The Green Sheet Online Edition
July 13, 2009 • Issue 09:07:01
This July we celebrate our freedom and our country's independence. In the merchant services industry the culmination of the right to life, liberty and the pursuit of happiness can be found in our independents - ISOs and merchant level salespeople (MLSs). It is an immense challenge to be your own boss and to know that success is tied to selling.
Many great merchant service companies have been built on the entrepreneurship of the independent contractor.
Entering our industry does not depend on having any particular kind of credentials. It does not matter if you are a high school graduate or have a Ph.D. in nuclear physics.
This lack of barriers opens the door for those who can sell to create their own piece of the pie and earn as much revenue as their tenacity and skill sets allow.
It was 2003 when Vanessa graduated with a degree in Industrial Engineering from Arizona State University. For many years Vanessa worked at large companies, including Honeywell Aerospace, Lockheed Martin, and under a variety of U.S. Department of Defense contracts. He was an analyst.
Vanessa's job was to look for ways to improve efficiency and increase throughput. Like so many people in the United States right now she became subject to the controls of a chief executive officer with little concern for the law and big concern for his pocketbook.
Ultimately, the company was run into bankruptcy and the CEO was indicted for defrauding the government. One hundred people had to find another career path.
A worthy dream
Everyone has a dream, and ours was to control our own destiny. We had a vision of creating wealth and setting our own schedule. We explored many possibilities, including insurance, knowing we wanted to create residual income. After stumbling upon a merchant services company looking for independent contractors, we began our journey.
It has had many twists and turns but has provided more than we dreamt possible. Who would have thought that after working so hard to earn degrees they would be a nonfactor in our entry into a lifetime career in merchant services? So much for updating the resume.
Many independent contractors begin by hitting the streets or dialing for dollars. Others market to community banks and join chambers of commerce. Some sell POS systems or other value-added products and services. The path you select depends on your unique skills and desires.
People with strong technology backgrounds can leverage the Internet; those with experience managing restaurants have a unique understanding of POS systems. We met a gentleman at a Western States Acquirers Association meeting who had managed copy stores for most of his career.
He entered into the merchant services industry and used his experience with the merchant side. He focuses on those retailers and leverages his contacts.
The challenge of realization
Because of the ease of entry to merchant services, there is much turnover; the dream does not always become a reality. It takes a great independent mind to succeed purely on commission, and it takes time to build sufficient residuals. Entering into the merchant services world is not as immediately lucrative as it once was.
We entered during the leasing death rattle. Leasing provides a significant source of revenue that has helped many organizations get over the hump until residual income becomes sustainable. The pendulum has swung to the opposite side, and free terminals have become a common offering.
Ours is not an easy business to thrive in. Concern has been voiced on GS Online's MLS Forum regarding the viability of the independent contractor.
On the forum, amsusa stated, "To date, the 'brands,' primarily Visa and MasterCard, have failed to formally recognize the independent agent.
"There is speculation that our industry is in a state of transformation. It is our belief that we, as agents, have our very livelihoods at stake."
Visa Inc. recently published a list of all registered ISOs (www.visa.com/isolisting). This has led to discussions about registration of MLSs - also called independent sales agents (ISAs) - and how to secure their role in the bankcard industry.
Also, Visa Inc. and MasterCard Worldwide recently bid on the purchase of a majority interest in Fifth Third Bancorp's payment processing unit. With the lack of recognition by the card companies and their budding interest in the acquiring side of the coin, what will become of the MLSs - the very feet on the street?
If you are an independent agent, a variety of steps are necessary to preserve your role as an MLS not registered with the card companies. The first steps are to protect yourself and structure your business accordingly. Dee Malik stated on the forum, "I just tell my fellow ISA/MLS brothers/sisters to read every contract, closely."
With the current lack of regulation governing the ISO and MLS relationship, the devil is in the details. Seeking an industry-specific attorney can be one of the best investments upfront to protecting your best interest. The Green Sheet and the MLS Forum are good places to find attorneys who are familiar with our unique industry.
There are bound to be roadblocks and stumbling points along the way. Establishing a strong relationship with a partner in this industry takes time and commitment - a two way street where both parties should benefit.
TheCreditCardMan stated on the forum, "Over the years I have ... found better rates. To date I have never signed another agreement and continue to deal with them [my ISO] exclusively. What keeps me loyal to them is the people."
Strength in a niche
Differentiating yourself from that competition becomes vital. Our model is to care for and feed our local businesses. We identify merchants with a strong desire to see and touch their payment service provider. We target those thriving business who want transparency, high-tech solutions and a one-call solution for their processing needs.
As a result, we are viewed differently than much of the competition in our area. Our retention of clients is high because of our high-touch solution. Within the market you select there are opportunities to differentiate; identifying them is difficult but well worth the effort.
Bringing on new clients is exciting, but retaining them is a different story. Our merchants are bombarded daily with phone solicitations offering lower rates and much more.
We received a telemarketing call from "Merchant Services" who asked if we accepted credit cards. I said, "I am a merchant service provider, so yes." Merchant Services said, "Great! We can lower your rates!" I said, "I am a merchant service provider." Merchant Services said, "We will give you $500 if we can't save you money."
Sometimes the ones selling merchant services don't even know what they are selling, and merchants are wise to that fact. MLSs and third-party processors all have concerns about shrinking margins as the ISOs are squeezed from both sides.
The question of regulation
Merchants want to pay less, and independent contractors want more money and more bonuses.
In 1787, 13 representatives from the colonial states gathered to design guidelines for self-government. From this meeting was birthed the Constitution of the United States of America. The three branches of government - executive, legislative and judicial - were formed. These branches work as checks and balances to maintain a fair and democratic rule of law.
In business we have checks and balances as well. The three major branches are customers, businesses and industry. Without customers businesses would not thrive. Without businesses there would be no industry. And Industry protects its "country" - its businesses and customers.
It took four years after its signing to amend the Constitution with the Bill of Rights, which defined and protected our individual rights. The Constitution told us what government can do, and the Bill of Rights defined what it cannot do.
What checks and balances are in place to ensure proper treatment of all customers and businesses, as well as maintain the prosperity of those in the industry? What are their inalienable rights? These are not easy questions but ones that are becoming necessary to define.
Self-regulation is not an easy or expeditious process. It took rebels, leaders, traitors, and parties from all states and many more to lead our country down a righteous path. So it will be as the merchant services industry moves toward increased self-regulation.
As we write this article, legislators are at work defining these regulations for us. While much of it may be a wait-and-see game, let us ponder what we, as businesses and as a part of the industry's checks and balances, can do to put our best foot forward to support our industry.
At least for now, we all have the right to life, liberty and the pursuit of happiness.
Jon Perry and Vanessa Lang are the owners of 888QuikRate.com, an ISO based in Ft. Worth, Texas, that was named Small Business of the Year by the local newspaper, The Star Telegram. For more information, tweet them at twitter.com/dfwcard, comment on their blog at http://merchantservices.cc or visit their profile at http://linkedin.com/in/jonperry or http://linkedin.com/in/vanessalang. Alternatively, you can contact Jon and Vanessa by phone at 817-857-3557 or by e-mail at firstname.lastname@example.org or email@example.com.
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