustman brought up a perspective that I had not thought of but is an excellent point - the impact of health care reform on 1099 employees. Dustman wrote, "With all this looming mandatory health care stuff brewing, many may think it prudent to maintain the 1099 model. Unless, of course, that is altered as well."
The health care bill has passed but I am not sure of its impact. If coverage is more available and less costly, perhaps more folks will desire to be 1099 employees and make that model more viable.
UBC weighed in from a product offering standpoint, "I certainly don't believe we have sold all we can sell," UBC wrote. "The vast majority of payments are being processed on stand-alone credit card terminals.
"The product revolution has already happened. There are low-end POS systems, efficient software, integrated cash registers et cetera."
UBC said that most modern POS systems do more than just take payments and added, "It's only a matter of time before merchants switch away from that older technology and it's going to be the ISOs and agents of the industry that make that happen." UBC helped explain why ISOs will continue; a differentiated product.
Jdeckard compared our industry to the insurance industry in an attempt to explain the future. "Nearly every individual in the United States has auto insurance...have you noticed a decline in the number of insurance agencies?" Jdeckard wrote. "Every home in the United States is required to have home owner's insurance...Again, any lack of agents to provide this?"
While this is true, what appears to be happening is the plain, or "vanilla," insurance is being sold through the mass media, like the Geico and Progressive Casualty Insurance Co. advertising campaigns. Agents that appear to be doing well are the ones selling specialized or business insurance.
Payment services may follow that same path with the vanilla offering done en mass, either telephonically or via the Internet, while specialized services are provided by ISOs. If that's indeed the case, what are the areas an ISO can specialize in?
CCguy weighed in with an answer: "There are few growing trends... Other companies combining their technology with credit card processing and taking business away from the MLS... Web companies, selling sites, shopping carts ... are now selling the gateway and a merchant account. With all that going on ... there is business out there for the man or woman on the street.
"The keys are relationships, product offering, personal service, knowledge and specialized offerings ... These are the same things that keep the State Farm agents, Allstate agents, etc., still in business because there is a group of people that do not want to run with the herd and want personal service."
Hallelujah. The key words are: relationships, product offerings, personal service, and knowledge and specialized offerings. Today's ISOs must operate differently. For ISOs to succeed we must be more narrowly focused. We must develop niches and provide:
Wineries, for example, could be a perfect niche. Vintners are a tightknit group. They share stories, practices and knowledge. Furthermore, wineries have very unique needs.
Those wanting to sell to card-not-present clients must adhere to very strict state laws. Providing a solution that adheres to those laws, such as ensuring a wine buyer's age is verified before delivery, could enhance your offering and eliminate pricing discussions.
Wineries also require card present service and sometimes at remote locations. Wineries have tasting rooms that may be in very unique areas without phone lines. Providing these same locations either wireless or properly encrypted store-and-forward devices may be an excellent solution.
Additionally, winery customers are often tourists from out of the area and country. Providing them dynamic currency conversion processing could be a benefit which further binds that relationship. Think about it. By first identifying a niche market, then developing unique knowledge to assist merchants in that niche, allows you to develop longstanding customers who possess plenty of referrals. So, when the end of the world does come, you will be ready.
For my next post, I am curious to know your success with advertising. Is advertising an efficient and profitable way to generate new clients? Which forms are most effective? Regardless of the relative effectiveness of advertising, how do we gain new referral partners? Let me know your thoughts. Until then, when in doubt, sell something!
Ken Musante is President of a startup ISO. Contact him by phone at 707-476-0573 or e-mail him at kenm@euekapayments.com.
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