Causes of Inefficiency and Their Impact on Service

The Merchant Processing industry suffers from a very high level of inefficiency that affects the quality of service provided to merchants by Independent Sales Organizations (ISOs) and their agents at the street level, commonly referred to as “Foot Soldiers.” I have been on the receiving end for nearly two decades. Sadly, this saga continues with no end in sight. My focus is to advocate for merchants while assisting the industry in a positive manner so as to improve processes and relationships. The level of service merchants receive is directly proportional to how the ISO is managed and led. Sadly, it is far from perfect, and not even close.

The knowledge gained through this writing allows merchants and others alike to better understand the challenges you face so you could tailor your evaluation of any ISO accordingly. Now, let’s get started.

Many executives and managers are focused on the number of sales and the gross processing revenue. What they do not realize is how much money is lost due to shortcomings that waste their resources, thereby giving rise to unnecessary bottlenecks, frustrations, loss of resources, and ultimately poor service. Some of the most important problem areas I have observed are as follow:

  1. Departments within the organization are not connected in a cohesive fashion;
  2. Poorly designed software and disconnected computer networks and intra-organization communications systems that do not share information;
  3. Mistaking lean and mean for lean and efficient;
  4. Not providing access or communication flow to higher level managers and/or department heads for their own managers as well as agents and merchants;
  5. Poorly-trained staff;
  6. Using call centers in other countries to save money. Combination of poor sound quality, limited access to information and solutions, inadequate staff training, and extra time spent on calls can diminish the quality of service significantly;
  7. Staff not cross-trained in technical support and file build departments;
  8. Hiring staff who are unqualified for their position. This includes the board members hiring C-level executives from unrelated industries or Wall Street with little knowledge of this industry;
  9. Placing their trust on incompetent staff at all levels including executive management;
  10. Using outdated, legacy billing systems that create more work and aggravation for all parties involved;
  11. Offering products and services that do not deliver as promised;
  12. Devoting little or no resource on training and continued education of their most valuable assets: their staff and agents;
  13. Not being completely honest with agents on issues that affect all stakeholders: merchants, agents, vendors, ISOs, processors, and sponsor banks;
  14. Corporate arrogance: i.e. not apologizing for mistakes made;
  15. Placing their most profitable relationships ahead of the moral and ethical imperatives vis-à-vis merchants and agents. This includes Sponsor Banks, Processors, ISOs, and some of their vendors (i.e. equipment leasing companies) that should place the interests of consumers, merchants, and agents ahead of corporate profits;
  16. Not recognizing that their most valuable asset is their human capital;
  17. Brain Drain: Voluntary departures or laying off of experienced and key employees. These losses are incalculably costly, both morally and financially;
  18. Creating resentment by underappreciating their staff or not paying them what they are worth, while top bosses make unreasonably huge salaries;
  19. Not investing in new products and solutions;
  20. Not being a Change Agent. Having little ability to forecast future trends with accuracy. As a result, resources are misallocated and efforts are misguided;
  21. Micromanaging instead of coaching;
  22. Not realizing that confidence is different than competence; and,
  23. Blinding Success Syndrome©. I have coined this phrase to describe the shortsightedness of many top-level executives. Their companies have increased in size and revenue substantially. However, irrespective of their success, they remain like a pond of stagnant water. Stagnation gives rise to poor performance that afflicts agents as well as clients and lowers the overall productivity and profitability substantially. This breed of executives accepts nothing less than superficial accolades, perceives constructive suggestions as personal attacks, and then bitterly and swiftly fends them off. Even the company’s board members stand behind them because many of them do not really understand the nature of the business. They get paid to sit on these boards due to their name recognition rather than their qualifications. As long as the balance sheet is positive, they are happy and think the company is on the right track. Little do they realize the ship needs a new captain and has to be steered in a new direction. Their kind of love is truly blind and blinding.

I have witnessed firsthand the above shortcomings in most companies I have worked with, or evaluated. I know employees and agents who offer great suggestions, yet they are shunned by the same executives who cunningly boast of their willingness to hear any and all relevant suggestions.

I have seen most caring employees and agents pour their heart out, contribute greatly, and offer solid and sensible inputs based on their first-hand observations and on-site experiences. Yet, the bearer of the constructive criticisms and suggestions is shunned, blamed, undermined, and then terminated or forced to resign by the incompetent upper executives. The cost of training staff is high; so is the value of their knowledge. With their departure, so departs the money. The company is rendered inept, and it continues to bleed financially on the path of its moral descent. This vicious cycle is self-destructive, and it will degrade the level of service.

It seems the industry is receptive only if suggestions have nothing to do with bettering processes, procedures, policies, and otherwise real solutions and improvements. This attitude is the underpinning of an unconfident, insecure organization.

I admit it would be very difficult to find out immediately if an ISO falls into the category above. A full list on how to fully evaluate an ISO and agent and to safeguard yourself against all pitfalls can be found in my timeless and new book “Credit Card Processing: “Exposé.” Suffice to say, the best safeguard is to sign a merchant agreement that allows for cancellation with no early termination fee or a short-term annual agreement with no disadvantageous or funny language in its Terms and Termination clause hidden within the Terms and Conditions document, one you MUST insist to receive a copy of and read before signing the merchant agreement. If you don’t, you may find yourself in a hot zone later!

Good luck!

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