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Table of Contents

Lead Story

Data breaches, more than bad publicity

News

Industry Update

Insuring against compromise

Negotiating the economic currents

U.S. court trims AmEx's clause

ACH network gets more mobile

Features

GS Advisory Board:
Challenge breeds opportunity - Part I

PCI Compliance for Dummies

Sumedh Thakar and Terry Ramos

Standing together against online fraud

And the nominations are

Selling Prepaid

Prepaid in brief

eCommLink refocuses, targets global remittance

Data breach leads to payroll card fraud

Event Innovation Inc.
Stored value - That's the ticket

Views

Coming in from the cold at NEAA

Patti Murphy
The Takoma Group

The HMS odyssey

Ken Musante
Moneris Solutions Inc.

Education

Street SmartsSM:
Rules by which to thrive, not dive

Jason Felts
Advanced Merchant Services Inc.

How to write right

Nancy Drexler
SignaPay Ltd.

Dead-on delegation

Vicki M. Daughdrill
Small Business Resources LLC

Keep an eye on the store

Adam Atlas
Attorney at Law

The lowdown on downloads

Dale S. Laszig
DSL Direct LLC

Company Profile

TransFirst Holdings Inc.

MicroBilt Corp.

New Products

Giving salons, spas the Midas touch

TouchSuite Salon POS
Company: Invenstar LLC

RDC, scanner tandem for small merchants

Dep@sit
Jack Henry & Associates Inc.

Inspiration

Cut back without cutting out

Departments

Forum

Resource Guide

Datebook

A Bigger Thing

The Green Sheet Online Edition

February 23, 2009  •  Issue 09:02:02

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Challenge breeds opportunity - Part I

We have all heard the barrage of bad news. It is inescapable. But what about the good news? Sure, today's business environment is volatile. However, with risk there is always reward. Anyone who has been in the payments industry for any length of time knows that with every challenge new opportunities arise.

So we turned to members of The Green Sheet's advisory board to see what silver linings they see in the clouds hanging over the industry. We asked them to answer the following questions:

This article contains the first portion of responses we received; the second installment will be published in The Green Sheet, March 9, 2009, issue 09:03:01.

Sam Chanin
Outside Ventures LLC


We're finding merchants are placing a greater premium on certainty of execution, service reliability and a deep relationship with their ISO than ever before. For us that's a very good thing because these concerns are fully aligned with the areas of our business we have concentrated on. We are being rewarded in two critical areas:

  1. Our existing customers are relying on us to deliver a greater range of services, so we are increasing customer share while reducing the rates of merchant attrition.

  2. We are also experiencing tremendous growth in new business because more merchants are seriously interested in how we can help them manage through today's volatile business environment.

As Chief Executive Officer for operating companies that have spent a great deal of time refining every aspect of the business, the best reward is the market seems to be favorably responding to everything we have implemented. It's incumbent on us to keep developing services that will meet the challenges that are sure to come.

Steve Christianson
All Card Processing/AAmonte Bankcard


One of the problems with the economic downturn in the financial markets is it is unprecedented in the history of the country and the world. We have no history to study.

The last big downturn began in 1929, and the bailout by Roosevelt was the Works Progress Administration, for instance. Obama has said he wants to do some of the same things. But the truth is that economic plan was doomed to fail then; inflation was skyrocketing, and unemployment was still very high. Throwing money at that problem in the 1930's did not cure our problem.

The saving grace, sad to say, was when Japan bombed Pearl Harbor, and the war machine kicked in. Boom went the economy; the unemployment rate sank to new lows; those not fit for military service, including men and women, went to work in our factories, building military hardware, uniforms, cots, food rations and so on. So if we want a historical solution, do we want to wish for a big world war to spike the economy?

Also, because this time is unprecedented, we cannot predict the point at which it will begin real recovery. If the bailout fails, the recovery is set back several more years. We cannot print more money to spend on government programs as a solution. There is no free lunch, and if the government continues raising taxes things will get worse - a lot worse.

One solution is having no income tax for one year. Let people have that money to spend, and a recovery will start without government spending. If we ran our businesses like the government, we would not be in business today.

You ask about a silver lining. ISO owners and our sales reps, who have worked hard, been conservative in their spending and have savings in the bank to work through this hard time, will be in prime position to be even more successful when this is over.

But again, how long can we all wait when merchant volume is down 10-plus percent and revenues the same or more? We used to see over a 1,000 new businesses open each month in our area.

