As merchant services professionals, we’ve all found ourselves in this very uncomfortable position: a vendor isn’t delivering, and we’re left holding the bag.
Here’s the thing about payments… we all want to be in control of our service delivery and destiny.
But we need processors, POS devices, gateways, security/compliance services, and an ever-changing combination of other providers to fill in the gaps and help us deliver what we hope is a seamless experience for our merchants.
Sometimes those things break. Or fall short of service levels.
Yet the merchants come to us. They bang on our doors demanding answers. As they should— often this affects their cash flow, the very lifeline of their business.
It can put us in what feels like a very helpless position. But here are some constructive tips to help you weather the storm:
✔️ Communicate clearly with your merchants and vendor. Share enough information, but not so much that it’s overwhelming or irrelevant. Tell your merchants how this affects them. Tell your vendor how this is impacting you and your merchants without being whiny. This is an art form, practice makes perfect.
✔️ Take responsibility. Even though this is not “your” issue it has now become your issue. Pointing fingers not only does you no good, but it says something about you (and it’s not good.)
✔️ Keep your cool. Losing your composure on an innocent bystander employee of a vendor will get you nowhere.
✔️ Hold vendors accountable, respectfully. Ask these kinds of questions: “Do you have a timeline for resolution?” “May I expect an update by the close of business today?” “Do you have any suggested workarounds, even if temporary?”
✔️ Offer to help your vendor. Often we are uniquely positioned to provide insight that can potentially expedite resolution. It’s amazing how this small gesture can change the dynamic of a big problem.
✔️ Reach out and collaborate with others facing the same challenge. Not because misery loves company, instead so that you can brainstorm and share potential workarounds.
✔️ See this as an opportunity to know exactly who you’re doing business with: how does the vendor act when it’s not smooth sailing? Are they owning the issue by getting in front of it? Or taking a nothing-to-see-here approach?
If the vendor is a repeat offender and never takes ownership, it might be time to find a new one.
It’s not a matter of if you will find yourself in this situation, but when. How you handle it can have a big impact on the outcome.
Category: Secrets of Building a Successful ISO
Secrets of Building a Successful ISO: Don’t Forget the Customers You Already Have
This is a mistake we see ISOs and agents make repeatedly: they spend more time focusing on new sales rather than supporting existing merchants.
As a result, they feel the ongoing burn of merchant services churn. With typical attrition rates hovering around 20%, that number can be almost impossible to overcome, even by the very best payments sales force.
What can you do about it?
The easiest and best place to start is choosing a processing partner that addresses these support areas well:
👉 Access to right-fit products & solutions for the types of merchants you serve. What are the pain points your merchants experience, and who has the solutions that best address them?
👉 Access to a self-service reporting platform that is easy to use and accurate.
👉 Transparency delivered, not just talked about. If there’s an issue that affects merchants, do they own it or do they use the complexity of payments to hide behind it? When you want to dig deeper into the data for your merchants, do you have that information available?
👉 Customer service requests like refunds and banking updates are handled efficiently.
The customers you already have are your most powerful form of advertising– testimonials, which can lead to a steady referral source. What are you doing to nurture those relationships and convert them to referrals?
The old adage is true ~ if you’re not growing, you’re dying. But don’t focus so much on bringing new business through the front door that you fail to see the back door swinging wide open.
Secrets of Building a Successful ISO: Don’t Spread Yourself Too Thin
Don’t spread yourself too thin across too many processing relationships.
It is nearly impossible to have only one payment processing relationship. One might be your only source for petro, another might be your only best option for high risk, while yet another might have your favorite solution for retail card-present business.
ISOs usually find themselves in a situation with multiple processing relationships because they’re trying to be everything to everyone. They want to sell into every opportunity that they walk into.
But ISOs should try to minimize these relationships down to a select few.
Why?
➡️ When ISOs spread themselves too thin across several relationships, they usually don’t have leverage in any of them.
➡️ They spend too much time managing merchants across several platforms, leading to inefficiency
➡️ They spend too much time learning the ins and outs and supporting each of these processor platforms.
➡️ They spend too much time consolidating residual downlines across several relationships. Yes, there are tools to help manage this, but they can be expensive and the more relationships, the more complicated you make this activity.
➡️ They significantly reduce the value of their business if their ultimate goal is to sell.
Diversity isn’t a bad thing when it comes to processing relationships.
After all, we’ve all seen a merchant services portfolio go downhill fast after an acquisition, a sponsor bank program that’s gone sour, or some other major event that puts a portfolio at risk.
But diversification is a balancing act. ISOs should find their niche, establish solid processing relationships that meet the needs of that niche, invest in making the processes with them more efficient, and then nurture those relationships.
Secrets of Building a Successful ISO: Integrity Has a Rightful Place in the Most Successful Payments Companies
Integrity has a rightful place in the most successful payments companies.
Success and operating with integrity aren’t mutually exclusive in merchant services.
We don’t know how the idea of anything contrary to this started, but it’s time to reverse it.
✨ We can do things the right way and be richly rewarded. Bring your own definition of rich, whether it’s financial, surrounded by great people, building a legacy, work/life balance, etc.
✨ We can opt out of using the complexity of payments to our advantage, and instead, work transparently and honestly.
✨ We can stop trying to make a quick buck via hidden, dishonest nickels and dimes (mega processors that try to recoup acquisition costs in this way, I’m talking to you.)
✨ We can lead by sharing knowledge instead of hoarding it.
✨ We can be honest stewards of the lifeline of funds for the businesses we serve.
Payments people who have figured this out are truly living the dream.
The right way is THE way.
Secrets of Building a Successful ISO: Know Your Numbers
Secret # 4 to building an ISO that will stand the test of time: Know your numbers.
One of the key activities to managing a successful payments portfolio is to track its performance with meaningful KPI’s.
✔️ First, set your strategic, financial, and operational goals.
✔️ Identify the KPI’s that align with your goals.
✔️ Set up a system to collect, calculate, and review regularly.
Here are a few ideas to get you started:
• First the obvious – processing volume, active merchant count, revenue billed, etc. If these baseline numbers aren’t correct, nothing else will be. START WITH GOOD NUMBERS! Then be consistent in the way that you measure.
• Profitability by merchant so that you can easily identify under- and over-performers
• Month over month margin change for the overall portfolio
• Average merchant life
• Average lifetime value of merchants
• Net revenue / gross revenue ratio (how well are you managing your expenses as your revenue grows? If you’re scaling well, this ratio should be increasing)
• Net margin loss – average margin of deals lost vs. average margin of deals being boarded
• Losses as a percentage of revenue (are you taking too much or too little risk?)
• Overall chargeback ratios
Operational:
• Calls/Inbound customer service inquiries per day
• Average call time / response time
• Call hold times, average and longest
• Number of customer service inquiries per rep per day
• Client satisfaction level whether your clients are merchants, agents, or other ISOs
• Underwriting timeframe from application submission to MID issue.
As you track these, you’ll see the trends– the most important of which is that improvement in your operational metrics leads to success with the financial ones.
Secrets of Building a Successful ISO: Don’t Feed the Beast
Here’s a scenario that plays out too often:
ISO gets locked into a payments processing deal with a minimum. The processor doesn’t have the right solution or consistent service for the type of merchant services business ISO is boarding.
They end up sending business there because they have to, not because they want to.
Or, maybe the processor is great, but the ISO has underestimated the effort required to meet the minimum and ends up having to cover the difference.
There are great processing arrangements out there without minimums.
Do your homework and spend time to shop it.
But remember, picking the right one goes much deeper than cost.
