Evaluating the ROI for Your Credit Card Processing Business

Jeff Fortney


As another year draws to a close, now is a great time to look back at your credit card processing business and identify your accomplishments for the year. This self-examination will help you identify your strengths and weaknesses and will give you the tools you need to repeat your successes.

Most ISOs I talk to admit this is a great idea. However, all too often this exercise is done at the 20,000-foot level, and does not involve a deep, focused review of our efforts. What happens then is that we sum up this process with a generic statement like, ”I did okay, but wish I could have done better.” Granted this is a nice thought, but it will have no true impact on the growth of your credit card processing business and will most likely result in another year of lackluster sales.

In the payments world, identifying true success - and failure - requires a detailed analysis that concentrates on those areas that will have a direct effect on your income. Start by asking yourself, ”Did I make the return I expected on each of my merchants?”

Chances are most of us cannot answer with a resounding ”Yes.” If you can, then there is no need for you to read on. However, if you are like most of us, you will sadly have to say, ”No.” Now that you've admitted you need help, let's get started by identifying why you didn't make as much as you thought you would on your portfolio.

First, recognize that ”return” doesn't always translate into a dollar amount. This is because merchants don't always process the volume you - or they - anticipated. The return on the dollar may be the same, but the number of processed dollars is less. Remember to measure only the return on individual dollars processed, not the fixed amount you had hoped for when signing the merchant.

Next identify those merchants that fell below your expected return. Once you've come up with a list, figure out the reason for the shortfall.

There are two main areas that will cause lower returns, your actions and the actions of others. By this I mean how you priced the merchant, and the costs you incurred from your credit card processor.

Your Actions

Examine each merchant and identify those whom you priced below your minimum acceptable price. Then ask yourself why they were priced so low, as there may be a good reason why they're underpriced. For example, did you base their rate on a different average ticket than what you anticipated? Or perhaps you anticipated higher volume.

If the reason was a perceived promise of return, review the merchant's volume to see if it actually came to fruition. If it did not, remind yourself to reward merchants after you receive your return - not before.

Those of Your Credit Card Processor

This is the main area ISOs fail to consider when evaluating their credit card processing business. It's easy to blame yourself, but what if your credit card processor impacted your return? Believe it or not, this happens more often than most would think.

When examining your current partner, consider these questions:

1. Can I proof my residuals down to my costs? If you can't, there may be a problem, but you'll have no way to identify it.

2. Is my pricing really as good as I thought it was when I first signed? Oftentimes one area may look great, but it could be offset by things like lower splits, higher monthly costs, and even miscellaneous fees, such as those for PCI.

3. Am I getting what I need in terms of support? Remember, your credit card processor should act like a true partner. This is done by supporting you when you need help, providing guidance, and being available when you have questions or concerns.

4. Did the relationship turn out like I expected? Remember the old adage, you get what you pay for. There's also a chance you may have expected too much from your partner when you first signed.

If your partner is falling short in any of these areas, it's important that you address them now - not after the start of the New Year. Explain to them what you've discovered, and ask how they will address these shortfalls. It may be that your expectations were too high.

If your processing relationship did not turn out as you had hoped, consider finding a new credit card processor that fits your needs. Keep in mind that not all processors are a good match for your credit card processing business. That's why it's important to look for one who isn't afraid to tell you if you're not a good fit. Ultimately, that new relationship may be your first step to finding yourself saying yes to that all important question next year, ”Did I make the return I expected on each of my merchants?”