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GS Advisory Board:
Weathering a rough climate

Spiraling energy costs, higher interest rates and unstable market indexes have created an atmosphere of economic uncertainty. Add to this the threat of security breaches and litigation in the payments industry and it is easy to see why many merchant level salespeople (MLSs) have become a bit nervous. To gauge the industry's reaction to the turmoil, we posed the following questions to members of The Green Sheet Advisory Board:

  • How is your company faring in the current economy?
  • Has the price of fuel become an issue?
  • What advice can you offer to MLSs for weathering the current economic storm?

Following are their responses, in alphabetical order:

Steve Christianson, AAmonte Bankcard

Interest rates and the investment indexes do not affect our business much. We are not servicing any debt at this time, and we are profitable. As an ISO, we are also compliant and comfortable with our security.

For ISOs that have serious debt service, that are living on the edge of security compliance, and that are involved in any litigation, times can be getting tougher.

The current economy is excellent overall. ... We are optimistic. Our business and industry are percent and fee driven. When inflation goes up, so do our revenues.

The cost of fuel has little effect on our ISO business. What it does affect are the MLSs' daily expenses. What we see is their concern over the cost of transportation in their daily business routines.

They seem to be a little reluctant to make consistent follow-up visits, relying more and more on the phone.

The true professionals are taking the attitude that they must work a little harder, increase the number of new accounts and equipment sales, and increase their residuals to minimize the effect of increasing costs to their businesses.

Bottom line for MLSs for weathering the perceived economic issues: Work harder, increase income and residuals, and do not worry too much about it.

Also, pay off or minimize debt, whether on your automobile, office expenses or home. Eliminate your current consumer interest costs, pay off your bills and do not depend on anyone but yourself for your needs.

Alan Gitles, Landmark Merchant Solutions

Landmark is well-positioned to take advantage of certain trends. We are vertically integrated, meaning we handle all sales and back-office functions with our own staff.

We have no outside agents; we are building partnerships; we offer a host of Web products that merchants desire; and we have a management team with decades of experience in the business.

This business is more competitive now than ever before, with tighter margins. And sales could always be higher. The increasing price of fuel has no impact on our costs since we are entirely telesales. In that sense, it is an advantage over those salespeople in the field. It may, however, cut into our merchants' sales, but that is impossible to measure. Of course, everyone focuses on sales and new distribution channels. We didn't used to spend so much time working to cut costs, but I find that increasing our ... use of technology and programming to reduce expenses usually means spending more upfront for a long-term benefit.

Russ J. Goebel, Pay By Touch Payment Solutions

Organizations must use the current market and economic conditions as an opportunity to improve their well-being and grow their portfolios. Being proactive during these times will allow them to increase their market brands and be positioned more favorably with their competition.

They will need to work more efficiently by utilizing the telephone, e-mail, mailers and other vehicles to maximize sales opportunities.

The conditions will force sales representatives to be more productive. They need to master the one-call close and articulate the value proposition of their organization's offering.

Furthermore, organizations will need to understand their specific differentiators such as service, technology, gift cards, electronic check conversion, prepaid, or biometrics tied to electronic payment processing, and access to additional business capital.

Jerry M. Julien, Equity Commerce LP

As the economy continues to fluctuate, big changes for our industry unfold and profit margins continue to thin. ISOs and MLSs will need to offer superior products and services to remain alive and profitable.

The economy, merchants' increased knowledge of interchange and our industry, as well as public review of it, will force all of us into more of an advisory role for our merchants as we seek a return on our time and costs invested in getting and keeping those merchants.

The cost of fuel is forcing many agents to telephone, e-mail and direct mail marketing efforts to help reduce the costs of driving. That being said, establishing face-to-face presentations and personal relationships helps agents protect their portfolios, making them invaluable and worth the expense.

The cost of fuel to merchants is causing them to review all their costs of doing business. They see where they can either pass those costs on to consumers or cut costs with their vendors or providers. This is opening many opportunities as merchants put their credit card processing needs out for bids to help reduce costs.

This is a double-edged sword. Although it presents many opportunities to earn new business, it also creates just as much work for agents to maintain their existing accounts. They may have to reduce their fees to keep those accounts, thus reducing their residual income.

My advice to agents: Know your products extremely well, be professional and courteous, and offer full disclosure of all terms, fees and conditions.

The economy, technology and our industry are changing rapidly every day. But the closing of one door creates new opportunities. Be aggressive and knowledgeable, and do not rest on reputation or existing business.

Dee Karawadra, Impact PaySystem

How is your company faring in the current economy? We have been fortunate to not have been affected yet.

Has the price of fuel become an issue? Yes, we hired telemarketers to create set appointments pinpointed by certain ZIP codes. This eliminates driving from one end of town to another, and each day is more productive.

Advice to MLSs for weathering the current economic storm: You just have to let the dust settle. One thing unique about our business is that during better economic times, people spend money using credit cards. During tougher times, they have to use their credit cards to make ends meet.

