A Leading Question Generates Mostly Negative Responses

Question 1:

Do you use or recommend the use of lead-generating services? Can you name some (or one) that you feel GS should profile?

Several times weekly, The Green Sheet is contacted by someone wanting to "become an ISO." Along with a request for "how to" materials and guidance, we often are asked to recommend a source for leads. Several "lead generators" have posted ads to our Web site. But when we decided to ask the experts for their opinions regarding lead generators, it was decidedly thumbs-down, with one exception. Look for a profile on True Advantage in a future issue.

Gary LaTulippe Schmooze "We use a lead-generating service known as True Advantage. We have found that they are able to customize the types of business we are looking for in a geographical and industry environment. I have been most pleased with their level of service and insight into my needs and their anticipation of how I can better utilize their services. The one reason I had selected this opportunity is that all of the leads provided have voluntarily submitted their information and look forward to hearing from potential suppliers for their request. You never have to feel that you are treading on thin ice when you contact these potential clients."

Robert Joyce Alliance Payment Systems "No."

Stacy Bell Advanced Payment Technologies "I think that lead generation is at its best when done internally. We have tried several different services and have found them too expensive for what they produce. Lead-generation services often concentrate too much on quantity while sacrificing quality. These services rarely give ISOs the types of leads they need and usually cause greater frustration for the salesperson because of the poor sale-to-lead ratios. When done internally, it is much easier to control the quality and keep the sales reps motivated with solid leads."

Ross Federgreen CSRSI "No, we do not."

Steve Christianson TransPay Processing "NO and No."

Robert Carr Heartland Payment Systems "No."

Craig Millington Compass Bank "We utilize our branch network with a financial reward for any leads that close. I can't really think of any valuable ones offhand."

Mitch Lau Money Tree Services "N/A."

Alan Gitles Merchant First Bankcard "We use our own lead generators - never thought about using an outside service."

Jared Isaacman United Bank Card "Personally, I don't advise it nor have I tried it. Lead generation, I think, requires a personal touch and a direct knowledge of the product you're selling. If you use a third-party company, you're taking a big chance in the first place, but you also eliminate some of the valuable tools in marketing, such as your personal touch as a sales rep and vertical sales. I think the concept of third-party lead generation will not last very long."

James Marchese IRN Payment Systems "We use lead-generating services, and some of our sales offices do also. If the list is used properly, it becomes another resource to add merchants to your portfolio."

Question 2:

What is the big opportunity for ISOs in early 2002?

Spring is here, and business is beginning to bud along with the trees. Across the board we see enthusiasm as we turn the corner on perhaps our shortest recession in recent memory. New technologies, products and services coupled with renewed focus on customer care all seem to be leading toward market growth in 2002.

Robert Joyce Alliance Payment Systems "I can't say there's any big opportunity of which I'm aware. It's pretty much business as usual."

Gary LaTulippe Schmooze "I think this opportunity will be to find your market niche and learn everything you can with respect to these clients. By specializing you can become an advisor to your clients and gain their respect and confidence. Referrals are a very powerful tool, and what better way to help yourself than by having the endorsement of key players in this segment of your marketplace? We must continually ask ourselves each and every day, 'What am I willing to do today that I didn't do yesterday?'

"Our opportunities are what we develop, nurture and present to our clients. Thinking outside the box has always been a sales buzzword. Sometimes we overlook the obvious and forget to see what is inside the box and how we can better utilize what is already in place but needs revitalization.

"Opportunities are created by core qualities of conducting business - honesty, integrity and the fact that we are asked to anticipate and create solutions. That being said, the opportunities manifest themselves, and those of us who can see beyond will prosper. Those that cannot or will not will continue to experience the agony of 'business as usual.' "

Lee Ladd LADCO Leasing

"I feel there is continuing opportunity for cross-selling. I have reviewed two opportunities in the past month that should be in all salespersons' briefcases. New products should be priority one after service to the existing customer."

