Credit card sales volumes in the U.S. exceed $4 trillion per year and add up to more than 26 billion transactions. Businesses that turn away customers wanting to pay by credit card often fall out of favor with their clients, making this a critical service for a successful business. This makes the ability to process credit card payments an essential function for companies, and sales of these services is a lucrative career option for many independent sales organizations (ISOs) and agents.
How it Works
Revenue from the sale of credit card payment processing services is based mostly on commission payments, which can—and do—accumulate to reach a substantial sum a couple of years into the relationship. The services are sold to merchant companies to enable them to accept credit cards from their customers, and their inclusion into the "fold" depends on whether they are categorized as low risk or high. Some companies sell processing services to both types of the merchant, while others focus on one or the other.
Understanding the Difference
Low risk or A-list merchants are frequently companies that have been in business a long time, and whose operations appear well established.
This includes businesses that:
- Process small amounts of money such as R20,000 or less each month, for example, because the lower the payment values the lower the risk.
- An average transaction of $50 or lower
- No or low chargeback ratio
- Incorporation in a country on the low-risk list, including USA, Canada, Australia, or the UK
- Operating in an industry considered low risks, such as online clothing sales, books, pet products, office or household items, or health and beauty supplies.
These low-risk companies typically enjoy faster approvals by credit card processors and pay lower processing fees. Statistics show the average commission earnings on a $20,000 client is around $30 per month, which can, in fact, be lower for larger merchants because of their requirement for more competitive bulk pricing.
A merchant’s risk level increases with various criteria. One of the primary factors resulting in higher risk is the prevalence of credit card fraud. Many online purchases fall into the category of Card Not Present (CNP) transactions, which have a higher fraud risk in spite of using multiple verification methods. This is a major area of concern for processing providers.
Other reasons businesses could be labeled high risk for services are:
- Being registered offshore – this counts as a high-risk company in some circles, but not all.
- Having questionable sales methods such as high-pressure selling.
- Involvement in “adult” or porn industries of any sort, chat websites.
- Sales of gambling opportunities such as online casinos, gaming websites or lotteries.
- Brokering of services, such as bankruptcy, car sales, debt collection or consolidation.
- Drugs or drug paraphernalia.
- Horoscopes or psychic services.
The list of high-risk industries and merchants also includes social networking sites, real estate, and prepaid debit cards, and companies operating in any of these fields could find it more challenging and expensive to obtain services.
Higher Risk, Higher Return
It makes sense to believe that agents who specialize in high-risk clients make more money, and they do. Although this can be attributed partly to the fact that fees (and therefore commissions) are higher for these merchants, the main reasons are that merchants involved in high-risk business activities typically generate higher volumes, and interest rates are usually higher for these clients.
Ideally, sales reps should work towards having a balanced portfolio that includes both low risk and medium to high-risk merchants, but that doesn’t mean you need to take chances with your career and future.
Finding the Right Company
The solution for a hungry and determined ISO or agent is to find the right processing company to partner with. Look for an organization with a clean reputation that offers:
- excellent technical support,
- funding services,
- sign-up bonuses,
- a high commission split,
- full training in their processes,
- online reporting and data entry tools, and
- marketing materials to help you build your merchant account portfolio effectively.
Search for a company that puts you in control of your own business, including pricing and rate quoting your referrals. And if you have access to traditional merchant account service providers as well as high risk, non-traditional providers, you’ll be able to build that balanced portfolio that offers both a stable income and better volumes and commissions.
It takes a special type of person to be able to sell to and support high-risk merchant clients when low-risk companies are so often easier to work with. The higher the risk the better the reward, though, so don't be discouraged by the fact that there are so many high-risk customers out there. All you need is to find the right company to partner with, and your troubles will be solved.