An Introduction to Selling Merchant Services
This section will help you understand why the merchant services industry works the way it does and how that affects your ability to sell credit card processing. If you’re new to the industry, this is essential reading, but even industry veterans can benefit from looking at their field in a different light.
What Am You Selling, Exactly?
Whether you’re new to merchant services or you’ve spent decades in the industry, credit card processing is already a big part of your everyday life. The terms “credit card processing,” “payment processing,” and “merchant services” all refer to the network of services that transfer digital payments from a customer’s bank account to a seller’s bank account. A “digital payment” is any non-cash transaction such as a credit or debit card payment. Merchant services is a subsection of the banking industry, and the networks through which digital payments travel are owned and operated by banks.
So does that mean you’ll be hired by a bank? Probably not. This is because in the 1970s, banks decided to spin their consumer credit services out into separate corporations. For example, Visa was created in 1976 when Bank of America and its international banking partners merged their various consumer credit brands under the single, internationally recognizable name of “Visa.” Similarly, MasterCard was created in 1979 when the group of banks that would eventually merge to form Wells Fargo and HSBC rebranded their popular “Master Charge” credit card service to the name “MasterCard.” Today, Visa and MasterCard are considered to be their own independent entities, but they are entirely reliant on the networks owned by the banks that created them.
So does that mean you’ll be working for Visa and MasterCard? Still no! Visa and MasterCard have essentially outsourced the sale of merchant services to contractors across the globe. In the U.S., these contractors are known as Independent Sales Organizations (ISOs). ISOs pay Visa and MasterCard annual, monthly, and per-transaction fees for the right to sell access to the banking networks that Visa and MasterCard operate. This access takes the form of merchant accounts. ISOs must pay Visa and MasterCard a base cost for each merchant account they open, and every business owner must open a merchant account in order to accept credit and debit card payments from their customers. ISOs hire sales agents like yourself to bring in new accounts and generate revenue.
So, to put it simply, you will be working for an ISO of Visa and MasterCard and selling access to credit card processing networks to small business owners. The account through which a business owner accesses the digital payments they’ve received is called a merchant account, which means you will primarily be selling merchant accounts.
The Wild, Wild West of Sales
You may have realized by now that every merchant services sales agent is effectively selling the exact same service. Furthermore, agents do not set the base price of this service, do not have any control over the rules of this service, and are not employees of the banks that actually own this service. In other words, you can only compete with other salespeople on markup, additional products, and customer service.
This has given the merchant services industry a well-deserved reputation for being extremely cutthroat. Merchants often talk about credit card processors in the same way they talk about used car sales: high-pressure, deceitful, and driven purely by commission. Similarly, agents regularly poach each other’s accounts and are fiercely protective of their existing clients. Visa and MasterCard’s decision to outsource the sale of merchant accounts has created a “race to the bottom” that has caused the vast majority of ISOs and agents to resort to pricing gimmicks, loaded contracts, and outright lies to carve out a sustainable share of the market for their businesses.
Visa and MasterCard aren’t completely to blame, however. ISOs have followed in Visa and MasterCard’s footsteps by hiring independently contracted sales agents to sell the majority of their merchant accounts. An independent sales agent (ISA) is a self-employed, outside salesperson who is typically compensated on a commission-only basis. This differs from a conventional W-2 employed sales agent, who typically works at a credit card processor’s physical location as a full, salaried employee of a company. ISAs have the freedom to set their own sales strategies and pricing, but they also tend to receive less training or support from the companies they sell for.
Working as an independent sales agent is objectively more challenging than working as a W-2 employee. Independent agents often have to source their own leads, travel for face-to-face presentations, manage a portfolio of different accounts, and build their residual income one account at a time. In contrast, in-house employees receive a predictable income, regular coaching and oversight, and other agents on-site to help them manage unexpected developments.
Whether you are planning to work as an independent or in-house sales representative, this guide can be of use to you. However, it is primarily intended for independent sales agents who are hoping to avoid common obstacles and develop a sustainable career within the merchant services industry.
“It” Rolls Downhill
Here’s the truth: the credit card processing industry, as currently constructed, is an endless chain of ripoffs. Visa, MasterCard, Discover, and other card networks charge annual, monthly, and per-transaction fees to ISOs but never justify these fees relative to their costs. Then ISOs turn around and, unwilling to invest in full-time staff, promise independent sales agents “uncapped commissions” and “potential” six-figure earnings to do their selling for them. Once agents hit the pavement, they quickly realize two things: that most merchants are hostile to their sales pitches, and that even the most reliable merchant account portfolios take a very long time to add up to a livable income.
As a result, desperate agents will often (intentionally or not) pass the ripoffs onto the merchants by locking them into undesirable contracts that are great for the agent’s commission but terrible for the merchant. This leaves both the agent and the merchant unhappy with the situation and causes agents to burn out within months. Independent sales agents are the source of most merchant complaints that are posted to online review websites like CPO, yet they remain the standard approach in what has become a widely despised industry.
However, you don’t have to give in to the status quo. It’s possible to carve out a decent living selling merchant services, and, in fact, it can be fairly pleasant if you know what you’re doing. The first step is to ensure that you aren’t getting screwed by your ISO or employer. Then, once you’ve locked in a fair sales arrangement, you need to ensure that you aren’t screwing over your merchants. From there, your portfolio and reputation will experience positive, organic growth as long as you’re willing to put in the work.
Part 1 Summary
- You are selling business owners the ability to accept debit and credit card payments from customers
- These payments are processed via networks controlled by Visa, MasterCard, and large banks
- You will not work directly for Visa or MasterCard, and you probably won’t work directly for a bank
- You will most likely be working for an Independent Sales Organization as an independently contracted sales agent
- Independent sales agents effectively operate as their own bosses and are paid on a 100% commission-only basis
- Unethical ISOs often tie their agents’ compensation to how much profit they can make off of merchants, giving agents an incentive to sign merchants up for bad deals
- Most agents who trap merchants in bad deals eventually burn out or destroy their reputations
- The only way to build a sustainable career is to demand appropriate compensation for yourself so that you can provide your merchants with real savings
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Tell Others About Your Experience
Your comments will help others who are researching working for companies that sell merchant accounts and credit card processing services. How much money did you make selling merchant services? Which credit card processor did you work for? Were you an independent 1099 agent or a full W2 employee? Did you sell over-the-phone or in-person? How did you find leads and the businesses that you contacted? How competitive was it? Did the merchant account provider train you well? What else should we all know?