Many organizations, such as banks, local business associations, Web-site designers and software developers, refer their customers to independent sales organizations and acquirers for merchant-processing services. The ISO or acquirer then shares with those organizations a percentage of its processing revenue. Or it may provide the referring organization a one-time finder’s fee when the merchant begins processing transactions.
ISOs using referral agreements as a source for merchant sales leads may want to heed the advice of their peers when crafting the deals. In many cases, the referring entity becomes an agent for the ISO. As such, contracts must be clear and specific, says Will Detterman, CEO of Leap Payments Inc., an Agoura Hills, Calif.-based merchant-services provider.
“The big deal is defining clear roles and responsibilities and communication,” Detterman tells PaymentsSource.
Everyone signing the agreement must understand why and how he gets paid, Detterman says. Details also must include who is to receive payments within the referring organization.
Detterman also includes examples of how the payments will work, something helpful for those unfamiliar with credit and debit card processing. “It helps set expectation levels appropriately,” he says.
Kyle Morgan, president of Mercantile Processing Inc., a Fenwick Island, Del.-based merchant services provider, often prefers that referring organizations sign a standard agent agreement. Unfamiliarity with agent agreements may cause some to hesitate signing, or the length of the contract may intimidate them, Morgan says, noting some agreements can be 16 pages long.
“You have to see what your referral partner is willing to do,” Morgan says. “If you can get away with giving them a standard agent agreement, do it.”
Morgan recommends using shortened agreements if necessary but eventually moving the referrer to a standard agent agreement. “Tell them that’s where the real money is made,” he says.
