Uncertainty, competition and even attacks. In 2012, independent sales organizations face a year of danger and opportunity.
Because of rising renewal fees, some companies may stop registering as ISOs with the card brands and instead become sales agents for other ISOs, Duayne Haskett, vice president for agent/ISO business development at Priority Payment Systems LLC, an Alpharetta, Ga.-based ISO, tells PaymentsSource.
“An increase in registration fees by MasterCard and potentially Visa may force smaller ISOs to rethink being registered as an ISO,” Linda Rossetti, president of Bluestone Payments LLC, a Peachtree, Ga.-based ISO, wrote in an email to PaymentsSource. “Some may choose to fly under the radar as either not registered, or they will change their models to becoming agents.”
MasterCard Worldwide increased its renewal fee for ISOs to $5,000 for 2012, according to a MasterCard bulletin. That doubles the $2,500 fee the company charged for 2011, Haskett says.
Many ISOs fear a similar increase from Visa Inc., and that is contributing to the atmosphere of uncertainty, he observes.
Others see the immediate future in even starker terms.
“Merchant acquirers are under attack,” says Paul Coppinger, president of Scottsdale, Ariz.-based Apriva Inc. “They are being assaulted by people from outside the community who are taking opportunities away.”
Square Inc., which is offering merchants a free mobile card reader, intends to disrupt the entire payments industry, not just the acquiring side of the business, Coppinger tells PaymentsSource.
“Square has a big vision,” he says. “They are going to mess with the industry.”
In 2012, Square will begin to move beyond payments by offering related value-added services, such as back-office functions that help merchants run their businesses better, Coppinger says.
Other forces from inside and outside the acquiring industry also will continue their market assault, he predicts.
Google Inc. is offering a mobile wallet with the help of partners that include Citigroup, MasterCard and Sprint (
Both Google and Isis base their mobile-payment offerings on Near Field Communication, which will not reach maturity in 2012, Coppinger predicts.
“Next year will not be the year of NFC,” he says. “It’s a business model not proven and a business case not sold; it won’t move the needle in 2012.”
EMV chip cards, however, will make inroads in the United States by the end of the year, Coppinger prognosticates.
Fraud is driving the need to convert to EMV, and the merchant-acquiring industry should get started on adapting to the technology, Coppinger advises. The transition will not take place within just a year, but ISOs that begin the process early stand to benefit, he notes.
Visa is continuing to push for EMV adoption and has set policies designed to bring about the conversion, says Eduardo Perez, Visa’s head of global system risk (
In another thorny development for ISOs, some retailers and restaurant operators may stop accepting debit cards for low-cost merchandise or meals, Coppinger says. That rejection could come as a reaction to the so-called Durbin amendment to the Dodd-Frank Act, which is raising debit card fees for small-ticket transactions. If the public switches to cash, ISOs would lose residuals.
Although observers see a range of challenges ahead, one piece of advice emerges in just about every case: ISOs and agents should augment payment-processing offerings by providing value-added services that help merchants run their businesses more efficiently and more profitably.
That way, ISOs can transform themselves from salespeople offering a commodity product into consultants providing tailored offerings.
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