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How to Make Money Selling Merchant Services – Selling Payment Processing - YouTube
Channel: CCSalesPro
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Hi, my name is James Shepherd.
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We are in a mini series right now kind of
back to the basics, just talking about merchant
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services.
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What is it?
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How does it work?
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In the last video, I talked about to you about
what is merchant services and we talked about
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moving money.
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Basically we are just taking the customer’s
money and getting it over to the business
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owner.
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What we talked about in the last one is kind
of the history of merchant services.
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How did it start?
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What does it do?
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What is it?
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This time we are going to talk about how do
you actually make money selling merchant services?
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With the moving of the money around, how does
that actually work?
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As we discussed in the last video, there are
some costs of moving the money around, and
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those costs are primarily called the interchange
fees.
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Interchange fees are charged by the banks.
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The banks say, “We are going to charge an
interchange fee in order to move this money
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around.”
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They are going to hold a certain amount of
money.
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The way it really works with interchange is
that, if you are a consumer, you walk into
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a business, pull out your card and you spend
$100.
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What happens is when the money leaves your
bank, so let’s say you bank at Chase and
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let’s say that the business owner banks
at Wells Fargo.
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So Chase bank needs to move $100 from your
account at Chase to the business owner’s
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account at Wells Fargo.
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What actually happens is your bank doesn’t
move $100.
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Your bank moves $98.40 or something, depending
on the interchange fee for your particular
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card and the way that you processed it.
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They are going to hold some of the money back
as interchange cost and they are only going
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to move $99.40 or whatever over to Wells Fargo.
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When the business owner gets their money,
they don’t get all of their money because
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these interchange fees were held back.
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Okay.
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Now in order to facilitate all that stuff,
there is a couple things that really have
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to happen.
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If you think about the logic of this, there
is no way that a small business owner is going
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to be able to deal with all of these bank
relationships.
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Because even though you have Visa that is
tying everything together in terms of like
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getting authorization codes and checking the
balance and making sure it is available and
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all that, they are not moving the money.
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The money still has to move from one bank
to another bank.
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It is not feasible for a small business owner
to say, “Oh, yea, I just got a deposit yesterday
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for $7.40 from Wells Fargo and another one
from this bank and from this bank.”
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They are not going to do that, right?
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Somebody has to like tie this all together.
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That’s where a certain kind of bank comes
in called an acquirer, or an acquiring bank.
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You have the bank that is the issuing bank,
that issues the card.
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Then you have an acquiring bank.
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The issuing bank issues the money to the acquiring
bank.
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When you think of a processor, we think of
these big processors, First Data, Vantiv,
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Global, Tesis, these big processing companies.
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What most of them really are is they are something
called an acquirer.
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An acquirer simply means they are acting as
the bank for the merchant, and so the money
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is going into their account and they are the
ones that are pulling all the networks together
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to deal with all these banks to get the payments,
to deal with all the fees and funds and everything,
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make sure it is all working correctly.
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Then they in turn take the money from the
merchant’s bank account in their company
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and they move it to the merchant’s actual
bank account.
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They are kind of that middle man there.
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How do you make money selling merchant services?
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It is really simple.
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There is cost and there is mark up.
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That’s it.
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There is a cost to moving this money around.
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The interchange fees, the card brands have
some costs, but in addition to that, credit
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card processing companies mark up those costs
in order to cover their costs and make a profit.
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On that transaction, where that $100 we talked
about a minute ago, where they are only going
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to move $98.50 let’s say over here.
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Well, in actuality, they are going to move
$98.50 over here, but they are going to move
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it to the processor.
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The processor is going to grab another 50
cents and then they are going to move $98
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to the merchant.
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There is cost and there is mark up.
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How you make money as a merchant services
sales rep or ISO is that you are basically
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grabbing that part of that 50 cents and splitting
that up with the processing company in order
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to make residual income.
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There are multiple ways you can make money
in this industry.
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We are going to talk about that in the next
video, but the core thing you have to understand
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is there is cost and there is mark up.
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Every processor has generally the same cost
structure.
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They are all paying the same interchange rate.
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They are all paying the same fees to Visa,
MasterCard, and Discover and American Express.
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The only difference is in that mark up and
if they are marking it up more or less than
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their competitors and your choice as a credit
card processing sales rep as you are selling
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is you are trying to sell at a mark up to
create some margin so you have a little bit
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of profit to generate income.
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Then there are other ways you can make money
and we are going to talk about that in the
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next video.
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My name is James Shepherd.
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Thanks for watching and listening.
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