Profitability Behind the Promises
M
ario Parisi got right to the point. "We do what we say. We say what we do," said the Director of Operations for MSI New Jersey.
Founded in 1989 by Mario and his two partners, George Mayo and Andrew Czujko, MSI (Merchant Services Inc.) set out to establish itself as a leading provider of electronic payment processing services. Its initial steps were taken in leasing equipment, evolving to residual streams that eventually led to "ISO in a box," as Mario put it - front- and back-end relationship and processing. "We are now at the level where we do our own risk, credit underwriting, networking," Parisi said.
In 1993, MSI New Jersey formed a buying cooperative with two other entities, Merchant Services of Long Island and Merchant Services of South Dakota, although each entity remained independently owned and operated as well as financially autonomous.
MSI NJ's core competency is all about providing quality credit card processing for merchants, accomplished through sales channels on a national basis. Direct sales channels, major accounts, independent ISOs - they all are part of the mix.
MSI NJ's hot commodity is approval on merchant accounts in less than one day, getting them up and running out the door, setting up Internet gateways for e-commerce transactions.
For example, an ISO sends by overnight air an application to MSI NJ. Assuming it is received by 1 p.m. the next day, MSI NJ ships new, loaded, ready-to-operate MID numbered accounts within 24 hours. The ISO is informed through e-mail, fax or off MSI's Web site that the merchant is open for business. For local merchants, the approval process can even take less than 24 hours.
According to Parisi, hundreds of merchants can be automatically approved, regardless of credit, such as FIC code-sensitive entities, brick-and-mortar retailers such as hair salons, bicycle shops, etc. MSI NJ has no specific target market. "Our target is whatever our sales force wants," Parisi said. "We're not afraid of high-volume accounts if the criteria is there."
That criteria is volume of deals within a profit-sharing structure. MSI NJ has no set guidelines within that structure. Each ISO partnership is coordinated on an individual basis.
"It is so hard to define what level ISOs are at," Parisi said. "It's so hard to get the truth about their merchant numbers. Here at MSI NJ, we do not give anyone any type of false promises. We don't say yes to everyone. If they are credit worthy, we are willing to participate."
MSI NJ also offers direct leasing with no declines because of its strong relationship with a reputable leasing company. An even more appealing offer to ISOs is the signing bonus - $35 for AMEX, $20 for Discover and $15 for Diner's Club. MSI adds in a free merchant welcome kit with conventional stickers, user guide, overlays and plates. And don't forget the highly competitive wholesale equipment rates because of MSI NJ's direct-buy relationships with such providers as Lipman and Hypercom.
MSI NJ loads all equipment in-house and ships it UPS ground, free of charge. If equipment is under warranty and a defect arises during the first 30 days, it is swapped immediately, no questions asked and at no cost to the merchant or ISO.
After 30 days and within the timeframe of the manufacturer's warranty, MSI NJ will pick up problematic equipment for free, but the turnaround takes up to five or six weeks with no loaner. Parisi said MSI NJ has no choice - it is bound by manufacturers' restrictions. For those cases, MSI NJ charges $95 to get out another terminal immediately.
Then there's the money. MSI NJ promises monthly residual checks paid like clockwork on the 20th day of the following month to all partnering ISOs. Those checks can be paid in conjunction with portfolio ownerships that contain aggressive buy rates and multiple revenue streams. MSI NJ offers buyouts to ISOs who prefer money up front rather than residuals. Custom, comprehensive programs are available to every ISO who partners with MSI NJ with no app or set-up fees.
"Our primary market is ISOs," Parisi said. "The main thing we want them to know is that we are honest, reputable - a good company to do business with. We give you more opportunity. You'll make the most possible money available, and not only can you make the most money, but you're going to get paid it. There is something to be said for companies who promise the right thing. We wake up every morning and do the right thing."
Parisi says MSI NJ focuses on finding the good ISOs and getting rid of the bad ones - the ones guilty of profiling, poor credit, no credit or credibility. "We do our due diligence," Parisi said. "In the real world, everyone represents but can't say yes to everything. We're in the real world."
In that real world, support is vital to MSI NJ as well. Consider the three departments that make up its support services: The ISO support desk is open from 8:30 a.m. to 6 p.m. Eastern time; the Customer Service Desk has a live, real-time 800 number because MSI NJ insists that merchants always have a live contact; and the Tech Support Desk, also a live 800 number, is open 24/7.
About two years ago, MSI NJ implemented a proactive support program as opposed to a reactive help desk. It was simple - every terminal gets tested in-house before it goes out the door. Parisi reports that it has eliminated 20% to 30% of equipment problems. "Here at MSI, we basically do it right the first time so we're not chasing our tails all day," he said.
The program also involves quality control, dotting all the i's and crossing all the t's. Person A inputs data. Person B double-checks it. MSI runs daily reports in-house as yet another backup to insure high ROI as well as a 95% effective support rate.
About 15,000 merchants are using MSI NJ's services. In 2000, MSI processed more than $1.25 billion, up $550 million from 1999, largely because of its direct relationships with Visa, MasterCard, Diners, Discover and American Express. MSI NJ revenue doubled from $3.1 million to $6.2 million in that same period. A new alliance recently announced between MSI NJ and Provident Bank and CardSystems Solutions should position MSI NJ for even greater growth in the $100 billion bankcard industry.
What's in store for ISO partners of MSI NJ? According to Parisi, MSI will be offering more value-added services, i.e. Internet gateway, transactions through Palm and plans to launch gift card and loyalty programs as well as check truncation.
"Our philosophy is that merchants stick primarily with who your sales channel are," Parisi said. "If you develop a good sales channel, you develop good merchants. If there is loyalty, you're growing in a healthy fashion. I know our business will grow healthier."
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