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This article appears in the Nov. 12, 2009, issue of ISO&Agent Weekly.
A start-up company is working on a merchant-services provider directory akin to Yelp.com, an online venue where consumers can share their opinions about merchants.
The TransFS Directory, being developed by Chicago-based Transparent Financial Systems LLC, would be "a place where acquirers can maintain an online presence, which includes a description, a link to its Web site, contact information, etc.," Sean Harper, CEO and co-founder, tells ISO&Agent Weekly. The directory also would hold ratings and reviews of acquirers, similar to Yelp, he says.
The directory is not yet launched, but acquirers can create a profile within it via the TransFS Web site, Harper says.
TransFS moneymaker, however, is its "reverse auction" system to help merchants find processing services.
With reverse auctions, merchants submit to TransFS the percentages of orders they receive in person, through mail orders, by telephone and online, and a current processing statement or their monthly sales volume and average transaction size if not already accepting payment cards. TransFS then analyzes the data trends in transaction types and rates paid for these transactions, which creates a merchant profile on which merchant-service providers then bid. The merchant chooses the winner from among the bidders.
For merchant acquirers, however, these bid services are helpful. The cost of getting a merchant through an online service that matches them with providers often is cheaper than paying a salesperson to do the same job, says Adil Moussa, an analyst with Boston-based Aite Group LLC.
The service is free to merchants because acquirers pay TransFS 0.05% of the transaction revenue for every customer found through the service.
Merchant acquirers could find this and similar services from other companies beneficial for finding merchants.
Eventually, Harper hopes to use the directory as a way to find merchant acquirers TransFS could invite to participate in its merchant-locator service.
Finding Merchants
ISOs already rely on a myriad of methods to find merchants. An Aite Group survey conducted in October 2008 of 160 merchants revealed that 24% of the respondents found their processor through a referral from a trade association. Of the 12 possible methods included in the survey, referrals garnered the largest response.
Merchants often are better served by getting as many as 10 proposals on their own for their card-processing services, says Moussa.
Eight merchant-service providers participate in the system now, with more joining "at a gradual pace," Harper says.
One online retailer found a merchant-services contract with a discount rate of 2.32%, compared with 2.91% under its previous contract with a different company, according to TransFS. The discount rate includes interchange and processor fees. A bed-and-breakfast saw its rate drop to 2.59% from 3.89%.
"On average our customers save about 35% off their statements. However, our customers tend to be getting an abnormally bad deal to begin with, which is why they come to us," Harper says.
Merchants that have used TransFS services so far are not falling into typical patterns of designating merchants, such as having mostly card-not-present transactions, Harper says. Instead, "the common thread is the psychological profile of the merchant. Our customers tend to be very comfortable using the Internet. They are 'do-it-yourselfers,' in that they are the kind of shopper that enjoys doing research to ensure they are getting what they want," he says. The typical customers that TransFS works with often are online merchants and services businesses, such as dentists, Harper says.
Merchant acquirers that use TransFS declined to be interviewed for this
article. "They see TransFS as a competitive advantage and don't want to advertise their participation," Harper says.
