Servicing needs Featured

8:00pm EDT May 26, 2008

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 or (800) 572-6039.