Last week the new DBAs were 45. People either have no money or are holding on to it just in case - either way, not enough money is being spent. Fast food is doing relatively well. Fine dining is down up to 25 percent. Both silver linings and dark clouds just make a pretty sky. We are seeing more people looking for work in bankcard sales. Some truly want the opportunity to be able to live well; some just want an opportunity period.

Since our reps are true independent contractors, the lag time between sales and residuals will be tough, but if they persevere, it will be very rewarding.

Americans are resilient and have patience. The most important point is we will survive. So spend your own money, not the government's. Maintaining a positive attitude and good planning are instrumental in a recovery. Do we need to cross our fingers? Probably not, but it certainly cannot hurt.

Pete Estep
National Bankcard Systems


With massive layoffs, businesses closing, industry regulation and the general gloom and doom, it's been hard to see anything positive happening in our industry for the past year.

Normally during a recession we would see an increase in credit card use, but this time our overall volume dropped a lot faster in November and December compared to any increase in credit card use, especially when compared to the years before.

One positive NBS has seen, which is a product of all the layoffs in the financial industry, is an increase in the quality and quantity of salespeople looking for jobs. We've been doing very well at recruiting agents for the past year. Many of them are coming from the financial sector and have been a very good fit in the merchant processing industry.

Another opportunity that has arisen from all this turmoil is a lot of banks, ISOs and processors are going into some type of panic mode. We are seeing more extra or add-on fees than we've ever seen before. We're seeing extra Payment Card Industry Data Security Standard compliance; annual, quarterly and monthly fees; extra transaction, basis points, warranty and equipment fees.

There are fees for monthly discounting and security breach and risk fees. There are these simplified merchant fees that are really just a good way to charge the small mom-and-pop merchant 4 percent-plus for their processing. I even saw a fee for a rate review last week that really had the merchant confused.

Most, if not all, of these fees have been added after the merchant originally signed. Processors are imposing these fees even before the traditional interchange increases in April, which will mean these merchants will be facing another round of rate increases in the upcoming months. This will create further unrest with a lot of merchants. I think it will create a lot of opportunities for the sales agent out in the field.

Curt Hensley
CSH Consulting Inc.


Of course it's all about a focused sales effort, making sure our sales organization is actively pursuing the right prospects and properly supporting existing customers. To make sure we are executing, the company has to deliver an extraordinary level of service, we have to keep the product development pipeline fresh with compelling services, and we have to stay very plugged into the market. Boiled down to a simple phrase, at all levels for all reasons, we must make ourselves easy to do business with, and that's how we have pursued and intend to pursue opportunities.

Affiliation with a full-service provider that can help you attract and grow merchant accounts is vital. Once you have this, you can win merchants' confidence by promising a great deal but delivering even more. All merchants are going to be looking for ways to cut costs. Many retailers that wouldn't take the time to listen to a sales agent offering to save them money each month will now listen. We are seeing several good candidates at major players in the industry quietly looking for smaller companies where they can use their talents to grow another company.

This leaves open some great opportunities for small to mid-sized ISOs to grab some great talent without having to "buy" them away from where they are at. We are interviewing all of the candidates and looking to pinpoint top performers for our clients. Bringing on average employees who didn't make it elsewhere won't grow a company in this environment, so getting the best is more important than ever.

This environment thins the field, and the very best rise to the top. Be aggressive, enhance your knowledge and skills, and use every piece of good advice from those who have had success in the past. Those who are willing to work harder, be more prepared and be creative in closing techniques will weed out those frozen in fear of the economy.

Kevin G. Jones
First American Payment Systems LP


I believe the current economic climate will reverse the trend of our industry being looked at as a commoditized product. The challenges of the current economy create an environment in which the differences between each product, service and support-level becomes highlighted. This can help reverse the trend of margin compression as companies are able to demonstrate tangible results from value-building elements and reduce the focus on price/rates alone over time.

We plan to continue marketing ourselves as a premier, in-house processing partner. This message will not change (which emphasizes our proprietary front- and back-end platform, in-house 24/7 customer service and help desk, customized marketing and client relations consultancy, and consistent stability and security).

But as the market begins to place a greater value on creating long-term strategic partnerships, we will see greater response to our message. There are several outstanding companies in our industry and hundreds of talented MLSs. Each of us has built a differentiated product and service-set that offers a value we think is superior in the market.

Now is the time to illustrate these differences, while focusing on the building blocks of sustained success in this industry: a strong, stable balance sheet; reliable residual payments; dependable, measurable service levels; and in-house and/or flexible platforms.

Notice to readers: These are archived articles. Contact names or information may be out of date. We regret any inconvenience.

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Spotlight Innovators:

North American Bancard | USAePay | Impact Paysystems | Electronic Merchant Systems | Board Studios