ow. It's 2005. We've reached the midpoint of the first decade of a new century. The payments industry has come a long way in the past five years. And as merchant level salespeople (MLSs), you can take a lot of the credit for its rapid growth. Back in 2000, you first heard the terms "multi-app," "IP-enabled," "3DES" and "value-add." What is now known as the "Wal-Mart settlement" was then only a rumble. And unbundled debit pricing didn't exist.

What should we expect in 2005? It's the time of the year when everyone makes predictions and resolutions. In 12 months, some of these will have come to fruition, while others will fall the way of their many predecessors. I predict that the payments industry will continue to embrace the solutions that have demonstrated success over the past few years, with a sharper focus on retention-building solutions for long-term profitability.

Interchange Will Get Very Interesting

If you think a lot of confusion exists over interchange qualification levels and pricing tiers now, only one phrase comes to mind: "You ain't seen nothin' yet!" Things are about to get very complicated. This April will bring a lot of interchange rate changes, including new card type categories based on the cards customers carry in their wallets: a traditional card, a regular rewards card or a premium rewards card. Imagine a merchant's confusion when the exact same sale to three different customers, all paying in a card-swipe environment, results in three different fees.

The card Associations have unbundled signature debit pricing, giving you an opportunity to present more options to merchants, as well as to use the debit discussion to promote the value of PIN-based debit as a lower-cost consumer payment option. Change breeds opportunity. Help desks will light up with calls from merchants asking questions about higher fees. You'll no longer look at a Custom Payment Service (CPS) Retail swipe rate and get the whole picture. Instead of sitting back and bracing for the reaction, arm yourself beforehand with the knowledge and tools you need to prosper in this time of change.

New Year's Resolutions:

• Understand the new interchange pricing structure, and be pro-active in the development and use of tools to allow "apples to apples" comparisons at the detail level.
• Understand pricing on debit cards, gross/net rebate programs, surcharges and downgrades fees.
• Take advantage of the resources available to you. Work with your acquirer partner on the development of accurate interchange pricing calculators that allow you to dig deeply for the real answers when doing comparative quotes.
• Don't wait until April. Protect your turf and educate your customers. Analyze your merchant portfolio, identify "at risk" merchants most affected by the changes, and let them know what to expect.

You Will Get Closer to Customers

It simply isn't fun to sell what many view as a "commodity" into a saturated market, where MLSs and merchants sign deals solely on the basis of price, and set quotas and success measurements on new merchant activations. But it can quickly become a zero-sum game, and the end result is merchant churn. For every 10 merchants signed, seven leave, and you often aren't aware until it's too late. Hidden fees and surcharges become the only profit makers, and once merchants discover them, perhaps by a competitor doing a rate review, your portfolio is exposed to high attrition.

The market has changed, but many ISO/acquirer business models haven't. There's real opportunity in understanding how to segment a portfolio and offer more than price. Not all merchants are alike. In fact, the similarities end beyond the statement that they all "take credit." Businesses are unique. And for each segment, there are value-added applications that really mean something to a merchant.

Merchants in tourist areas are prime targets for dynamic currency conversion (DCC). How often have you been able to offer merchants a program that actually pays them back? Some processors surcharge for foreign card transactions, yet DCC results in merchant rebates. Now that's a no-brainer sales pitch. Electronic gift cards won't slow down in 2005. And when it comes to retention, there's nothing better than a population of loaded cards in consumers' wallets. It makes it pretty tough for merchants to leave. Even if merchants consider switching, it will usually result in a phone call, and a save opportunity, for you.

New Year's Resolutions:

• Find the real "sticky" applications and use your brain and your calculator to factor in total lifetime value of your best customers and what it will take to protect them.
• Get out of the price wars. Spend time analyzing your merchant data to really know and understand who your highly valued customers are. Your goal: to be connected to those customers so that you can better retain them. Segment your base by market, volume, length of service, application and solution needs, and profitability. Find a common denominator among each segment and think of opportunities to go back to that merchant with clear goals for cross selling, up selling, and improving retention.
• Bundle your solutions and tailor your sales pitch based on merchant segment. Don't present the same electronic check pitch to an auto service business as you would to a beauty salon. Offer the same service and benefits, but different positioning and value statements. Speak the merchants' languages and bundle the value-added solutions that will help their business.

Opportunities Will Expand for Electronic Check

In 2004, Check 21 took effect and created a new dialogue including the terms "imaging," "substitute checks," "point of presentment (POP)" and "accounts-receivable conversion (ARC)," which are now part of everyday conversations in our industry. Look for 2005 to bring wider acceptance of electronic check conversion. In 2005, new markets will open with the introduction of ARC processing where the check is present, but the consumer is not. This is typical of receivable payments, recurring dues/payments, mail-order purchases and drop-box environments, such as apartment properties.

These businesses usually know their customers, accept recurring payments and operate in consumer-not-present environments. They want the efficiency of electronic processing to reduce costs and improve the timeliness of deposits.

New Year's Resolutions:

• Target businesses outside of typical credit card acceptors. As April 15 approaches, consider presenting electronic check conversion to tax accountants.
• Talk to merchants about the risks of accepting out-of-state checks and the benefits of electronic check services, especially as businesses in tourist areas gear up for the summer season.
• Understand the impact cash flow has on your prospects' businesses and talk to them about faster funding on checks.

The Lawyers Will Get Richer

Our industry will continue to be dragged through the legal system with more lawsuits and settlements. Who knows what the outcomes will bring? Stay tuned because 2005 will certainly not be dull. You've enthusiastically embraced change and rejected merchant churn by adding value to the solutions you offer. Resolve to make new inroads in markets, understand new solutions, and try selling methods that you haven't previously explored. Happy New Year!

Michelle Graff is Vice President of Marketing for NOVA Information Systems. E-mail her at michelle.graff@novainfo.com .