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A Thing

Five questions to ask when converting merchants

By Kimberley Marvin

Many sales agents see the risk department as the bad guy. They tend to hear from it when something is wrong, and since this something often involves holding large amounts of money, interactions aren't always as pleasant as they could be.

The truth is that the processor's risk department exists to help agents and their merchants. It wants to protect them from financial losses and the company from liability against unscrupulous merchants or fraudulent transactions. It's time to open the dialogue between risk and sales. Following are the five questions agents should ask merchants when converting them. Asking these questions and receiving honest answers will help both parties avoid frustration (not to mention angry phone calls) down the road and will provide salespeople with a better sense of how to best work with the risk department.

1. What is a normal ticket?

Most processors require agents to list an "average ticket" when submitting applications for underwriting. Sometimes, though, the word "average" activates an agent's internal calculator, and the math involved (volume divided by transactions equals average ticket) overwhelms the questions' intent.

Also, agents often try to think one step ahead of the risk department and are tempted to inflate or deflate the average ticket amount in order to minimize the department's involvement in future transactions.

That's why it's better to use the word "normal" instead of "average." The risk department isn't looking for an exact amount, rounded to the thousandth; rather, it needs to know what a typical transaction for the merchant looks like. If the figure is distorted, it will end up creating more work for everyone. The risk department will have to flag seemingly unusual transactions that are actually well within the average ticket range, and the merchant will have to risk funds being held on perfectly ordinary business days.

2. What is the frequency of uncommon tickets?

Remember that the risk department focuses on exceptions. If it knows ahead of time the typical flow of business for a merchant, it will know not to overreact when an unusual ticket amount comes through the system.

Not all merchants have what could be termed an "average day." If agents make the risk department aware of merchants' normal ticket size, and how frequently large deviations from that amount occur, it will focus on protecting their investment in merchants by looking for exceptions to the exceptions.

3. Do you have special customers or special items?

Do merchants have customers who always pay for a month's worth of merchandise in bulk over the phone? Do merchants provide special goods or services for a recurring monthly or annual event?

These are exceptions that the risk department also needs to know about. Merchants have certain VIP customers; agents should communicate that to the department so it also gives these customers the VIP treatment, or at least is on the lookout for their larger-than-average purchases.

4. Do you have seasonal items or promotions?

Again, this question is about constructing a full picture of the normal flow of business for merchants. Florists or nurseries could be expected to do more business in warm weather, but perhaps merchants support themselves in the cold months by selling firewood or plowing driveways. The average ticket for those goods and services will likely be very different from the rose bouquets sold in spring and summer.

Also, merchants offering gift certificates or gift cards can be expected to have a sharp increase in activity in November, December and (for the procrastinators out there) early January.

Last minute gift givers making purchases on the phone or online may place many of these orders. The risk department will know to allow these transactions if it's informed of them ahead of time, but otherwise, the sharp increase in phone and Internet orders might set off fraud warnings.

5. Are you opening up different marketing channels?

Cynergy's merchant application asks agents to list the percentage of card-swiped and MO/TO transactions. If merchants are underwritten for a 100% card-swiped business but then decide to begin selling merchandise through the Web or a catalog, risk flags will be raised.

Agents should get the full picture of merchants' businesses before submitting the information. Merchants who do 90% of their sales in the store, for example, but occasionally exhibit at trade shows (which have limited space for on-hand inventory, leading to a greater reliance on keyed-in transactions and delivery by mail) should not be underwritten as 100% card swiped.

These questions are only a starting point, of course, but if agents ask them and provide honest answers on merchant applications it will save quite a few hassles down the road.

Kimberley Marvin is the Risk Director of Cynergy Data, a merchant acquirer that distinguishes itself by relying on creativity and technology to maximize service. Cynergy offers its ISOs: VIMAS, a cutting edge back-office management software; Vimas Tracking, a ticketing system that makes responses to customers fast, accurate and efficient; Brand Central Station, a Web site of free marketing tools; plus state-of-the-art training, products, services and value-added programs, all designed to take its ISO partners from where they are to where they want to be. For more information on Cynergy e-mail Nancy Drexler at .

Article published in issue number 060201

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