Steve Christianson TransPay Processing "Not really sure right now. Will take a look at ETA in Orlando and see what is new. Over the years we all have faced challenges, such as getting new, honest salespeople, increasing costs and so on. Sticking to the basics of fair rates and fees and good customer service is necessary to keep merchants from moving on you. Competition is greater than ever, and these relationships established with your merchant base are invaluable with the daily onslaught of competition."

Stacy Bell Advanced Payment Technologies "The big opportunity for ISOs is getting into the biometric market. People are looking for stronger security, and biometrics is no longer just on the horizon."

Ross Federgreen CSRSI "I believe the biggest opportunity is always the same - understanding your clients' needs and seeing how you can fulfill them."

Bill Pittman RichSolutions "I come from the computer (PC) industry. I see a lot of parallels between the early PC industry and the ISO business. Early PC resellers made good money just selling PCs. Over time the PC became a commodity, and solutions selling became the name of the game.

"I think the same is true of ISOs. It will be difficult to make a living just selling a box and similar financial services to those of the person next door. I believe ISOs need to start partnering with other vendors to provide complete solutions. These solutions will meet all of the businesses' payment needs - credit, debit, EBT, check, smart cards, loyalty, gift card, mobile, wireless, etc. These solutions will be provided in the form of software services that can be integrated into the business processes.

"This becomes a win-win - the business wins because it does not have five terminals on its countertop and it has a more efficient operation that meets all of its needs. The ISOs win because they have a differentiated offering with multiple revenue streams and, for all practical purposes, lock the customer into their services (as long as they do their job) because they have now created a barrier to change."

Scott Wagner Hypercom "It's a good time to be a merchant and negotiating a processing deal. The marketplace is very competitive and hence merchants can hammer themselves out a good deal. Additionally, instead of just selling countertop boxes that move money from A to B, ISOs and the like have new opportunities to sell gear that is multifunctional and robust. So it's kind of a win-win for the merchant and the sales force. Things like gift card/loyalty, EBT, smart card, electronic signature capture, just to mention a few, are all additional sales revenue streams for salespeople - and, moreover, potential revenue streams for merchants."

Craig Millington Compass Bank "I really believe that we will start coming out of the mental depression that has consumed many people since 9/11. I think that the successful ISOs will be the ones that go after the new start-up mom-and-pop shops and meet their coming-out needs."

Joyce Leiser U.S. Wireless Data "I believe fixed location wireless is a big opportunity. If the ISO/agent can show that he can provide his own wireless connection for the existing terminal to talk to the processor at a cost that is 50% of what the merchant is paying to the local phone company - it is a way to show an annual savings on processing fees without having to compete on discount rate."

Jared Isaacman United Bank Card "The big opportunity for ISOs and agents for 2002 is education. The Green Sheet is offering the online learning center, and processors/banks have been offering more seminars and training events. There are a lot of mistakes that ISOs and agents have been making, and perhaps this year we will stop the recurring problems. Sales reps bouncing from one processor to another, switching leasing companies, trying multiple products - it doesn't ever work out. My mentor in the industry told me you stick with what makes you money, and relationships are everything. Perhaps if 2002 produces a more educated sales force, our industry will grow stronger as a whole from the bottom up."

James Marchese IRN Payment Systems "The biggest opportunity for ISOs is trying to find the next unique VAR that distinguishes your company from all others and gains you a competitive edge in the marketplace. Also, with many states now going to electronic EBT, the opportunity to gain new merchants will increase for those who offer this service to their merchants."

Robert Carr Heartland Payment Systems "The big opportunity for ISOs in early 2002 is to take market share from those acquirers who have cut back their sales organizations."

Mitch Lau Money Tree Services "Wireless and online services." In this post-dot.com-bubble economy and post-Enron market environment, business practices, merchant retention and earnings ratios are the industry challenges. With an optimistic attitude overall, the Green Sheet Advisory Board sees solutions on the horizon. However, ISOs are facing some significant challenges.

