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Table of Contents

Lead Story

Warning: Merchants turning up the heat on interchange


Industry Update

Wal-Mart banks on the underbanked

MasterCard wins injunction against Visa

A new, happy tune for GS Online


GS Advisory Board:
Value-adds: Recipe for success? Part I

Coinstar and the unbanked

Marvin Lazaro
Kiosk Marketplace and Self-Service World

The symmetry of sponsorship

Industry Leader

John McCormick –
Sharing many kinds of riches


PayPal: 21st century cash

Patti Murphy
The Takoma Group

Spot-on sales savvy

Steve Schwimmer
Renaissance Merchant Services

Kicking the horse we all rode in on

Biff Matthews
CardWare International


Street SmartsSM:
Veritably valuable added services

Dee Karawadra
Impact PaySystem

The lowdown on locked documents

Adam Atlas
Attorney at Law

Shape up those level 4 merchants - now

Ken Musante
Humboldt Merchant Services

10 keys to unlocking your million-dollar portfolio

Jason Felts
Advanced Merchant Services Inc.

What do your customers say about you?

Joel and Rachael Rydbeck
Nubrek Inc.

Company Profile

Central Point Resources Inc.

New Products

POS equipment fit for royalty

EZPROX, Vega9300 and Vega7000
Castles Technology Co. Ltd.

A gift-bearing kiosk

Reward and Gift Card Kiosk
Pay By Touch


Are you living in current reality?


Resource Guide


A Bigger Thing

The Green Sheet Online Edition

June 25, 2007  •  Issue 07:06:02

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Street SmartsSM

Veritably valuable added services

By Dee Karawadra

Value-added products are getting more attention as the credit card processing market approaches saturation. They enhance a portfolio's worth considerably, bring more flavor to the product-offering table and provide an additional source of revenue to ISOs and merchant level salespeople (MLSs).

Additional obvious benefits to agents who offer these products include lower merchant attrition and increased margins due to packaged pricing.

There is a wide selection available of value-added products and services, which are also known as value-added reseller (VAR) products.

I have picked some of the more popular ones to discuss in this article: check services, gift and loyalty cards, ATM services, and remote deposit capture (RDC). In order to sell these, MLSs need to have a fundamental knowledge of the benefits the products bring to merchants.

Check services

Check service offerings have existed for a long time, but those who are new to the payments industry may need an explanation to better understand this product. There are several different aspects to check services:

Gift cards

Gift cards are quickly replacing paper gift certificates. The country's largest retailers and chain restaurants have been using and heavily promoting them for the past several years. Small to medium-sized merchants issue gift cards as well.

Gift cards work just like old-fashioned paper certificates. A merchant can set them up in predetermined denominations or variable amounts. Cards are activated at the POS.

When a customer redeems a gift card, the merchant swipes it through the POS system to verify and readjust the balance, based on the current transaction.

The newest trend in the gift card arena is third-party gift cards. These are cooperative ventures involving popular retail chains, Visa U.S.A., MasterCard Worldwide and American Express Co.

Loyalty cards

Loyalty cards work the same as traditional hole-punch loyalty cards. When customers make purchases, a set value per dollar spent is added to their cards. When the amounts on their cards reach a certain level, customers can redeem them for discounts and/or products.

ATM services

Many may not consider the ATM arena to be value-added, but it definitely is. The market for this involves fewer merchants, primarily bars, hotels and convenience stores.

Residual revenue comes from two avenues: 1) the surcharge added to each transaction by the merchant – usually $1.50 to $ 3; and 2) revenue from the debit networks. Residuals are usually paid to the processor, which passes them on to the ISO after deducting the cost of the transactions.

ATMs may be placed at merchant locations in several ways. Merchants can buy or lease them, refill the money, as needed, and keep 100% of the surcharge. Merchants can also own ATMs but have an ATM service company refill the money. In this case, the surcharge revenue is usually split.

Another common option is for ISOs or MLSs to own ATMs for which merchants refill money, as needed. Surcharge revenue is generally split in this type of arrangement.

Remote deposit capture

The value-added product that I hear the most about is RDC, which is also known as remote back-office conversion. Agents, agent banks and one merchant have recently asked me about it. So what is RDC?

Basically, it is a way to truncate and clear checks electronically. In simpler terms, it is a way to scan checks at the merchant level and have them deposited to merchants' banks.

The passage of the federal Check Clearing for the 21st Century Act (known as Check 21) in 2004 eliminated legal impediments to check truncation and revolutionized banking. There is, however, some resistance, the majority of which stems from concerns about increased risk of compromised transactions.

RDC allows merchants to run checks and electronically deposit them into a chosen account. This enables merchants to access funds much more quickly than with traditional deposits. RDC also eliminates frequent trips to the bank.

RDC is an attractive product to offer agent banks. Margins for the banks are shrinking due to current economic conditions. RDC allows more deposits to be loaned out at better margins than when certificate of deposit funds are used.

To sum it up, value-added products give us another sales avenue. They can generate significant income for ISOs and MLSs. I hope this basic information helps you cash in on this potentially lucrative area.

If you have any suggestions, questions or just simply want to say hello, please do not hesitate to get in touch.

Safari Njema (safe journey).

Dee Karawadra is the founder, Chief Executive Officer and President of Impact PaySystem, based in Memphis, Tenn. He and his team have a wealth of knowledge on the merchant services industry, with a niche in the petroleum market. Dee's experience on the street as an agent has guided him in laying a foundation for an agent program that is both straightforward and lucrative for his agents. Contact him at 877-251-0778 or

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

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