First American Payment Systems LP has signed Parkway Bank of Lenoir, N.C., as its 26th referral bank partner.

Under the terms of the deal, Parkway will promote the Fort Worth, Texas, independent sales organization's payment processing services to its commercial clients.

The deal was announced Nov. 9.

First American started its bank referral program 18 months ago, Kevin Jones, its vice president of sales and marketing, said in an interview.

Merchant trust of banks and better attrition rates from bank referrals are the two primary reasons for First American's commitment to bank-referral deals, he said.

"With so many different types of [sales] agents walking through a merchant's door, many merchants want to go to their banks because they trust their banks to do the due diligence," Jones said.

Banks will check an ISO's references, financial statements and other business information to verify the organization's credentials, he said.

Moreover, the attrition rate for merchant accounts opened through a bank referral is lower than some other acquisition methods, Jones said.

"Usually when a merchant has that trust factor [with the bank], they're not going to leave for a basis point or two" lower payment processing rate, he said.

First American works with banks through various types of relationships.

One of its models — the one it uses with Parkway Bank — allows the bank to refer all merchant inquiries directly to First American.

In another model, the bank refers merchant inquiries to a local First American agent office.

A third method has the bank serve as a sales office for First American.

In this model, the bank would sell the merchant account itself.

The mix appears to be working for First American.

"We win about 70% of the merchants the banks refer to us," Jones said.

ISOs rely on referrals, including from banks, trade groups and other sources, for 29% of their merchant clients, according to Aite Group LLC's "Merchant Acquiring in 2010" report released in November 2009.

Subscribe Now

Access to authoritative analysis and perspective and our data-driven report series.

14-Day Free Trial

No credit card required. Complete access to articles, breaking news and industry data.