Wednesday, April 23, 2008
If you are an ISO or a merchant level salesperson (MLS) from the early years, chances are you don't have fond memories of the term "prepaid."
Prepaid is not a new concept. It began in the mid-1990s with the prepaid phone card offering a certain number of minutes for $5, $10 or $20. In 2000, prepaid progressed into wireless – otherwise known as prepaid cellular – with products such as Cingular Wireless' (now AT&T Inc.'s) Pay As You Go, and prepaid offerings from Virgin Mobile USA LP and Boost Worldwide Inc.
Today, prepaid is a multi-billion dollar industry including gift cards, reloadable cards and music downloads to mobile handsets. But the age old question remains: What's in it for me?
As an ISO or MLS, you are on the street day in and day out, selling products and services to merchants. Although POS terminals and card processing are a definite cost center for merchants, it's a necessary evil if merchants want to stay in business and make money.
The fact is merchants can't live without electronic payments. Still, they complain that they can't live with rising interchange fees, Payment Card Industry compliance and all the other hassles associated with accepting cards for payments. Why would they want the added burden of a gift card or reloadable card program using prepaid cards?
What ISOs and MLSs need to do is convince merchants that prepaid cards transform their cost center into a profit center.
Just walk into any major convenience, drug or grocery store, and you will come face to face with a "prepaid mall." If the big boys can do it, so can small and mid-sized businesses.
By adding prepaid products to your merchant offering, you can enable your merchants to compete with the chain stores and big box retailers for eyeballs and foot traffic. One tree of prepaid cards on J-hooks next to the checkout station can provide customers with a convenient way to pick up a gift or prepaid phone card, thus generating additional income for the merchant.
Lo and behold, that terminal has just become a profit center, and the merchant has taken a positive step in reducing churn.
But what products or brands should an ISO or MLS offer?
Popular products you could sell to merchants may include long distance prepaid cards, financial service products (gift and reloadable), and the current hot trend of online ring-tone downloads and games to mobile handsets.
Not only can prepaid help your merchants stay competitive in an increasingly intense and aggressive marketplace, it can increase ISOs' and MLSs' residuals. In other words, selling prepaid can make you money.
Margins in terminal sales and processing are falling all the time. By bundling value added prepaid products and services to your terminals, you get a percentage of the sale each time a product is sold. And you know better than anyone that those pennies add up to a significant sum over time.
There is no set percentage for various prepaid products. Some prepaid offerings have higher percentages (usually high-dollar products with infrequent sales), while others have very low percentages (usually low-dollar products that fly out the door).
ISOs usually take their percentage first, then determine what percentage merchants get, always making sure the merchants' slice keeps them competitive in their particular market; the rest is profit. For example, an ISO sells a $100 wireless card to a merchant for $95. When the merchant sells that card to a customer for $100, that means $5 is available to divide as profit between the merchant, ISO and MLS.
Now, if merchants have 10 to 15 prepaid products in each store, and each ISO has 100-plus stores generating income in its portfolio generating income, those little percentages start to add up.
As you can see, prepaid has grown since the early days; it's not a one-trick-pony calling card anymore. That little pony is a thoroughbred now, ready to make money for all the players in the value chain.
Editor's Note: Clare J. Morgan is Vice President, Marketing, for nFinanSe, http://www.nfinanse.com She is also on the Advisory Board for Selling Prepaid.
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