ptio is derived from the Latin verb optare, meaning "to choose." In ancient times, the Optio in the Roman army was chosen by his Centurion commander as the second-in-command. Unlike the Centurion, the Optio was not stationed at the front of the army, but at the back, to provide strategy and positioning for the troops during battle.
Optio Solutions LLC desires to be that strategic leader for merchants experiencing problems collecting on delinquent accounts, as well as a vital piece of ISO's and merchant level salespeople's (MLSs) value added product offerings.
Optio's innovative strategy for debt collection is two-fold. Strategy I involves a series of three or five customizable written demands sent by Optio to the nonpayer. As directed by the merchant, the letters can be worded in either a diplomatic or more aggressive manner. Each letter can be sent in 10 or 14 day intervals. If the first notice goes unanswered, the second notice is firmer, and so on.
If Strategy I is not effective in resolving the issue, Optio forwards the account to Strategy II, where licensed collectors at Qualia Collection Services (QCS) - another aspect of Optio - telephone the nonpayers and politely demand payment.
A new paradigm
While Strategy II resembles the traditional approach taken by collection agencies, Strategy I sets Optio apart from the competition.
"One of the things that is important is that we realize our clients want to be able to retain their customers, not get their customers upset where they won't bring business back to them," Chris R. Schumacher, President and Chief Executive Officer at Optio, said.
"It is something that's new to the marketplace. When you look at most collection companies out there, everybody has got this vision that collection agencies are all aggressive. What we've tried to do is to explain to the clients [that Optio] is a company that is interested in keeping the client-customer relationship, which is one of our key focuses. ... It's more of a kinder, gentler approach that we tend to use."
For Strategy I, merchants are charged a flat fee per individual account, often less than $12 for each account, based on package rates. ISOs receive 25% of that package rate.
"When a customer remits the money, it's going straight to our clients, speeding up their cash flow," Schumacher said. "A lot of other agencies sit there and say [to businesses] send us the money, then they hold onto it for 30 days. Our goal is to get cash back into our clients' hands as quickly as possible."
The pricing structure for Strategy II is done on a contingency rate, similar to most other collection agencies, according to Schumacher. The fee to QCS ranges from 40% to 50% of the funds collected. If QCS is able to collect 50% of the funds with Stra-tegy II, ISOs receive 8% of the net dollars collected.
Another unique aspect of the Optio experience for merchants is Optio's Online Client Portal (OCP), something Schumacher said most other collection agencies do not offer. After a merchant is signed to a contract through an ISO, and that contract is entered into Optio's database, an e-mail is sent to the client with a logon password for OCP and instructions on how to get started on the portal.
Through OCP, merchants are able to plug in relevant information about customers with outstanding balances and select the approach they want Optio's letters to take: diplomatic or intensive. Merchants are also able to stop the letter process on accounts, apply partial payments to accounts and place holds on accounts, all in real time and at any time, day or night.
"[OCP] gives them the flexibility that if you go in today and enter an account, tomorrow we're starting the letter series, the written demands, to collecting their money," Schumacher said, adding that Optio operates two automated mail centers - one on either coast - to speed up the letter sending process.
Furthermore, OCP offers merchants the ability to view and monitor Optio's progress in collecting payments.
Merchant control over the collection process is confined to Optio's Strategy I tier. Once Optio gets to Strategy II, the merchant is asked to step away from the process and allow QCS to work with the nonpayer to get merchants' their money. But Schumacher insists that when turning over accounts that are 90 to 120 days delinquent, one could see successful resolution rates of 50% to 56% in Strategy I, never having to revert to Strategy II.
Unlike many collection agencies, Optio is national; it is licensed and bonded in all 50 states. Schumacher noted that the importance of this cannot be underestimated. Collection laws vary from state to state. In our mobile society, with individuals moving repeatedly, a regional collection agency licensed only on the West Coast may be violating collection laws when attempting to contact an individual living in Colorado, for example.
But, with Optio, each letter is tailored to abide by the laws in whatever state the letter's recipient resides.
With 17 years' experience in the accounts receivable business, and having worked in 140 different sales offices, Schumacher knows that the job of an MLS in today's marketplace is an especially tough one. MLSs can no longer sell new merchants just on equipment or cheaper processing.
But "all of these companies have account receivables issues," Schumacher said. "When you start talking about the problem they have, that gets that discussion going.
"What ends up happening is when they don't collect that dollar - the money that's owed to them - they write it off at the end of the year as a loss. And so what they do is they realize that every dollar that they write off at the end of the year, that's writing off pure profit.
"So when [an MLS] walks in and says, 'You know, Mr. Client, I help companies with regard to recovering their slow-paying delinquent accounts. Do you have any slow-paying or stubborn accounts, people that owe you money for services or product that you rendered?' And now all of a sudden you've opened up a discussion for a problem that they have."
In other words, Optio is a solution to that problem, a service that can relieve businesses of a very acute pain point.
The value of having Optio in an ISO's product portfolio can also aid in merchant retention.
"When we talk about selling the total package, which is an MLS/ISO selling bankcard, gift and loyalty, check and a collections product, you've now given them four products to that business," Schumacher said. "The barrier to exit - meaning the ability for that business to just get up and walk away because a competitor came in the door - is not very likely because you've given them these four products."
Schumacher cited statistics from the Federal Reserve stating that total credit card debt had risen to $943.5 billion at the end of 2007. Credit card debt has increased 22% in the last five years. Furthermore, according to Schumacher, U.S. consumers charged $68 billion worth of purchases in 2007, 7.8% more than the previous year - the largest increase in the last seven years.
"We had no idea a year ago when we started to focus on getting [Optio] up and going that the economy would be as slow as it is right now," Schumacher said. "The economic news is not good today."
But it is good news for Optio, with businesses having no shortage of delinquent accounts. The businesses that Optio works with, such as dental practices, health clubs and building contractors, are not necessarily of primary importance to consumers when the bills at the first of the month roll around.
Spun off from check approval and guarantee company CrossCheck Inc. in February 2007, Optio hopes to enroll 1,000 to 1,500 ISOs and MLSs to sell their product in the next two years. Optio offers them the following benefits:
- Market to existing merchants
- Target new businesses
- Develop business-to-business opportunities
- Generous upfront commissions
- Ongoing residual potential
- Renewal commissions
- Training program
It looks like the Optio option is timely indeed.
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