by Ken Sturm

   We're on the phone every day with offices around the country, and something is becoming crystal clear over the past 6 months or so. It seems that every office's sell rate to merchants is approximately 1.65% and .25 cents per transaction. Sure there are offices out there at 1.60% and .25 etc., but the fact of the matter is there seems to be only pennies separating everyone at retail.
   Of course all the big Acquirers tell you that they were Acquirer of the Year, or that they received some special Association award for best chargeback processing that a merchant could care less about. Let's face, the big Acquirers all do a pretty terrific job. The really clever ISO's that know what their front end can do can differentiate their product on a terminal versus another front end; maybe the Vital front end makes that Hypercom T7 series sing a better tune than Global in the Restaurant application.
   Problem is most merchants don't really care. What's my bottom line cost is what the merchant asks you. So what if they have to do 6 key strokes to adjust a tip versus your application which takes 3; merchants only care about price which always brings things down to the lowest common denominator. Merchants are fighting in the trenches everyday worrying about this delivery coming in, who didn't show up for their shift or a myriad of other day to day operational issues.
   Fact is, you and the other 10 guys that came in saying that they could lower the merchant's bankcard processing rates don't seem to raise anyone's eyebrows from their cash registers. A few dollars a month probably won't change their lifestyles and they have heard it all before.
   The retailer's point-of-sale device, the magnetic stripe or bar code on a plastic card, and the underlying telecom infrastructure, are the springboard from which the complimentary products, services and technology merge. Our take on it is very simple; you have already mastered the bankcard piece- you know your buy rates, sell rates, and you can do the merchant analysis in your sleep. ISO offices that lead with complimentary products and services end up getting the bankcard business by default.
   Electronic Check Conversion is a relatively new technology that is being offered by many providers, many with extremely aggressive buy rates that provide for an Interchange type of component that rivals margins available on traditional bankcard qualified rates. Of course one of the exciting components of ECC is the fact there is a need for another piece of equipment; the check imager such as the EC5004i manufactured by RDM. Not all terminals deployed have the ability to interface with this piece of equipment so check with your ECC provider for their equipment matrix to see what works in conjunction with the terminal that you are looking to connect. If you are going to upgrade a merchant's terminal to work with this service, try to steer them into a multiple application capable product that can have other programs peacefully coexist in conjunction with credit and debit.
   Many offices around the country are now leading with gift and loyalty card programs instead of bankcard and are finding very high close ratios in the process. As we alluded to before, it's probably 10 to 1 on bankcard salespeople to a gift card salesperson. Many companies now offer small card production runs with custom graphics. With a gift card product, the sales agent has complimented a financial transaction with a marketing transaction. Merchants enjoy the ease of card issuance for gift card sales or merchandise returns and they enjoy the real time reporting capabilities that many providers offer. Once a merchant understands the concept of "float" (money in their account for goods and services yet fulfilled), and "breakage" (cards purchased and subsequently lost), they tend to look at gift cards in a most favorable light. Many gift card professionals have pointed to widely circulated stories of the Starbucks chain issuing 9 million dollars more of gift cards than what were fulfilled during the first 4 months of its gift card rollout. A good gift card program should provide an ISO with income streams on transaction fees, statement fees and card re-orders and collateral material. Look for providers with certifications on the big three: Hypercom, Verifone (Tranz series and 3700 series) and Lipman Nurit.
   We would be remiss if we didn't touch upon the exploding world of pre-paid products such as cellular minutes. Less than 15% of the United States population that carries a cell phone is on a prepaid plan, yet 35% of all people that visit a cellular phone store get refused credit on a postpaid contract. Today there are terminal applications that allow a merchant to sell the exact nationwide prepaid cellular minute plans that are offered by National carriers such as ATT Wireless, Cingular, Verizon, TracFone and more. Even Long Distance calling card products are available off the terminal. These types of products offer a multitude of merchant benefits such as no inventory carrying costs, and real time reporting. Of course one of the biggest merchant benefits is these services lend themselves well to redundant consumer traffic to a merchant location which leads to other impulse purchases as well. There are plenty of merchant Standard Industry Codes in your portfolio today that could benefit by the addition of pre-paid service.
   A whole discussion can revolve around merchant attrition based on price alone. Some Acquirers say they'll only pay nine times a monthly residual others say they'll pay 20. As an ISO, if you have a couple of other products and services with a merchant, the likelihood of you keeping the merchant in your portfolio probably increases tenfold. This allows an ISO the ability to work on a good margin without the worry about some rep coming in behind them with a 3 basis point savings.
   Table the price issue by offering complimentary operational pieces to your merchant accounts!