Between earnings pressures, looming regulatory changes and new technologies flooding the marketplace, today’s market can be a tough place for sales agents.
Some ISOs have written off the agent model as an inefficient way of doing business, but many still believe there is a bright future for those willing to evolve and adapt.
“I do not see the importance of the agent or sub-ISO diminishing at all,” says Dan Neistadt, president and CEO of Electronic Merchant Systems in Cleveland. “In fact, my view is that they will continue to be an important cog in the acquiring business.”
But survival will be a challenge. The consolidation trend, combined with the struggling economy, creates fewer opportunities for salespeople. At the same time, processors and acquirers face continuing pressure to bring in enough business, and the only way the two can compete in the market is on price.
“The current situation is we’re in a negative zero-sum gain,” says Paul Martaus, president and CEO of Martaus & Associates, a consulting firm based in Mountain Home, Ark. “Not only are we stealing merchants from each other, but the pool is continuing to shrink.”
Despite market forces, the independent sales agent program is thriving at Atlanta-based First Data Corp. John Barrett, the company’s senior vice president of independent sales services, calls the program one of the processor’s “key distribution channels.” First Data has more than 500 independent sales agents throughout the country and processed more than 28 billion merchant transactions in the United States in 2009.
First Data sees plenty of opportunities for independent sales agents, as long as they are willing to educate themselves and keep abreast of industry changes.
“They’re independent, so they’re not employees. Yet you want them to go out with the same message and follow the same strategic plan the ISO may have. And that’s one of the challenges you have with a lot of agents. They need to adapt with their knowledge level and as the environment changes,” Barrett says.
Keeping Sales In-House
Not all ISOs have faith in the outside sales agent model. Dharma Merchant Services does not use any outside sales agents, and that suits company President Jeff Marcous just fine.
“Our attention kind of shifted to other ways of engaging with merchants,” Marcous says. “The old model, it’s kind of passed.”
Today, 65% to 70% of the San Francisco-based ISO’s merchant portfolio consists of merchants specializing in e-commerce and mail/telephone orders. The remaining clients are retail merchants.
“Twice just this week, I got a call from a yoga studio and acupuncturist, both in New York. We closed them over the phone and walked them through the application. So from our perspective, although it’s wonderful to meet someone in person, it’s simply not necessary these days,” Marcous says.
Instead of independent agents, Dharma Merchant Services relies on its staff employees to answer the phones to land sales. They don’t receive commissions and have regular hours and benefits. “We’re fortunate that we don’t have to do any outreach. Most sales are from people who find us,” Marcous says.
Keeping sales in-house has been a necessity for the small company, which does not have the resources to communicate regularly with outside salespeople. It also is difficult to find agents who know all the nuances of the industry and then keep tabs on how much effort they put into their sales.
“It really takes three to six months to learn this industry, speak with confidence and be effective, and we just don’t want to take that time,” Marcous says.
Still, Dharma Merchant Services does receive employment inquiries. “Occasionally someone will call and ask if we have a sales agent program. We have full disclosure of our fees and donate 10% of our proceeds to charity, so a lot of people want to work with us. But we just don’t feel it’s the best use of our time,” Marcous says.
Inherent Advantages
The company has tried taking on part-time agents, but without success.
Dharma Merchant Services has set some boundaries in terms of limiting personal interaction. Early on, the company tried an electronic application in which a prospective merchant could go online and never have to engage with a human.
“But we feel it’s so important for there to be a relationship between the merchant and our company,” Marcous says.
A debate goes on among ISOs over whether to sell direct or take the independent agent route. “The increasing level of residual compensation that acquirers have to pay out could ultimately threaten the independent program,” First Data’s Barrett says.
By keeping sales in-house, the ISOs have more control over what salespeople say or do because the reps are employees. But from a sales perspective, having independent agents creates a broad spectrum of opportunities for the ISO. Plus, acquisition costs are lower because the ISO does not have to pay benefits or other overhead costs.
“These (agents) are all entrepreneurs, and they go into markets in areas of the country you may not be able to go into, or want to go into, as an organization. And I think there are some inherent advantages in there,” Barrett says.
But independent agents who do not keep up with industry changes and lose the ability to help develop new markets might find themselves out of work quickly, Barrett says.
Look for an expanded version of this article in the January/February issue of ISO&Agent magazine arriving shortly.
