ISOs Upset About Nation's Business Article
In case you missed it, Nation's Business, written by the U.S. Chamber of Commerce and considered to be "The Small Business Adviser" in the United States, just wrote a hatchet piece on ISOs.
The piece titled "The Minefield of Merchant Status" by freelance writer Frances Cerra Whittelsey quotes Ken Bowman, Executive Director of the Electronic Transaction Association, Craig Millington Senior Vice President, and misquotes me.
The following is one ISO's opinion of the article:
Misleading Credit Card Article:
The January article, "Minefield of Merchant Status," was very misleading and unfair. The prices quoted for VeriFone(r) equipment barely covered the wholesale cost with shipping. What about some income for the high cost of being an ISO? (Independent Sales Organizations). Does a furniture store buy a couch for $950 and sell it for $960?
There are 3 ways to make money in the bankcard processing business. 1) With the discount % rate the merchant pays for each transaction. 2) On equipment purchased, and 3) Application fees. The article sounded slanted toward making it on the % rate. Many banks charge 2 or 3%. Sure, they give away equipment close to cost, but the excess % will more than make up for it in the future. The article slanted against ISOs.
Our company charges an average Store Front Merchant around 1.48% plus- 20 cents per transaction. We charge a fair price for our equipment. For example if one fixes cars and spends 3% on $10,000 in charge cards, with an average ticket of $400, they would pay $300. With us, the cost is $153. They can lease the equipment from us including a terminal printer, and pin pad to accept ATM debit cards as well as credit cards. We would sell a Terminal 330, Printer 250, and Pin Pad 1000 for $1,463 or lease for $49.50, 4 years, for Market Value buyout. Some ISOs charge $2000 plus cash or lease in excess of $70 per month for the same equipment. However, some of us do charge fair prices with low discount % rates. Best of all, with the legal write off, at our prices, it is less expensive to lease than to purchase.
So if the example merchant spent $300 with their bank, even after $50 equipment plus $153 in processing cost, the $203 total still saves over $ 1000 per year, assuming, equal other related charges. Our application fee is $75 not $150 as the article stated. Some ISOs do mark up this fee for a 3rd source of income. We do not.
Renting is not practical for one who intends on staying in business. In 10 years, renting a full set up for debit and credit could cost $6,000, when a purchase or lease/purchase would cost $1,500 to $2,000, but much less after the tax deduction.
ISOs do represent banks, and some major banks are giving up the costs of internal merchant services, and contracting ISO's. Banks started merchant services to 1) Make interest 2) Acquire Merchant checking accounts. They can have both, use ISOs, and save aggravation.
In the long run, it is less expensive for merchants to obtain a lower discount % and pay a fair price for equipment than to pay a high percentage, and get the equipment close to whole sale costs.
Matt Jordon
President
Affordable Merchant Services
Poughkeepsie, NY
If you read this article let us know what you thought, and if you wrote to the editor send us have a copy to greensheet@greensheet.com or POB 6008, Petaluma, CA 94955-6008.
