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This article appeared in the March 5, 2009, issue of ISO&Agent Weekly.
U.S. Bancorp's Elavon Inc. merchant-processing unit is using a simplified enrollment service that American Express Co. developed to help boost acceptance of its cards among small and midsize merchants.
The Atlanta-based processor announced Tuesday it is offering the AmEx OnePoint program to more than 170 ISOs and 1,500 banks, which can use it to encourage more merchant clients to accept AmEx cards.
Under OnePoint, merchants that want to accept AmEx cards can check a box on an application form, and Elavon sets up the clients' AmEx accounts, handles the processing and settlement, provides customer service and compiles monthly statements-everything but setting pricing and owning the customer contracts, which remain AmEx's responsibility.
This arrangement "allows American Express to preserve what is unique to their card type, but at the same time they benefit from our economies of scale," says Stuart C. Harvey Jr., Elavon's chief executive.
Previously, merchants had to complete a separate application to accept AmEx cards and received a separate statement for AmEx transactions. Those purchases are included on consolidated statements that Elavon creates that also include information about the merchants' other card transactions.
The service makes it easier for ISOs and banks to convince merchants to accept AmEx cards, though Harvey could not estimate how big of a boost AmEx might receive. Elavon has more 850,000 merchant clients.
AmEx receives the same data on each transaction from Elavon that it would obtain if the New York-based card company handled the acquiring relationship itself, Harvey says.
"Elavon, in this capacity, acts as a service agent," he says. "We basically perform several processing functions."
Working With Third-Party Providers
Elavon began using OnePoint with its own merchant customers in February, and it says it is the first processor to offer the service to third-party acquirers and its agent banks.
The processor plans to make OnePoint available to Canadian merchants, says Mike Passilla, Elavon executive vice president for global business development. He would not say when that would occur.
Elavon will have a "little bit of an edge" on its competitors until they, too, adopt OnePoint for their third-party sales partners, Adil Moussa, an analyst with Boston-based Aite Group LLC, tells ISO&Agent Weekly. "Everybody realizes the top 10 acquirers are going to be offering this very soon," he says.
Aside from the splash of being first to market, Elavon also stands to gain by eliminating multiple statements for merchants, Moussa says. "That'll give the merchant much better service by having everything in one single contact point," he says.
Under the previous system, acquirers had to wait until AmEx approved the account and then hope the merchant activated it, he says. Now the responsibility for ensuring those accounts is activated rests with acquirers.
Acquirers are likely to pursue "anything to supplement" transaction volume, Moussa says. "Acquirers will really go after this," he says.
ISOs likely will pursue consolidated accounts, too, says Jamie Savant, partner at The Strawhecker Group, an Omaha, Neb.-based consultancy.
"This is a great thing for merchants," Savant tells ISO&Agent Weekly. The merchant-service provider will be able to sell that consolidated account as a benefit, he says.
Consolidated accounts also could speed how soon a sales agent makes money from the merchant's new account, Moussa adds.
Agents do not earn recurring revenue from merchant transactions until the account is activated, Moussa says. As processors and acquirers push merchants to activate their accounts sooner than later, that could boost how quickly agents start earning money, he says.
Expanding Acceptance
Expanding acceptance by small and midsize merchants is an important goal for AmEx. Until 2007, it handled all of its own acquiring, but it has since struck partnerships with Elavon, Kohlberg Kravis Roberts & Co.'s First Data Corp. and Heartland Payments Inc. that handed off the work of pursuing acceptance with small and midsize merchants, leaving AmEx free to focus on large merchant clients.
A First Data spokesperson wrote in an e-mail message Tuesday that the Greenwood Village, Colo.-based processor also offers OnePoint to its merchant clients and plans to make it available to third-party sales companies in the third quarter. AmEx executives were not available to discuss OnePoint Tuesday.
Elavon also provides acquiring and processing services to Discover Financial Services, which, like AmEx, long handled sales on its own but began working with third-party acquirers in recent years to boost its acceptance among small and midsize merchants.
Elavon offers consolidated statements for its merchant clients that accept Discover, but unlike its AmEx deal, it also can set pricing for Discover and bundle it with Visa Inc. and MasterCard Worldwide card acceptance.
Elavon sets a single discount rate, which includes interchange and processor fees, for transactions made with any of the three companies' cards, and Elavon owns the merchant contracts, Harvey says.
