As competition for clients intensifies and margins grow increasingly thin, many ISOs are seeking ways to reduce costs, increase efficiency and stand out from competitors. One method gaining consideration is the use of digital signatures and contracts.
Backers say they can reduce how long it takes ISOs and agents to process merchant applications, decrease the amount of paperwork required for new accounts and cut costs.
“I personally believe that a few years from now paper will be the exception in signing up merchants,” says Adam Atlas, a Montreal-based attorney with Adam Atlas Attorney at Law. “How we are going to get from where we are now to where I think we will be somewhere down the road is really the challenge” because of possible opportunities for fraud that may arise from using digital contracts, he says.
Merchant-service providers overall have been slow to adopt digital contracts because often ISOs and agents are too busy growing their own businesses with the tools they have to explore new technology, says Atlas.
The method a merchant follows to complete the digital application typically varies by vendor. Those companies that have embraced the technology typically find it increases the speed with which they process merchant applications.
“We automated the process of getting an application not only from the merchant but cleared through underwriting,” says Mike Cottrell, vice president of business development at TriSource Solutions LLC, a Bettendorf, Iowa-based merchant-processing provider and ISO.
One of the biggest issues for TriSource’s agents and ISO partners is getting merchants to fill out the contracts and fax them back to the company, says Cottrell. “We looked at it and said, ‘if we can speed up that process, making it easy to sign with a digital signature, we’ve got a good start,’” he says.
Potential Benefits
ISOs benefit from using online merchant-account applications instead of the traditional paper-based process because it reduces not only the amount of time it takes to process a contract but also the potential for errors, note some observers.
Switching to electronic contracts from paper-based ones can reduce an ISO’s sales cycle from 14 days to two days, says Warren Owens, the executive vice president of sales for ContractPal Inc., a Lindon, Utah-based company that provides online application forms with electronic signatures for documents.
With ContractPal, a sales agent initiates the process by opening a new contract and adding the client’s information. ContractPal then sends the customer an e-mail that includes a link to ContractPal’s website. The merchant logs in to the site to view the contract and can make changes and enter information as necessary.
The system indicates the areas where a merchant must sign digitally by displaying buttons that say “sign” or “reject.” A merchant can use the “reject” button if it chooses not to sign in the indicated area.
ContractPal ensures all necessary fields are completed before a merchant can submit the contract back to the agent. The system records who signed, the date and time of the signature, the Internet protocol address of the computer used to sign the document, and a unique transaction-identification number. An Internet protocol address is a number assigned to a device that is participating in a computer network.
Once the merchant completes the contract, ContractPal alerts the agent that the contract is ready for the agent to review and sign.
The paper-based process typically involves a merchant receiving a paper contract, filling out the necessary information and faxing it to the ISO, says Tom Gonser, founder and vice president of product strategy for DocuSign Inc., a Seattle-based provider of electronic-signature services.
Mistakes can occur during the traditional process, says Gonser. “Maybe [the merchant] filled out the wrong boxes. Maybe they missed filling out a page,” he says.
Some potential clients also may change their minds in the time between the handshake agreement with the agent and when the client receives the contract, says Gonser. A day or two often may pass between when the merchant receives the contract and when it signs it.
With DocuSign’s electronic process, the company sends an e-mail to new clients that informs them the sales agent with which they are doing business would like them to fill out and sign a document digitally, says Gonser. The client clicks on a link in the e-mail and is directed to a Web page that displays a graphic representation of the person’s signature but not an exact replication. The representation serves as a substitute for a physical signature that the client must accept as his or her
digital signature, he says. Clients also have the option of uploading a scanned version of their physical signatures.
Once clients accept the digital signature, they can view their contracts on the computer screen, says Gonser. Tags indicate where the client needs to “sign,” and the client can leave a digital signature by clicking on the areas indicated by the tags. Once finished, the client can print a copy of the contract for the company’s records, save it to a company computer or store the contract electronically with DocuSign, he says.
The costs for ISOs can decrease from roughly $45 per paper contract to roughly $10 per digital contract, says Owens. Paper contracts cost more because of the printing, ink, paper and storage costs associated with them, he says. Companies also must pay employees to enter data printed on the physical contracts into computer systems.
TriSource pays roughly $5 per electronic application, says Cottrell. “Initially we said we don’t want to pay $5 for an application to come in. Then we saw that 15% of applications that were faxed to use were incomplete,” he says.
For each incomplete application, the ISO has to use employee time to review the contract, inform the sales agent it is incomplete and have the agent gather the missing information from the merchant, he says. “We looked at it as a cost savings on the data-entry side as far as incomplete applications. That alone is worth more than $5,” says Cottrell, noting the company spends three to four times that amount to finalize an incomplete contract.
Excerpted from the May/June 2010 issue of ISO&Agent magazine.
