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Table of Contents

Lead Story

Economic hang-ups: Will payments wilt?

News

Industry Update

Visa shoots for largest U.S. IPO ever

Vermont interchange bill a cry for help

Interchange act coming back stronger

TSYS joins the mobile fray

Data Treasury: Billions in the balance

Features

AgenTalkSM:
Jim McMahon

ATMs and a changing biz model

Travis K. Kircher
ATMmarketplace.com

Optio Solutions LLC. - Kinder, gentler collections

ISOMetrics:
Recessing, depressing economy

Views

Card stripes, prison stripes - security required

Biff Matthews
CardWare International

Education

Street SmartsSM:
Biting the ISO that feeds it

Dee Karawadra
Impact PaySystem

Shower candidates, grow your ISO

Curt Hensley
CSH Consulting Inc.

Secret's out: How to snag merchants

Maxwell Sinovoi
United Bank Card Inc.

PIN-ing profits

Scott Henry
VeriFone

Annihilate attrition

Jeff Fortney
Clearent LLC

Setting the stage for stupendous sales

Daniel Wadleigh
Marketing Consultant

Company Profile

Cutter LLC

New Products

Brand protection the Teleblock way

Teleblock Do-Not-Call Blocking System
Call Compliance Inc.

Software for streamlined processing

NitroSell
Company: NitroSell

Inspiration

Here comes the sun - and the dust pan

Miscellaneous

POScript

Departments

Forum

Resource Guide

Datebook

Skyscraper Ad

The Green Sheet Online Edition

March 10, 2008  •  Issue 08:03:01

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Street SmartsSM

Biting the ISO that feeds it

By Dee Karawadra

I recently heard a commercial on the radio from one of the major processors. The company was advertising the fact that it was a processor and asked, why bother going through the middle guy?

At first, I didn't think much of it. I know the processor has a direct sales force; ISOs are just one of its sales channels. But the thought of my processor directly competing with me, ultimately got me in an uproar.

At the risk of ruining my relationship with this processor, I think it is necessary to write about this issue.

Many ISOs have a direct sales force, including my company, Impact PaySystem. So, what is the problem with a processor advertising that it is a direct service provider and insinuating that ISOs and merchant level salespeople (MLSs) are superfluous?

As I thought more about it, it seemed as though the processor in question is aiming to shoot down ISOs. The ISO channel may not be the main focus for this particular company, but its actions affect all of us.

So, I posted a question about this on GS Online's MLS Forums to see what others were thinking.

MLS Forum member Mike Maxxon said it right. "We are and have always been the 'ugly stepchildren' of the entire credit card system," he noted.

"Even though we changed the entire world of credit card acceptance, bank executives see us as a temporary fixture as they fine tune the 'right way' to market products that they rightly own."

David Felts, known as eagle1 on the MLS Forum, brought up a good point that illuminates something I have also experienced. "I have heard of a few sponsoring banks offering large merchants better pricing than they offer to their MSP/ISO channel," he wrote.

"I saw on a recent thread someone complaining about running across a mega merchant who had IC [interchange] + $0.015. Is there an ISO out there anywhere with that pricing?"

He added that ISOs and MLSs bring more deals than this large merchant, but yet the merchant gets better pricing. "This is unethical, immoral and should be illegal," he stated.

Unfortunately, the processor does have a right to market however it sees fit.

As an ISO with direct sales reps (employee MLSs), my company has a general rule: We do not assign employees to areas where independent contractor MLSs are working with us.

If overlap occurs, it is because the employee was already working in an area before the independent contractor signed up, and the contractor was made aware of it before we began working together. A great many other ISOs seem to be applying the same rules.

In addition, ISOs benefit from having more than one MLS in an area; it helps build a company's brand name, for example.

But why would a processor compete directly with ISOs and MLSs?

Andy Pitts, alphapro on the MLS Forum, said, "I will also agree we take a lot more business from them [processors] than they take from us, mainly because they are going after the larger market segment, and we are focused on the medium to small market segment.

"We are more likely to run across a larger merchant than they are a smaller merchant. I'm not saying I like their carnivorous business strategy. We've just learned to live with it."

This may be true, but the majority of the ISOs will flip business right back to the processor. Hence, the processors have little to lose.

Anna Solomon, also known as FastTransact, expressed her frustration clearly, "It's called capitalism," she wrote. "Find an opportunity, and take advantage of it as long as you can until the backs of the people you walk on are no longer willing to support your weight.

"When the people revolt and demand restitution, only then will they [the exploiting parties] begin to realize they need the people to continue to exist.

"It's time for the MLS to realize they hold a lot more power and stop acting like victims. ... When the MLS realizes the collective power they have and are willing to risk their comfort zone, they can make effective change in the industry."

The only way ISOs and MLSs can gain respect in this industry is to step up and express themselves. And remember, ISOs and MLSs, there are many processors out there that would love to have your business, and they would not directly compete with you.

The company I mentioned at the beginning of this article is a great processing partner, but its practice of marketing directly to merchants to compete against its own ISOs worries me because the processor has all of the information necessary to take away my merchants should they respond to its direct marketing efforts.

Let this be a wake-up call. Think about which companies you are working with and how their business practices affect you.

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 dee@impactpaysystem.com.

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

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