High-risk ISO takes business personally

Humboldt Merchant Services, a boutique wholesale ISO specializing in hard-to-place and high-risk accounts, prides itself on personalized service in an era of commoditization. Despite handling annual transaction volume of more than $750 million, the Eureka, Calif.-based ISO's staff finds time to lavish attention on clients that other acquirers spurn. Staff members also devote time to coaching resellers on the complexities of the high-risk business.

"I urge all of my merchants and all of my sales partners to pick up the phone and call me if there's an issue," said Adam McDonald, the company's president.

High-risk, not all risk

The ISO, which has been processing transactions for more than two decades, works with clients in more than 15 high-risk verticals. Most of the company's business comes from categories that include adult, direct marketing, free trials, electronic cigarettes, card-not-present tobacco, and firearms and ammunition.

The company turns down business from some types of merchants, including those in the travel, credit-repair and online-gambling industries. But some seemingly unremarkable merchants can also find themselves labeled as high-risk, and Humboldt sometimes takes them on as customers.

"Every application for merchant services has its nuances," McDonald said. "There are so many reasons a merchant can be classified as high-risk." The merchant could sell a mainstream product, for example, but had too many chargebacks and wound up in the Terminated Merchant File.

Unlike many high-risk ISOs, Humboldt books accounts only in the United States and Canada instead of businesses based offshore. It's also a wholesale ISO sponsored by BMO Harris Bank, registered with the card brands and dedicated to performing all underwriting and risk management in-house. "We are not a broker," McDonald said to emphasize the breadth of the company's operations.

Pursuing a true passion

McDonald, who has worked in acquiring about 15 years, became Humboldt's head of sales in 2010 and was promoted to president in November 2014. The Detroit native had worked in several capacities in the payments business to help pay for college and law school. After a year as a real estate attorney, he realized that his "true passion" resided in the payments business and he came back into the fold, he said.

McDonald considers himself fortunate to work for one of the few wholesale high-risk acquirers that can deal with merchants on a personal basis. The staff's "all hands on deck" attitude also helps build the company's relationships by making senior employees readily available. "If you call customer service, you might be talking to my vice president of operations, my risk manager or myself," McDonald said of Humboldt.

Paying attention pays off

Although clients sign a fairly standard three-year contract, many stay with the company longer; some have been on the rolls for more than 10 years. McDonald declined to quantify the company's retention rate, but he said he was recently "blown away" when he reviewed the metrics and saw how long companies stay. The staff also takes a personal approach to dealing with retail ISOs and merchant level salespeople (MLSs), McDonald said.

That willingness to help resellers includes advising any acquirer who happens onto a high-risk account and wants to sign the merchant. One-time deals aren't a problem. The company also devotes time to training ISOs and MLSs who want to specialize in high risk. The training doesn't follow a rigid formula because the Humboldt staff designs its instruction to fit the individual.

Fielding the right team

The crew behind the personalized services includes an inside sales staff of two and outside resellers who number in the hundreds. As with most ISOs the 80-20 rule applies, meaning that most of the business comes from a small fraction of the outside salespeople. Five employees in senior leadership roles oversee compliance, underwriting, risk and customer service.

Together, staff and outside resellers believe they provide a satisfying merchant services proposition for clients who might have few places to turn for transactions.

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