It may be time for MLSs to start focusing on service and lowering attrition. This way they keep the accounts they have and balance out the lower numbers of new accounts.

Allen Kopelman, Nationwide Payment Systems Inc.

The economy will go up and down, and people will buy fewer luxury items. But they will still shop and go out to eat, therefore driving transactions. And if people are worried about cash flow, they will use credit cards even more.

The price of gas is affecting everyone who needs gas to get somewhere, including MLSs. It is harder now to be a new MLS with equipment margins so low, free equipment and established MLSs to go up against.

Something changing in the industry: More and more companies are using inside sales reps for phone sales and salaried sales reps for outside sales. If you can't get independent reps, then bring it all in-house.

To read the Green Sheet review of
Who Moved My Cheese? go to

Our company is doing great; revenues are up. And we keep in mind the principles in the book Who Moved My Cheese? by Spenser Johnson (Putnam Publishing Group, New York, 1998).

You have to evolve and change. We are looking to the future and making plans to stay competitive and remain competitive.

If you are an established MLS, look at ways to cut overhead and look around for a processor with low costs.

Joseph Natoli, Retriever Payment Systems

Retriever is experiencing year-to-date double-digit growth in every important measurable metric. From what we are seeing, we will have a record year.

Has the price of fuel become an issue? To ignore what is happening to the price of fuel would be foolish. The nature of the acquiring business is such that one can do very little in the short run that will have an immediate impact, other than to cut down on travel.

Advice for MLSs: Diversify. If your portfolio is diverse enough in geographic locations, SIC codes, and size of merchants, then you have a better chance of being less affected by economic (high interest rates), geographic (hurricane) or catastrophic (such as 9/11 and what it did to airline travel and hotel bookings) events.

If people are in an economic bind, they still need to make emergency purchases: appliances, auto repairs, medical, etc. What suffer are items and services some may consider nonessential.

That is why a portfolio comprised of all merchant types in all parts of the country will do well even in a down economy.

Charles Salyer, GlobalTech Leasing Inc.

Make every call, every trip and every lead count. Now is the time for the one-call close as each follow-up will seriously degrade the account's profitability. The steady onslaught of interest rate increases will force leasing companies to increase rates. Indeed, the two largest lessors have already sent out rate increase announcements, and the smaller companies will most likely need to follow suit.

The margins are already very thin in the leasing business. None of the companies can absorb the numerous increases in the cost of funds.

J. David Siembieda, CrossCheck Inc.

Since much of our business is completed over the phone, gas prices haven't been an issue with us directly. However, rising fuel prices have an impact on everyone in some way: our employees, the MLS, the merchant, the merchant's customer ... everyone feels it.

As sales professionals, we need to ask if there are ways to lessen the impact. Some ways to do this include offering your merchants additional payment services that provide convenience to them and their customers.

Internet payments, phone and fax checks, and wireless applications can all help merchants weather the storm by providing their customers alternatives to shopping on-site.

Small business owners will appreciate ways to incorporate payment processing into their business software; this will streamline their accounting. Business office conversion is the service to sell for reducing trips to the bank, saving business owners both staff and travel time. In the meantime, as MLSs, you also need to look for ways to optimize your selling and travel time. Ideas for this include maximizing your trips by taking a few extra minutes to contact other businesses in the same area.

Use the phone for follow-up calls when possible or to preset appointments. And see if your payment processor provides training by phone. These small actions may make a big difference. As sales professionals, we should keep in mind that challenges can sometimes turn into opportunities.

Scott Wagner, Humboldt Merchant Services LP

Your question as it relates to uncertainty in the marketplace hits the nail on the head for our industry. To that end, it is one of the chief reasons why we [Humboldt] are doing as well as we are. Reason being, we are a bank.

We are not an independent organization or some agent loosely affiliated with a financial institution; rather, we're a real bank that handles almost all its payment processing internally.

This is not something you see every day, and it makes for an excellent story when pitching our services versus the local "flavor of the month." As far as keeping afloat, we just try to keep our heads down, stay focused and leave the spin control to others. Our banking story and payment processing speak for themselves.

Dan D. Wolfe, Teledraft Inc.

We have seen no real impact from the ever rising fuel cost; in fact, business has never been better. When fuel went up, a lot of our reps were concerned with the cost of getting the sale. This opportunity has allowed us to concentrate on top qualified leads that are in close proximity.

Our associates are happier, and this has shown on our bottom line. We have also added new product lines that have created additional cash flow. ... [W]e are firm believers that the good Lord never closes a door without leaving a window open. The trick is to find it.

We thank the GS Advisory Board members who responded to our questions. We will further examine many of these issues in our upcoming GSQ (September 2006, Vol. 9, No. 3). Look for it as a supplement to The Green Sheet, issue 06:09:02, and on GS Online at

Article published in issue number 060802

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