Automated clearinghouse transaction processor ACH Federal LLC is introducing a merchant-referral partner program for ISOs in the hopes of expanding its client base, according to the Chattanooga, Tenn.-based company.
ACH Federal, which officially launched its business in January, has been in development for three years. It processed its first transactions in March of last year and now is working with nine banks and 170 of their customers. It processes about 260,000 payments per month.
To gain referral partners, ACH Federal introduced itself to many ISOs for the first time last month at the Northeast Acquirers Conference in Dover, Vt., says Cindy Firestone, ACH Federal director of merchant processing.
ISOs that choose to work with ACH Federal in its referral program will “refer the business to us so they are not having to learn everything about it or sell it,” says Firestone, referring to the ACH-payment process and related services.
ACH Federal plans to give ISOs a residual in exchange for client referrals, says Craig Cotter, ACH Federal senior account executive. The residual will be a percentage of the sale, he says.
“The residual structure will depend on the size of the client,” and ACH Federal will set the residual percentages on an individual basis, says Cotter.
ACH Federal is enabling ISOs to pass along referrals without becoming experts themselves in ACH transactions “because they already have so much to deal with and keep up with just on the merchant side,” says Firestone.
When an ISO becomes a partner, it will receive a tutorial about the company’s service and an overview about what to say to a merchant to pique its interest, she says.
“They then refer the client directly to us, and we do the sales and onboarding and training,” says Firestone.
ACH processing involves many rules and regulations, just as card processing does, yet it is “like two different worlds,” notes Cotter. “I use the analogy that they may be heart surgeons and we may be brain surgeons,” he says. While both types of doctor can operate in the other’s primary field, “do you want them to,” or is it better for the respective experts to focus on their specialties? he asks.
The company only is beginning to grow its referral program.
“We don’t have any ISOs signed up at this point,” says Firestone, although multiple ISOs attending the Northeast Acquirers Conference expressed interest in working with the company.
For mom-and-pop companies with simple payment needs, the processor collects payments from customers online, makes payments to vendors and deposits payroll funds into employee accounts.
Multiple Competitors
The company has entered a market in which transaction volumes are growing because of new transaction types.
The number of ACH payments in 2008 reached 18.2 billion, a 7% increase from 17 billion ACH payments in 2007, according to NACHA, which oversees the ACH system. NACHA could not provide 2009 transaction data by deadline.
Businesses once primarily used ACH for recurring transactions between well-known parties, such as direct deposit of payroll funds, but the system has transformed during the past decade to include purchase transactions and payments made online or by telephone.
ACH Federal also enters a market where there is no shortage of alternatives. Major core processing vendors provide ACH software and services to their bank customers, as do other independent service bureaus.
The economic crisis has led the government to impose additional rules on electronic transactions, and Cotter argues his company’s system is well suited to handle changes in the automated clearinghouse system.
Additional reporting by Steve Bills, former deputy editor of technology and payment systems at ISO&Agent Weekly sister publication American Baker.
