Not all merchant service providers are created equal

We receive calls daily from agents inquiring about the Vantage program. Many of these calls have the same common theme. They go something like this recent paraphrased email exchange…

Prospective Agent

I have recently been recruited by a merchant services provider to become a sales person for them. 

I'm writing to you because this provider does everything you tell your customers on your web site not to do...we lease our equipment to merchants; we have qualified and non-qualified rates and we charge fees to get everything set up. 

I want to be sure that I'm with the "right" company.  I would appreciate your guidance.

Vantage Card Services

Thanks for writing. We applaud your research. 

The leasing commitment, monthly payments and buy-out clause means merchants are upside down immediately out of the box and the problem is compounded when merchants are sold leases on proprietary equipment that cannot be reprogrammed by other providers.   If you could purchase an open source terminal for a couple hundred dollars and make 3 monthly payments, what would you choose?

A non-qualified bucket pricing scheme means merchants cannot manage Interchange qualifications.   If you are going serve your clients long-term, I highly recommend you learn Interchange.

At the end of the day, if you knew that a month-to-month agreement (without early termination fee), and Interchange pricing without a terminal lease was available, which merchant services program would you choose?

Prospective Agent

With our program, they're not upside down if they are paying a $50/month lease and we are cutting their rates to the point that they are saving money every month including the lease fees. We also guarantee compliance with the payment card industry rules as part of the lease.

I don't think our equipment is proprietary; that is, I do believe it can be reprogrammed.  But, of course the customer is in a lease that is with a finance company so they would still be responsible for the lease even if they wanted another company to take over their processing.

I currently can offer three rate programs. One is a low qualified rate and a higher non-qualified rate, another is a low non-qualified rate and a higher qualified rate and the third is an Interchange rate, but I’ve not learned how to explain it very well to merchants. I would like to be better educated on Interchange, and will do some research on my own. 

I guess the answer to your final question is that I would pick whatever plan allows me to process payment cards at the lowest cost to me, while making sure that I'm in compliance with the processing rules of Visa or MasterCard.

Vantage Card Services

The merchant is upside down on the lease.  Paying $2,400 + for a terminal that is worth $240 once they open the box is upside down. Merchants could save more by not leasing regardless of the rates you quote. And you could still offer the better rates without the lease, right?  When you tie your rate quote to a long term lease, what happens when those rates go up?  What if the service provided is poor, what if the merchant does not get funding on time, etc.? As you pointed out, merchants are still stuck in the lease. Last, service providers are not allowed to sell, lease or reprogram any card processing terminal that is not PA DSS (meets the Payment Application Data Security Standard) so this is NOT a sales feature of a lease.

Find out the make and model of the equipment you are leasing. Proprietary lock-in from selling terminals that are only certified on a single processing network means the merchant is unable to use another vendor without substantial switching costs. Research what networks have certified the specific make/model you are selling and any restrictions you should make merchants aware of during the sales process. Full disclosure is needed if you are going to become a trusted advisor.

If you are serious about understanding what you are selling, read the fine print of the merchant agreement for terms / terminology. Read the merchant services agreement cover to cover and look for a few key points: 

  • Can rates go up for any reason at any time?
  • What is the contract term? 
  • What is the termination penalty?  Who has the authority to waive terms? 
  • Does the application reference the terms?  Do you provide the fine print with the application?

Last, let me ask you this…How much of your income is from the ongoing processing of payments (residual income) and how much from selling leases?

There is a way to "service" clients and earn a professional income consulting in the payments business.  It's not a get rich quick program and without the "lease factor" payout or other upfront fees it may not pay the bills month one.  This is something you will have to decide.  But what we find is that eventually your industry experience will make you wise to the various programs in the market place.  There are agents that enjoy longevity serving loyal clients in this industry and those with short term get rich quick schemes that come and go.

Prospective Agent

I do understand what you are saying, and you are technically correct, but one thing I have learned in sales is that people pay for what they perceive is valuable.  Still, everything you are writing and what I've read on your website is really challenging my sense of fairness.

I also met with a guy I know from the church I go to who works for a different merchant services company. It seems like every company has different ways of approaching the market, with a twist on some of the common themes we’ve discussed.

I’m really not comfortable with the approach of selling leases and non-cancelable contracts.  I really am intrigued by the industry, but I know what I would agree to if I was a business owner, and I would not agree to the terms I’m selling now.

I like your company’s approach much better, and I guess the information on your website has helped open my eyes to what’s good and what’s not so good in the industry. 

Vantage Card Services

Most merchants don't do the in-depth research that you are doing.  But if they knew the whole story they would perceive things differently.

Experience the Vantage Program

Rates: Today’s merchant clients require more than a generic “qualified rate as low as” quote. You need to deliver a detailed proposal with a custom rate structure based on specific industry Interchange using the latest payment technology and best practices acceptance methods. Partnering with a company that can help you manage Interchange qualification is very important.

Service: Service, good or bad, impacts your bottom line and ability to do your job. Vantage is a full service payment provider focused on high quality personal service. By far, most of the people and companies you talk to are going to be strictly sales oriented. At Vantage, we are merchant SERVICE providers. We process applications in house including credit underwriting, data entry, terminal deployment, implementations and one-on-one personal service with our clients after the sale is made, all under one roof. It makes a difference in the quality of service.

Terms: Pay close attention to the fine print of the terms and conditions of the merchant agreement you represent. Don't lock your clients into long-term contracts with steep early termination fee penalties and add-on hidden fees. Vantage has a true month-to-month contract with no hidden fees.

Solutions: Selecting the payment processing solution that best meets your clients’ needs is critical. From terminals and software to wireless, contactless and ecommerce payment gateways, we support the technology today’s businesses require to accept payment. Vantage provides comprehensive business-to-business (B2B) and business-to-government (B2G) payment solutions including Level 3 payment solutions and a trade credit payment platform. We represent emerging market payment systems and work with businesses to implement trade credit A/R outsourcing solutions.

Incentives: Retention is the key if you are to build a large profitable residual income. “Vantage Points” is a merchant loyalty rewards program. Help your clients earn great rewards from distinguished Vantage Points program partners like: American Airlines, Marriott, Hyatt, Staples, The Home Depot®, Starbucks Coffee and hundreds more. Vantage adds value beyond what's available with your standard merchant account provider. With Vantage, reward your best clients with a unique incentive program you won't find anywhere else.

In Conclusion

Throughout this story, you could replace terminal “leasing” with “free equipment” offers. Similar points apply. And if you are selling introductory rates so you can lock merchants into long-term contracts with early termination fees in an attempt to qualify for an upfront signing bonus -- well it’s not likely you will build a career under this type of program either. The reason is that gimmicks don’t work long term. To earn referrals and become a respected payment industry professional, you will need to graduate to a different approach; one that puts the best interest of your merchant client first.

If you are an agent in the payments industry, looking for a better program to represent, send us your resume. If you are a fit for our organization, we would welcome the opportunity to partner with you.

by Ty Hardison

Share this Post

Share to Facebook Share to Twitter Share to Google+ Share to LinkedIn More...

See Your Merchant
Interchange Rates