Gary LaTulippe Schmooze "The looming issue may be the closer examination of how our industry conducts itself. Clients should become more aware of what the industry can provide from a positive aspect and therefore learn what is detrimental to their cause. That being said, we must constantly look for ways to remove organizations that do not conform to a higher standard of conducting business.

"We all have 'basically' the same tools to utilize, so what inspires a client to allow us to represent his interests? It's the integrity and trust that we can instill in this client, the continued customer service, and the willingness to do what failures won't."

Stacy Bell Advanced Payment Technologies "I really can't think of any looming problem. Hopefully what one sees as a problem one can change into a benefit."

Lee Ladd LADCO Leasing "Retaining good people. No longer can a salesperson do well based on equipment sales. The more successful ISOs will develop pay plans, benefits and products to keep and motivate their salespeople. Also, quite possibly, financing.

"We are starting to see major changes in the lease business. Several major lessors have closed their doors in recent months. Are small-ticket lessors next? We have seen several significant policy changes by companies with POS as a major part of their portfolios. Success in the POS leasing business is predicated on cost of money and losses. As losses grow, money dries up and lessors close their doors. The situation is worth watching carefully."

Ross Federgreen CSRSI "Commodity pricing."

Robert Joyce Alliance Payment Systems "Account retention."

Steve Christianson TransPay Processing "With the declining difference between cost and retail rates, more and more ISOs are relying on downgrade markups for increase revenues. Some of these markups are very high, such as 125-200 basis points on a non-qualified transaction. Merchants are starting to figure this out. And since this is not a fee that is generally listed on a merchant application, some merchant somewhere will soon figure this out and the CMS/FTC issue will be even bigger.

"Full disclosure of all rates and fees, including downgrades, will be necessary to avoid legal action in the future. The opportunity will be to maintain and grow portfolios by giving better customer service to avoid making some merchant or group of merchants mad so they pursue legal action to get these undisclosed fees refunded."

Bill Pittman RichSolutions "On the e-commerce front - security."

Scott Wagner Hypercom "I see two challenges. One is market saturation. The other is selling ethically. Potentially, in this scenario, one takes care of the other."

Alan Gitles Merchant First Bankcard "The economy continues to be a question mark, and the terminal-leasing companies continue to have problems."

Craig Millington Compass Bank "RISK ... RISK ... RISK. Things like CMS, the failure of Authorize.net firewalls (allowing access by outsiders), gift card disasters like those experienced recently by BB&T and Heartland Bankcard. These types of occurrences will scare the bigger banks into rethinking their position in bankcard processing."

Robert Carr Heartland Payment Systems "The looming problem continues to be lack of workable models to create value for merchants. Heartland has a $14 billion low-risk portfolio, but gift cards have caused some problems. Heartland brought up the sensitive issue of gift card risk at the Vital conference [February 2002] to focus other acquirers on this evolving segment of bankcard use. I am unaware of any gift card 'disasters' other than a salon that may cause us a loss that may equal as much as one-tenth of one basis point of our annual volume. We don't consider that is a disaster, but we don't like it."

Jared Isaacman United Bank Card "The only problems I see for the year to come are further FTC and government investigations into the industry. I think processors/ISOs with corrupt business practices should be exposed and investigated, but an industrywide witch-hunt could slow the growth and production of everyone. Don't get me wrong. I think the results of this will be good, but the possibility of a Pandora's box having been opened still floats in my head."

Mitch Lau Money Tree Services "None that I can foresee."

Jared Isaacman United Bank Card "The only problems I see for the year to come are further FTC and government investigations into the industry. I think processors/ISOs with corrupt business practices should be exposed and investigated, but an industrywide witch-hunt could slow the growth and production of everyone. Don't get me wrong. I think the results of this will be good, but the possibility of a Pandora's box having been opened still floats in my head."

James Marchese IRN Payment Systems "Certainly the biggest looming problem is what the FTC's finding and actions will be in regard to CMS and our industry. Hopefully government intervention and regulations will not be cost prohibitive for us to conduct our business in the future."