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Merchants using independent sales organizations have become more sensitive to the rates they pay acquirers to accept credit cards for credit card processing since 2003, according to Harold Montgomery, chairman and CEO of the Dallas-based ISO lender Calpian. That sensitivity is squeezing the profit margins that ISOs and acquirers can get from merchant transactions. Speaking at the Electronic Transactions Association Strategic Leadership and Networking Forum in Chicago last week, Montgomery said ISOs that Calpian tracks typically saw a discount rate in 2007 that was 60 basis points above the interchange rate. The discount rate, which includes interchange and other fees, is what merchants pay their acquirers per transaction. In 2003, these ISOs tended to assess a discount rate 75 basis points above interchange. "We will see that continue to decline, but how much is hard to predict," Montgomery said. This dwindling pricing puts even more pressure on profit margins for ISOs and acquirers. To that end, as ISOs look for other products and services to boost revenue, their efforts to find products and services that can boost revenue are ongoing, Montgomery said. "There is no visible trend or product to change profitability, to change the basic downward trend line," he said.
