By Steve Norell
US Merchant Services Inc.
No merchant level salesperson (MLS) starts out sending merchants to one ISO/processor and ends up with the same one years later. Most MLSs will send their merchants to several partners and never stay with one for their entire time in the industry. So what causes most MLSs to change their partners? I'll explore some reasons.
In many cases the MLS's business has grown to a size that warrants registering as an ISO. The only question is, who do they register with? If the MLS's current partner is smart, the ISO will register the MLS as a sub ISO to retain the business. This doesn't always happen. MLSs are determined to go their own way. Often, the reasons are that some type of negative action has motivated them to leave 100 percent and not to look back.
Most of the time, MLSs are seeking more money. Most MLSs think they are getting a great deal from their current ISOs, and truth be told, many are. Some ISOs are now giving away the store to sign new MLSs just to have them send as many merchants as possible. You have signing bonuses, conversion bonuses, larger splits, lower costs, trips to the islands, cars, pet ponies, etc. However, the notion exists that if you register as an ISO, you are going to get this huge increase in revenue. We can debate this forever, but it's more fiction than fact. It's true you will get 100 percent over your costs, but what are your costs?
Many ISOs start out being the best at everything they do. Customer service is outstanding, underwriting is liberal and fast, files are built correctly, product offerings and costs are great, and risk is not quick on the trigger. Then one day merchants call customer service and are put on hold forever. Merchant boarding slows to a crawl. Files are screwed up, and risk holds money at the drop of a hat. This occurs for a multiple of reasons, but as far as MLSs are concerned, it's not their problem. So they run to ISOs that promise none of those issues ever occur at their offices.
One morning you walk in the office and merchants are blowing up the phone wanting to know, what the hell is this fee? Over the years, I've seen ISOs offer services in an underhanded way. The famous $95 Y2K fee comes to mind.
Then there's the "it's on unless you turn it off" fee. The ISO announces it's signing the merchant up for this great new service that does everything but what the merchant needs. It's only going to cost the merchant $29.95 a month. It will be free for three months, but unless the merchant cancels after the initial period, the ISO continues to charge for it even though the merchant never asked for it. I have seen this cause more attrition than raising prices. It comes off as sneaky and unprincipled. If MLSs attempt to opt out of this money grab before implementation, they are told to suck it up and enjoy the few pennies they'll make from the monthly fee.
I've encountered situations where an ISO that started out being MLS driven decided that MLSs were a major pain and wanted only to work through POS resellers. Once an ISO makes a full commitment to do this, it's just a matter of time before the MLS is given lowest priority. The end result is the MLSs move on.
Many ISOs review the MLS agreement and want to renegotiate it. By renegotiate I mean give less to the MLS. If I have learned anything in this business, it's that deal count is the best way to gain power over any ISO during contract talks. I think it's a foolish way to do things, it's still the first question everyone asks prospective MLSs.
It's a fact of life in business that sooner or later you are either going to be bought or you will buy someone. If you are the one being bought, it's a sure bet your merchants will start to see either rate increases or new fees magically appear on their statements.
When the MLS questions this, the new owner always claims to have notified merchants by mail. The owner probably did, but it was at the bottom of page 11 in print so small you need to be a hawk to read it. If I bought a company for a lot of money, I'd want to get a return on my investment immediately. There are only two ways to do this. Add a lot more merchants or raise prices. Guess which one usually wins out? Whether or not this happens, most MLS leave when a company is acquired, because the toy they fell in love with is no longer bright and shiny, and policies have changed. If there is anything MLSs hate, it's change.
This issue surfaces the most: the ISO didn't pay the MLS on time or didn't pay in full, took away merchants, took back money, and on and on and on. The reasons are numerous and are always the same. One could say this would not happen if MLSs have attorneys look at their agreements before signing. This is a fairy tale. Unless you have signed numerous agreements, you really don't know what to look for when litigation becomes reality. I will never understand why an ISO who made a deal on day-one would want to change it down the road and negatively impact an MLS that has been a good partner for years.
If I were to ask all MLSs that read this article to send me examples of why they left a former ISO partner, I'm sure 90 percent of the emails I'd receive would describe how the MLS was screwed by his or her ISO. I'd prefer it if 90 percent of the emails would indicate the MLS just grew up and wanted to leave the nest.
I remember a line from a Michael Franks song that said, "I hear from my ex on the back of my checks." Using that same line of thinking, most ISOs never meet in person or talk to their MLSs even though the MLSs are sending them lots and lots of merchants. So the only time MLSs hears from their ISOs is when they get paid. If more ISOs would take more interest in their MLSs and not just throw money at them, they might retain them a lot longer and not have to get email from MLSs that says, "Its time to say goodbye."
Steve Norell is director of sales at US Merchant Services Inc. Based in Port St. Lucie, Fla., he oversees the USMS sales force and maintains the company's bank and processor relationships. You can reach him by email at email@example.com or by phone at 772-220-7515.
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