Merchant Services Commission Structure and Credit Card Processing Residual Income: Tips for Success
Updated 09/24/2023 — If you are an aspiring credit card processing agent or ISO, then you should know that one of the most important keys to success in this field is the ISO agent program that you work with. Choosing the right partnership provides you with the resources that you need to make sure that you have success and are able to be competitive when it comes time to selling merchant services to your clients. Shaw Merchant Group is the best choice in the industry with a comprehensive suite of sales tools to help you succeed, and a history of helping our partners achieve success. We’re here to give you all the information that you need when looking for the best compensation in the payments industry.
How to Successfully Sell Payment Processing?
There are things that you need to put in place in addition to being hardworking in order to succeed. These tips will help you understand how to become a credit card processor and to easily make $100k per year. In order to make 6 figures in merchant services sales, you need to:
1. Set Your Goal
Just like in any industry, business goals are very important. These help you to be disciplined and stay focused on what you need to do. If you wish to make $9000 per month, then set that as your goal and put it the effort to attain that. If you wish to sign 15 merchants every month, set it as your goal and work towards attaining that.
2. Join the Right ISO Program
The merchant services agent program you join will determine your success. Look for an ISO agent program that provides both the tools and support needed to successfully run your business. Shaw Merchant Group is one of the top-rated ISO agent programs that you can join.
3. Understand Your Product
Ensuring that you understand your merchant products and services is important in helping you stay competitive. The ISO agent program you choose should be in the capacity to provide firsthand information about the credit card processing business. This will help you to stay up to date on selling merchant services and in-turn, attract merchant leads.
4. Manage Your Time
As an independent sales agent, it can be very difficult for you to stay committed to what you do. Remember that you are 100% responsible for your daily tasks. For you to succeed in merchant services, it is critical to stick to your schedule. Divide your time to tackle things such as following up with your leads and finding new leads. If you find it difficult to manage time by yourself, you can use apps and tools to schedule your daily tasks. This will improve your productivity and bring you a step close to making more money.
5. Invest In Referrals
Referrals are very important in helping you grow your merchant services business. This is very effective when starting out as a merchant service provider. Set a strategy to use and follow up with clients so as to get most referrals from every merchant client you get.
Why Be Choosy About ISO Agent Programs?
There are several issues that you can face with a credit card processor that can shut your business before it even starts. Here are a few problems agents face with many credit card processors:
· Payment Delays: One of the leading problems that many agents who start a merchant services company face is that their credit card processing company holds payments for too long. Whether for security reasons or for lack of funds, the companies usually pay very late.
· Lack of Support: Many don’t have good agent support. If you need to inquire about something on an urgent basis, you will either have to wait, or you might not get connected even after several attempts.
· No System in Place: For many credit card processors, there is no robust system like a dashboard providing agents with insights to their progress, available funds, and active merchants. This puts a lid on the agent’s ability to improve by monitoring progress.
· Low Profitability: By selling merchant services, agents get commissions and bonuses; however, some merchant processors simply don’t pay very well. Agents get very low payments for the amount of work they put into bringing sales.
· No Attractions: In order to sell, you need to show some attractions to the merchants like upgraded processing software, low fees, and some starting out gifts, and so on. There are many merchant processors who don’t offer much, which can make it difficult for the agent to pitch the program to the merchants.
1. Making Money with Residual Income:
When you sign up a merchant for service, the company will receive a percentage of the amount for every transaction processed via credit cards by that merchant. So as long as the merchant is happy and continues to work with the company, they will get some % of the money from every transaction, and you will get your split from it.
Now speaking of the ‘split,’ the industry average is around 50%. This means if your processor receives, let’s say, $0.10 for a specific transaction and the interchange rate/transaction fee is $0.03, then you should get $0.035 based on 50% sharing of remaining $0.07.
Now, if you let’s say keep bringing 10 merchants a month, then in one year, you have 120 merchants. Let’s say 20 of them closed the business or switched to another processor; then, you are still left with 100 merchants after one year. So with 100 merchants, your per month income should be $100 x 100 = $10,000. Now multiply it by 12, your second year’s income should be $120,000 in just residual commission.
Not a bad commission making $120,000 by the end of your first year, right? And keep in mind, we haven’t even added the merchants you will be bringing for that second year. We are just calculating for the merchants you brought for first year. So this is the basic calculation, you can crunch the numbers as per your goals and see how much you will be making.
2. Making Money with Upfront Bonuses:
We offer a performance-based fast start bonus that is payable for anyone that onboards more than the standard threshold of clients in the first 4 months. This program is designed to reward those experienced sales members that join our team and quickly learn how to sell this product. The bonus can reach up to $20,000, making it one of the most lucrative and competitive in the industry.
We will look at how much profit is generated on the account after they have been processing for one month and you earn 14 times of the total profit. Example: If we retain $100 in residuals in that month, the bonus would be 14 x $100 or $1,400. You would have already been paid $600, so we would pay you an additional $800 on that account. This bonus is capped at a max of $10,000 per merchant per location. With our dual pricing cash discount option it is easier than ever to earn huge bonuses with a 14x profitability bonus. This dual pricing model enables you to maximize your bonus at $10,000 on almost every merchant processing over $90k.
Don’t Just Consider Residual Split
There will be some companies that will offer you a low residual split. However, we suggest that you don’t just look at the split but to also look at your buy rate (Our buy rate = 1.5 cents).
Sometimes, payment processing companies offer things like training resources, ongoing support, and help with leads hunting, all of which are very important things to have if you are just starting out. You need to learn the ropes first, so going with this kind of deal is not bad.
How are they Paying High Residual Split?
Different companies have different methods for calculating the agent’s residual split. We suggest that you don’t just look at things on the surface level. If you are getting an offer of a 50% split and some good upfront bonuses, then that is a good deal. However, things start to get fishy when the deal is too good to be true. Maybe you are offered a very high split, let’s say 70% to 80%, With SMG, you get a true interchange revenue split. Unlike other ISO agent programs, there is no basis points off the top for BIN sponsorship or for what they call hidden losses. Our sales partners earn more residual income with our 50/50 program than you would with our competition who claim to offer a higher percentage because their interchange cost (buy rate) is higher.
If you don’t know, the basis point is a unit of measure in finance where 1bp = 0.01% or 0.0001. So if the company is adding BP to the interchange/transaction fee before calculating the profit, then you won’t really get much money. For instance, the processor gets $0.10 from a transaction, and the original interchange fee is $0.03, but the company adds 120 basis points to it, then it becomes (120x0.0001) + $0.03 = $0.042.
So now, your split will be calculated from $0.058, which will obviously be less. So if you get this kind of offer, ask for the ‘Schedule A,’ which is basically a document containing all the costs charged from you.
So, if you are passionate and persistent enough, you can make a good place in the market and earn a handsome amount. Besides, you would also need to have thick skin to have a growth mindset for all the failures and the competition you encounter in the field. With some hard work, persistence, and passion, you can make a good spot in the industry.