he most resourceful and dedicated professionals in the payment processing industry are merchant level salespeople (MLSs). I can say this because I am one, and I know how hard it is to make money in a constantly changing, extremely competitive and complicated business climate.

Next to interchange, the second most confusing aspect of the bankcard business is all the different commission structures. For example, do you know what type of residual plan (and commission structure) will provide you with the most revenue?

I recently posted that question on GS Online's MLS Forum and received a number of interesting responses that we as MLSs should consider before signing a contract with any ISO or processor.

For example, MLS Forum member maketelinc wrote: "I have seen buy rates, revenue share rates and various splits. I have had some that would default all the merchants to high fees; others, I could control all the merchant fees. I have seen many tricks, although not all, and I'm sure many are still in the making or haven't been thought up yet. My conclusion? The best ISO was the one I could price all on my own."

Commissions are 'in flux'

Getting to the heart of the matter, Adam Atlas, Attorney at Law, has found that industry commission structures are somewhat in flux. "The commission structures are going in two directions," he said. "On the one-hand, we are finding that some of the larger agents are discovering it is difficult to stay profitable as agents.

"The reason: ISOs have less of a pie to share with their agents, and ISOs are also under pressure to generate volume for their banks. The two areas of movement: Larger agents are finding it hard to stay agents, while others are experiencing a price pressure to generate more deals in order to keep their ground."

Because of these two schools of thought, Atlas said that everyone is feeling pressure to increase their deal count now. "Whether you are an ISO and feeling it from \a bank that you are registering with, or if you are an agent, you are feeling it from your ISO, and this is because more and more of the deals now include a minimum for ISOs or agents."

Choose based on reputation

While my own circumstances might have led to different conclusions, I do agree that what the industry is feeling with regard to how difficult it is to remain an agent, does bear many truths.

Several years ago, when I left my position at a bank to pursue credit card sales, I sought out the best ISOs based on the current industry buzz at that time. In my business dealings as an agent now, I don't regret the formula that I have elected to follow: Choose the best ISO that also has a great reputation and business principles.

I have heard horror stories from others about selectingthe wrong ISO partner, so performing due diligence in choosing which companies and individuals with whom to work has helped me avoid bad situations.

Consider the reporting

I also asked MLS Forum members about how they are paid: On what factors are revenue streams based? Do you get paid on everything or just the part from which the company is earning revenue?

"The best way to make money in this industry is to be with a company that gives you detailed reporting," MLS Forum member ccguy wrote. "Most contracts are 50/50, and if you are smart, you work it out so there are goals and you can move up to 60/40 or 70/30. The processor wants the volume, and if you are giving it to them, they can get more of a split. Revenue sharing or profit sharing is the best way to work, using interchange as the base rate."

When you work with people you trust and who have a good reputation, they treat you fairly. I have found that detailed reports are helpful but so is questioning anything out of the ordinary. Always have an eye to the future when considering agreements. Emotional as this process might be, remember that they are business agreements.

"When I see ads about 'We pay on all revenue streams,' I just laugh; MLS Forum member empire wrote. "Does your ISO or processor show you their Schedule A? Do they show you how they make money or what revenue streams they are paid on? No? So forget about getting paid on all revenue streams. Or at least forget about 'trust but verify.' ... You'll just have to trust, which brings me to residual reporting. "Don't trust. Verify. But I just told you that you couldn't do that, right? Well, yes, but that doesn't mean we can't define what a revenue share program is and isn't, and then go from there, verifying that you are being paid on line-items that you should be.

"This is what I believe: Get with any company that shows you the merchant's statement every month. The merchant statement is revenue. ... Whatever is billed to the merchant is revenue. Revenue less expenses is profit. Profit shared is what you should get."

Diversify

Other answers might be found in diversification, said Atlas, who recommends earning money from multiple sources. "When you diversify your revenue sources in this industry, you need to be very careful that you do not get yourself into a breach of one of your non-solicit or non-compete obligations.

"Let's say you are selling merchant services for bank A, then all of a sudden you want to start selling gift and loyalty services. Be sure your ISO agreement with bank A doesn't somehow prevent you from selling gift and loyalty with another provider."

Atlas also said that earning money from more than one vendor doesn't prohibit you from having a preferred provider relationship, but it will protect you from having all your eggs in one basket, should the unthinkable happen.

Remember to read your agreements carefully. For more information on how to do this and what to look for, see "A Primer on ISO Agreements," The Green Sheet, Jan. 9, 2006, issue 06:01:01.

As a participant in this industry, I believe that you must honor whatever agreement you signed and stick to that commitment. Be honest with all parties, and above all, don't think you can outsmart the system; in most cases it will outsmart you.

Steve Schwimmer is NAOPP Treasurer. He has been serving the payment processing industry since 1991 and works with Renaissance Merchant Services. He is based in New York. Call him at 516-746-6363 or e-mail him at thevisaguy@516phoneme.com .