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This article appears in the April 30, 2009, edition of ISO&Agent Weekly.
Faced with unrelenting competition, fickle consumers and an unending desire to lower costs, merchants are turning to their ISOs to find better payment options.
Evident in many conversations at last week's Electronic Transactions Association Meeting and Expo in Las Vegas, these trends are spurring ISOs to look deeper into their merchant portfolios to extract more revenue from them.
One method of accomplishing that is to capitalize on increasing merchant awareness of security.
At TransFirst Holdings Inc., a Dallas-based processor, interest among merchants in security spikes following widespread disclosure of breaches, says Stephan Hodge, vice president of product.
Whenever a TransFirst representative approaches a merchant, regardless of the time around an industry-breach disclosure, the sales approach is designed as a "partnership" with the merchant, Hodge says.
"It's not a scare tactic, but more of an effort to move the merchant to a better product," Hodge tells ISO&Agent Weekly. Such products could include a scanning service to check the integrity of the merchant's payment hardware and software.
Electronic Commerce International, a Las Vegas-based ISO, is having some luck selling security and compliance service as a "value" product, says CEO Jim Anderson.
"We're pitching a Mercedes Benz dealership with PCI compliance products as the value add," Anderson tells ISO&Agent Weekly. The merchant is concerned more with the overall service Anderson's ISO offers than just the rates for processing credit and debit transactions, he says.
Reduce Charge-Backs
Another avenue is to look at what transpires within the portfolios. Reducing the number of charge backs, for example, can help boost their portfolios' value.
As the economy changes, so too can the types of transactions that see charge-backs.
As out-of-work consumers scramble for any advantage to find a job, some are turning to merchants promising to certify them for an occupation for a price. For instance, a car dealership may insist that a job applicant purchase a sales-training course from a third-party vendor before considering the person's job application.
Many consumers, however, are finding that such merchants have little to deliver and are asking for charge-backs against their credit card transactions, Bryan Baumgartner, business leader of acceptance risk at Visa USA, told attendees last week at ETA's Compliance Day event.
Baumgartner loosely defined this type of employment-services merchant–and those that provide health and diet supplements, financial advise for debt consolidation and loan-modification services, online government grants, discount buyer clubs and travel clubs–as having charge-back ratios of as much as 10% of all their transactions.
The job assistance category recently came to light as the economy weakened, Baumgartner said.
Acquirers and the ISOs working with them should analyze their merchant portfolios to find these merchants and evaluate them, Baumgartner said. Too many risky merchants could jeopardize an ISO's ability to work with Visa, he said.
"We had three cases last year where we had to either terminate a sub-ISO or an ISO, or put restrictions on them because of the risk," Baumgartner said.
Charge-back risk is not dissipating. "It's happening more and more," he said.
