IMGCAP(1)]
This article appears in the Feb. 12, 2009, issue of ISO&Agent Weekly.
No immunity trophy exists that prevents an ISO from feeling some effect of current economic conditions.
And while most ISOs agree making a dollar is tougher today than it was a year ago, ISOs continue to generate revenue and make a profit from merchant accounts.
Among their business tools, ISOs turn to technology to help retain and add clients.
Merchant retention is especially important.
"We want to keep the merchants we have at the present time," says Mike Sanati, vice president of technology at Merchants' Choice Card Services, a Woodlands, Texas-based ISO. "Times are tough for everybody."
While optimistic for an eventual economic turnaround, ISOs are not waiting and are coming up with ways to find more revenue from existing merchants. They also are concentrating on reducing merchant attrition.
ISOs are finding new products, such as point-of-sale systems, that sell for less than similar systems a large retailer would use, to help strengthen the merchant's connection to the ISO. If a merchant gets a variety of services from the ISO, it becomes that much more difficult for the merchant to switch ISOs.
No Easy Task
Merchants' Choice Card Services reviews a variety of factors in calculating the potential payoff of adopting new technology: Is the new technology convenient for customers? What is the revenue potential for the sales agent? What additional hardware or software is necessary for the merchant? For the ISO?
Some ISOs asking those questions are finding homegrown answers.
Within the past year, United Bankcard Inc., a Hampton, N.J.-based ISO, introduced HarborTouch, a POS system that only its agents sell. Merchants get United Bankcard's payment services in a device that does more than accept payments. The PC-based system includes software for a time clock, merchandise pricing and inventory management.
Increasingly, merchants want payment equipment that enables them to track inventory, clock employees' time and generate sales reports. Point-of-sale systems are the next step for merchants that want a payment terminal that does more than accept payments, contends Henry Helgeson, president and co-CEO of Merchant Warehouse Inc., a Boston-based ISO. This year, Merchant Warehouse says it is working closely with POS-system maker PC America to incorporate its processing service into software loaded onto PC America's devices.
Such systems have become more affordable for smaller merchants, and more merchants are computer savvy than they were just five years ago, Helgeson notes.
ISOs long have worked with software developers to integrate their payment services into POS systems and POS-system software. The difference with these two examples is the emphasis on selling the POS systems through ISO sales channels.
With POS systems in the agent's hardware offerings, the agent stands a better chance of making a sale with one because the equipment is familiar and the revenue plan is known easily. All this work points to greater emphasis on retaining existing merchants and generating more revenue from them.
Shifting Models
The ISO industry is shifting from a residual-revenue model to a service orientation focused on value for the retailer, says George Peabody, director of Mercator's emerging technologies advisory service. Merchants want to know how to increase the size of transactions, keep loyal customers and attract more customers, he says.
Conceptually, the industry is taking on characteristics of the enterprise market where products and services are licensed to a customer, Peabody says. That transition generates a different set of technological needs and ways to fulfill those needs.
Specifically, an ISO should look at its sales staff and see which ones act as "farmers," who are able to get sales of out an existing group of merchants. "Put 'farmers' to work selling something like HarborTouch," Peabody says.
