Value-added products and services may offer ISOs an opportunity to increase profits, but only with the right sales pitch.
That means understanding potential customers, pricing effectively and acting as business consultantssometimes even long after the contract is signedindustry observers say.
The first step to selling value-adds is thinking about the merchant type, says Dave Thomas, owner of Burlington Bank Card, an ISO based in Burlington, Vt. The type of merchantbe it a restaurant, retail or e-commercenarrows the set of applicable products and services, he says. So does the initial reason for the meeting.
Whenever youre talking to a merchant, theres always something that got you into that conversation, Thomas says. If you know what that is, there could potentially be some value-added products that could make things go in your favor. For example, if somebodys contacting you because theyre having a problem with chargebacks, its going to be a different set of prodwucts and services than if its somebody whos trying to figure out a way to market to their existing customers.
Recently, merchants have begun expecting merchant-service providers to offer tablet-based point of sale systems. In fact, Thomas says ISOs not offering such systems sometimes lose potential business.
I think the average merchant isnt going out there and saying, I just need credit card processing, he says. Theyre thinking, I need credit card processing and a point of sale system or an online billing portal. Theyre thinking of it more as a complete package.
When pitching value-adds, ISOs and agents should remain focused on merchants core needs, says Thad Peterson, senior analyst at Boston-based consultancy Aite Group.
Its very important for anybody whos selling into the retail space to remember that the retailer, at the end of the day, really cares about a few things, he says. They want to sell more stuff, they want to get a larger basket and they want to get more customer visits. None of those things, by the way, have anything to do with payments other than the fact that payments enable the movement of money from the consumer to the retailer.
However, certain value-adds are prime candidates for ISOs to provide. Recent high-profile data breaches have piqued merchant interest in security-related services, PPeterson says, so he expects increased demand for point-to-point encryption and tokenization. Mobile and loyalty also seem likely to attract growing merchant interest.
The increasing number of sales channels means retailers are looking to their merchant services providers for help, says Sherry Seetram, president of ePay Consulting Services of Baldwin, NY. Brick-and-mortar retailers may want to sell online or even accept payments through a Facebook page, she says, which equals opportunity for ISOs to offer those services.
In his research, Greg Gooslin, president of Phoenix-based ISO GCG Consulting Inc., has found that merchants want access to reports even when theyre away from their place of business and that some merchants lack basic inventory control systems. GCG already offers remote reporting access and is researching scanners and other inventory-control tools.
However, Peterson suggests ISOs avoid venturing too far from their core payments processing services into offerings such as lending services, in-store Wi-Fi or web design. Otherwise, they risk raising questions in merchants minds about just how good those services will be compared with those offered by lending or technology specialists.
So what does a complete package look like for a merchant? Determining that requires understanding both business segments generally and individual merchants specifically, says Keith Reardon, managing partner of Commonwealth Consulting Group LLC, a sub-ISO in Worcester, Mass. that serves several business-to-business and business-to-government merchants. Those clients often have sophisticated needs for services such as foreign currency settlement, remote deposit capture and Automated Clearing House transactions. Reardon guides potential customers through a discovery process to determine their needs.
The biggest thing we always try to do is dig into what theyre doing with accounts receivables. In retail and restaurant, theyre either selling some type of product or theyre selling food or drinks. Theres not a ton of value-adds outside of POS, gift card, and loyalty, he says. When you get in to some of these bigger businesses, like wholesale distribution companies and manufacturing and industrial, cash flow is critical.
Commonwealth Consulting Group offers to examine a potential clients accounts receivables to determine how additional payment options, such as ACH, could improve cash flow and reduce the number of outstanding invoices, Reardon says.
For many types of merchants, a significant benefit of purchasing multiple products and services from one ISO or MSP is having one point of contact, says Thomas. That makes life easier for small-business owners.
And ideally its going to result in you having a longer-term relationship with them, he notes.
(An expanded version of this article is scheduled to appear in the May-June print edition of ISO&Agent.)