Ah, this is a truly rare “What if..?”. It is an event so rare and wonderful that you may have never seen or heard of it happening before. What is this rare “What if...?” The rare event is a consultant gives you something good for free.
    No. This is not a teaser or a taste of something to whet your appetite. It is not snake oil or an “all in” bluff for your next hand of “Texas Hold’em”. You really get something good, and there is no charge. Is this possible, you ask?
    Well, events and people like Mount St. Helens and Krakatoa, 9/11 and Pearl Harbor, the San Francisco and New Madrid earthquakes, the Tunguska Blast, the rises of Hitler, Stalin, Mao, Idi Amin, Pol Pot and Milosevic, multiple “lost” nuclear warheads, killer tsunamis and communication failures say that everything IS possible. And, as we’ve noted, almost all of these unlikely events or persons have taken place within the last century.
    These events and persons demonstrate that life is indeed a series of Poisson probabilities (EMJ = See below). The longer something has not happened, the more likely it is that it will happen. By the way, I’ve been noticing the use of Poisson probabilities a lot lately.
    Some “for examples” are the coming Yellowstone super-volcano, the “big one” quake in California and the shifting of the polarity of the earth. “They’re due or overdue, but they’re coming.” And, yes, even the recent TV drama about Revelations.
    When you see EMJ,* think ‘hocus-pocus’; but the concept does have a basis in fact which can take a long time to explain.
    So, “What if…” a consultant offered to help you get into the business as a card-accepting merchant? Of course, by stepping back, this can be a real help if you are an ISO, processor or Acquirer. It should give you a chance to review your pricing and the presentation of yourself to potential merchants.
    In this review, we’ll look at Pricing, Statements, Hardware, Software (Terminal and PC), Internet, Support, Underwriting, Risk Analysis and Miscellaneous. All of these items should be considered and appear clearly in a merchant’s contract.
    I just had someone call yesterday and crow about the low discount rate they had gotten. They weren’t crowing quite as loudly when they discovered all the “hiddens” they’d fallen for and what their real discount rate would be.
    With that in mind, let us take a look at most of the costing elements that go into the drafting of a merchant contract.

Pricing.

    Merchants, look for a full disclosure of all fees. Be very aware that if your discount is based on a series of prior events taking place, the chances that all the events will take place are slim (EMJ: Conditional probability) so don’t count on the low discount taking place.
    There are some usual fees such as monthly statements, any per item fees, online debit fees, EBT fees, e-checks and on and on. They should all be spelled out clearly.
    And, there is the question of how long your ISO or processor or Acquirer can hold your money after transactions successfully complete? Can they withhold a percentage of your funds for unexpected events or charges? How much for how long?
    But, there are many cases of other types of fees. As “for examples”, consider: Initiation fees; annual fees; retrieval fees; chargeback fees; and fees for supplies such as paper and tickets, ribbons, counter top signage, window stickers, special advertising assessments and anything else that may just appear.

Statements.

    Are they easy to read and follow? Do they show all necessary information to balance fully the merchant’s books and to determine how transactions settled so that the merchant can decrease fees by fixing transactions that downgraded?

Hardware.

    Merchant, go to the internet and price the terminal and printer you’re to get. If the highest price you find is $600, and you’re considering a five year lease at $30/month (60 x $30 = $1,800), you’re probably paying too much. Is there an automatic price increase? Can you buy or lease? Does the ISO/Processor/ Acquirer offer used or refurbished equipment? What is the warranty like? Extended warranty at what cost?

Software (Terminals and PCs).

    What terminals are available? What specific industries (p.a.: Retail; restaurant; travel; lodging; etc.)? Who/how are the terminals supported? Is PC software available? What does it cost? How is it supported? Does the merchant ever own the terminal or PC software? Then who supports it?

Internet.

    Are internet solutions offered? What is the cost? Who supports?

Support.

    Is support handled in house or by a third party supplier? Is it 24 x 7? Or, is it M-F/8-5; in which time zone? How much time can elapse before support is guaranteed? What happens if the guaranteed support is not forthcoming?

Underwriting.

    Is this process carried out by the merchant’s ISO? Or, is all underwriting done by an entity further upstream such as a processor or a bank? The further upstream the process takes place, the less likely the merchant will have serious input into the decision.

Risk Evaluation.

    Again, is this process carried out by the merchant’s ISO? Or is all risk evaluation done by an entity further upstream? The further upstream, the less likely the merchant will have serious input.

Miscellaneous.

    The dreaded “everything else”. Consider here such things as: What is the term of the agreement? Are there automatic renewals? What prices can just go up and what events can just happen on a date or at the ISO’s or processor’s or the bank’s sole discretion? Is there a cancellation fee for early termination? What about for any termination, at any time? Are things that the merchant bought, his/her property and to be ceded, when? Under what conditions can an ISO or processor or bank hold the merchant’s funds? For how long may the funds be held or how are the reasons for holding the funds resolved?
    Please look at all these items and their effects on your discount rate. At least, before the tears begin.
    If you have a “What if…” type question, please feel free to send it to me. I’ll try to fit your questions into these articles and give you a thoughtful and innovative answer.
    Let’s just say there are three guidelines:

• Answers must be limited to the size of this column. That’s a nice way of saying that questions that have long and detailed answers are probably not objects that can be addressed;
• No questions like “How high is up?” can be fully and correctly answered without significant artificial assistance, like lots of beer or EMJ. Always remember, the world cannot end today, because it’s already tomorrow in Australia; and
• This column, as good as it may get, cannot replace a full study and analysis. Again, a nice way of saying I probably can’t solve a specific problem without seeing and knowing all of the details.