Like soothing oil on a sunburned back, a
good merchant banker can help a company take the sting out of managing its revenue stream.
“Merchant services goes beyond the
acceptance of credit cards,” says LeighAnn L.
Wolff, merchant account executive for
FirstMerit Bank. “Merchant services means
forming a business partnership with someone who can help you optimize the way you
take payments for your goods and services.”
Wolff adds that it’s important to find a partner who will take the time to understand the
needs of your business and help you not
only look at the costs associated with
accepting payments but how to grow business. Merchant services can pay back their
costs handsomely — but only if the provider
is chosen carefully and offers programs that
fit a business’s needs.
Smart Business spoke with Wolff about
merchant services and how your business
can get the most out of them.
What are typical merchant services, and how
do they help?
Merchant services companies offer an
array of products, including e-check and gift
cards. E-check is the ability to convert a
check into an electronic transaction in order
to speed up the availability of your funds.
Typically, you can also opt to have the e-check transaction guaranteed. Depending
on your average ticket, eliminating one to
three returned checks a month may pay for
this service and will reduce your overall
exposure. As an added benefit, you may be
able to reduce the number of times you have
to pay employees to run to the bank to make
deposits.
Acceptance of credit cards can typically
raise your sales volume by sheer convenience and the fact that customers are not
limited by what is in their wallet.
Closed-looped gift cards, which can only
be used in the store where purchased, take
it one step further. On average, 56 percent of
consumers spend more than what is on the
gift card and typically buy bigger ticket
items. This will directly help you raise your
revenue and build loyalty. A new business or
a business looking to lift market share will
give out gift cards to employees of adjacent businesses or directly to clients in order to
build traffic and gain recognition.
How do you build a comfort level with a merchant banker?
Going beyond the product offerings, stability and capability of your partner are probably most important. Retailers are contacted
several times a month by merchant services
providers stating they can save them money.
As with everything in life, you get what you
pay for. Make sure the deal is as good as you
think. Because your partner is handling the
lifeblood of your organization — revenue —
it is imperative you know who you are doing
business with and that the provider will be in
business tomorrow. You don’t give credit to
clients or pick suppliers without knowing
their financial stability. Many merchant businesses are independent sale organizations
(ISOs). While affiliated with a bank, they are
not part of the bank. Do your homework on
the actual provider and its stability, not just its
sponsor bank. If you pick a bank that directly offers merchant services, you get the
added advantage that the bank can track all
of your activity from point-of-sale to what is
deposited in your account. When there is a
problem with settlement of your card or e-check services, this can save headaches and
time trying to work through issues with two
different entities.
How does the fee structure typically work?
Understanding exactly what your rates will
be after converting is another homework
item. Often a sales agent will show you rates
that look better than your existing rates but
that may not translate to true savings. If an
agent does not ask you for three months of
statements from different parts of your season, the agent is not providing you a reasonably accurate estimate of your costs. It is easy
to show a lower rate on any type of card or
activity, but first ascertain whether it is
aligned well with your actual card volume
types and how you take cards (over the
phone versus in-person). Also, watch out for
low rates coupled to an expensive leased terminal for 36 or 48 months. Many such contracts carry a high early termination fee on
equipment. In addition, some are proprietary
and cannot be reprogrammed for use with
another provider. This leaves you in a tough
situation. Even if the new provider fails to
provide quality service and its pricing is not
as good as you thought based on your actual
volume or growing volume, it just may be too
expensive to break your contracts.
Are there regulatory concerns?
One of the most important topics in card
processing today is Payment Card Industry
(PCI) compliance. Companies that accept,
process or store credit card information need
to comply with the standards set by the PCI
and the card associations. PCI compliance
helps you protect yourself and your customers from fraud. It is a mandate in order to
accept cards. If the merchant provider you
intend to do business with does not include
an education — or, more importantly, have a
partner to work with you directly — you will
likely be surprised by additional charges and
run the risk of heavy fines from being out of
compliance. On top of this comes the potential of reputation risk and liability from not
maintaining a level of diligence around customer data that is required in this industry.
LEIGHANN L. WOLFF is a merchant account executive for FirstMerit Bank. Reach her at [email protected] or (800) 572-6039.