his year brought rapid change to the payments industry. As a merchant level salesperson (MLS), you had to learn a new vocabulary, a new sales model and a new business formula for long-term profitability.

Take a brief look back at new opportunities uncovered in 2004. And as you read this article, assess how much and how well you've embraced change, because change will only accelerate as we move into 2005.

Debit Is the Buzz

In 2004, the U.S. court system became better acquainted with the electronic payments industry. It seems not a week went by without a card Association or issuer announcing a lawsuit against the other.

However, the settlements did produce a valuable outcome for professionals selling credit and debit card processing services. Offline (signature-based) debit cards became unbundled in the pricing structure, and you now have the ability to charge your merchants a lower price for check card transactions.

Consumers like debit cards. In fact, according to a study by the American Bankers Association and Dove Consulting, debit cards were the only payment method that showed an increase in usage last year.

The study found that in 2003, consumers initiated 31% of in-store purchases with a debit card, compared with only 21% in 1999.

People used cash for 32% of transactions last year, down from 39% in 1999, and checks accounted for 15% of purchases against 18% in 1999. Consumers initiated another 21% of transactions with credit cards, down from 22%. (The figures are based on data from more than 2,000 consumers who responded to paper and Web-based surveys.)

Both online (PIN-based) and offline debit card activity continues to accelerate. In 2003, purchase volume on offline debit products rose 21% to $386 billion from $317.7 billion in 2002. And online debit networks processed or "switched" 522.8 million PIN-based purchases in March, up 25% the same period last year.

As an MLS, you're in a unique position to sell merchants on both flavors of debit. Talk to them about processing online and offline debit cards and the benefits of providing their consumers with a choice. Unbundle check card pricing from credit card pricing, and sell a PIN pad for online debit use.

The Value of a Gift

In 2000, the terms "multi-app" and "value-add" were introduced to our industry. By now, they have probably become part of your lexicon. Does a day go by when you don't mention electronic gift cards or check conversion?

Take a look at retail holiday advertising in 2004. Gift cards were ubiquitous. Every merchant from the corner jeweler to the town butcher now has a gift card program. Retailers practically gave them away to attract consumers to their stores, and to make sure that they would make a return visit.

According to the 19th annual consumer survey of holiday retail spending trends, commissioned by Deloitte & Touche USA LLP, gift cards have replaced apparel as the holiday purchase of choice.

Estimates on holiday gift card purchases are reported as high as 20% of all retail sales, with 64% of consumers indicating they intended to buy gift cards. The value proposition is strong, and turnkey card programs allow even the smallest of merchants to get in the game by offering personalized gift cards.

Check 21 Drives Change

Even with check payments on decline, consumers still wrote more than 15 billion checks at the point of sale (POS) in 2003. Add to that the billions of dollars lost each year from check fraud and uncollected funds, and you'll find that, on average, merchants pay about $1.22 for each check accepted.

A closer look at returned checks finds that more than $169 million worth of checks bounce daily in the United States; banks reject them due to non-sufficient funds (NSF), closed accounts or stop payment orders.

The number of bad checks has surpassed 250 million annually, with a value of nearly $19 billion. Businesses never turn over nearly a quarter of all bounced checks for collection because the dollar value of the check is too low to justify the collection expense.

The National Retail Federation estimates that retailers lose $5.9 billion to bad checks annually; 70% are attributed to NSF and 30% are attributed to fraud.

In 2004 the Check Clearing for the 21st Century (Check 21) Act took effect. The law recognizes a digitally imaged check as a legal document. Advances in imaging technology and check conversion services bring the benefits of check conversion to a merchant's POS.

Reduced NSF occurrences and faster funding translate to improved cash flow, and businesses of all types and sizes comprehend that value proposition.

If you understand how to profile check prospects based on risk or convenience, and to demonstrate a true return on investment, you can profit from electronic check conversion.

The Upside of Retention Revenue

Businesses are under intense pressure to increase top-line revenue and implement best practices that improve the bottom line. The competitive nature of the payments industry marketplace today makes customer churn a devastating problem for many firms.

Some companies experience merchant attrition rates in excess of 15% - 25% annually. Attrition drives market prices lower and leads to lost profits and higher customer acquisition costs.

Analysts estimate that acquiring a new customer is five times more expensive than keeping an existing one. With this in mind, it's clear that merchant retention is crucial. As competition for new customers grows more intense, you must focus more on cross selling and up selling to existing customers.

Spend time analyzing merchants' data to really know and understand who their valued customers are. Your goal is to connect to those customers in order to improve retention.

Segment merchant portfolios by market, volume, length of service, application and solution needs, and profitability. Find a common denominator for each segment, and seize opportunities to go back and cross sell or up sell, and you will improve retention.

As the end of the year approaches, re-examine your business and your acquirer/processor. Is your processor a partner in change? Are you armed with the data, applications and tools you need to add value to your sales pitch and dollars to your bottom line? If not, use 2005 to modify your business model and challenge the status quo. Change happens faster than you think.

Michelle Graff is Vice President of Marketing for NOVA Information Systems. E-mail her at michelle.graff@novainfo.com .