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Insights and Expertise

Collections and loss recovery ISOs that can demonstrate strength across all eleven areas
will find that capital conversations move faster, valuations
Processing losses and chargebacks are a reality in are higher and transaction execution is smoother. Those
merchant acquiring. The question is whether the ISO has with material gaps in three or more areas should expect
a formal process for managing them. a longer, more difficult path to any capital event—and
This is a widespread problem across the industry. Most should consider addressing those gaps proactively rather
ISO owners and agents have limited experience in than under the pressure of an active transaction.
collections and servicing work, and the function is often
one of the last to be formalized—if it is formalized at all. The good news: These gaps are fixable
It is common to encounter ISOs where processing losses
represent a meaningful percentage of revenue, yet no The infrastructure gap is not a permanent condition.
formal collections infrastructure exists. It is a function of how the business was built: as a sales
organization first, an operating company second. Most
Management may acknowledge the need but has not ISOs can close the critical gaps within six to 12 months
prioritized it. For a capital provider evaluating the with focused effort:
portfolio, this signals both a current financial drag and an • Start with documentation. Write down every pro-
operational gap that adds risk to any forward projection— cess that currently exists only in someone's head.
and it is one of the key reasons many ISOs struggle to Sales workflows, underwriting criteria, merchant
access institutional capital or raise a credit facility. onboarding steps, deployment procedures, customer
service escalation paths, residual reconciliation steps.
ISOs with documented collections procedures, escalation It does not need to be perfect; it needs to exist.
frameworks and loss recovery processes demonstrate the • Build a basic reporting cadence. Monthly portfo-
kind of operational discipline that capital providers value. lio performance reports that track merchant count,
And that directly translates into lower loss assumptions residual revenue, attrition, processing volume and
and higher valuations.
agent production. Quarterly financial summaries
The eleven areas of readiness with clean P&L presentation. If you can produce
these consistently for 12 months, you have the foun-
Following is a comprehensive readiness framework that dation of a track record.
evaluates ISOs across 11 critical dimensions. While a full • Formalize your underwriting. Document your ap-
assessment would would be part of a consulting process, proval criteria, risk thresholds and decision-making
the categories themselves are instructive for any ISO framework. Track approval rates, decline rates and
owner or agent considering a future capital event: the reasons for each. This creates the paper trail that
1. Entity and corporate structure: Legal organization, capital providers need to assess your risk manage-
ownership, governance ment capability.
2. Services and product suite: Payment processing, • Invest in your agent agreements. Review your ex-
POS hardware/software, value-added services isting agent contracts with an attorney who under-
3. Strategic challenges: Scaling bottlenecks, competi- stands the payments industry. Ensure that future
tive pressures, technology gaps agreements include provisions that provide flex-
4. Sales and marketing: Client acquisition channels, ibility in capital events—buyout rights, performance
minimums and clear assignment language.
lead generation, sales process documentation
5. Leadership and management: Organizational • Engage professional financial support. A CPA rela-
tionship, even if initially just for reviewed financial
depth, succession planning, key-person risk statements, signals institutional credibility and cre-
6. Financial strategy: Profitability, capital structure, ates the foundation for audit-ready reporting when a
financial reporting quality capital event arrives.
7. Growth and scalability: Expansion roadmap, ca- The ISOs that invest in this infrastructure before they need
pacity constraints, market opportunity it will find themselves at a significant advantage when the
8. Mergers and acquisitions: M&A readiness, valua- consolidation wave arrives. The capital is coming. The
tion expectations, deal experience question is whether your business is ready for it.
9. Agent and partner network: Channel management, George Csahiouni is the managing principal of Tripoli Advisors, a pay-
compensation structures, production metrics ments industry advisory and capital markets firm based in Scottsdale,
10. Technology and innovation: CRM systems, portfo- Arizona. With 20 years of experience in the merchant acquiring industry
lio analytics, automation, competitive positioning and involvement in over $1 billion in transactions and analysis, George
11. Operational infrastructure: SOPs, compliance, col- advises ISOs, fintech platforms and institutional investors on portfolio
lections, deployment and activation, servicing, re- strategy, operational optimization and capital markets. For more infor-
porting cadence mation, visit tripoliadvisors.com. To reach George, see linkedin.com/in/
george-csahiouni.
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