Mindbody, a San Luis Opisbo, Calif.-based company that makes business-management software for health-and-fitness businesses, has become an independent sales organization to improve its profit margin and to secure more control over its relationships with merchants, says Rick Stollmeyer, Mindbody founder and CEO.

“Merchant-account processing is a natural outgrowth of our products,” Stollmeyer tells PaymentsSource.

Previously a referral source for ISOs, Mindbody completed its ISO registration in July. Cincinnati-based Fifth Third Bancorp is Mindbody’s sponsoring bank.

Such merchants as personal trainers, massage therapists and spa operators use Mindbody’s online software to manage their scheduling, billing and operational tasks.

Mindbody will offer merchants interchange-plus transaction pricing, in which they will pay the interchange rate plus a transaction fee. Stollmeyer would not disclose the specific rates the ISO will apply.

“The desire to be an ISO has two motivations,” Stollmeyer says. “First is to have a greater degree of control over the relationship. By the time we’re discussing merchant account processing, we already have a relationship with the merchant.”

The second benefit involves the additional revenue from holding the merchant accounts and from the monthly Mindbody subscription fees, which range from $29 to $155, he says.

Mindbody is not looking to charge merchants excessive processing rates. Instead, it will rely on a large volume of transactions.

“We’re looking to make a small amount of money from a large amount of people, Stollmeyer says.

In July, Mindbody merchants handled $68 million in payments, Stollmeyer says. About 10% of Mindbody merchants are outside the United States.

Stollmeyer also expects offering merchant accounts to help lower Mindbody’s merchant attrition for other software companies, Stollmeyer says. Currently, about 0.8% of Mindbody merchants each month stop using the company’s software, a rate Stollmeyer attributes mostly to companies going out of business.

Approximately 5,500, or 70%, of Mindbody’s overall users have a merchant account with the company, says Aia Stinnett, Mindbody director of merchant accounts.

Besides credit and debit card processing, Mindbody also offers automated clearinghouse recurring billing services at no extra charge, Stinnett says.

Mindbody’s strategy is not much different from the direction many ISOs are taking, says Jamie Savant, a partner at The Strawhecker Group, an Omaha, Neb.-based merchant-acquiring consultancy.

More ISOs are focusing on software vendors as a way to reach merchants. Where ISOs already have the payment expertise, companies such as Mindbody have to build that expertise, Savant says.

“One really has to have expertise in the merchant-acquiring space,” Savant says. “Once you find that, then it can become an all-in-one service.”

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