[Ditty]

What exactly is the merchant account residual?

[Sean Cash]

What exactly is the merchant account residual?

In the payments industry, when you sign up a business to accept credit/debt cards, the account rep gets a fractional percentage of every single transaction the business does as a commission for life. The same applies if you get a merchant to change from a previous merchant services provider to a new one. In a way the payments industry is a giant MLM model with processors reselling for acquirers, mega-ISOs reselling for processors, small ISOs reselling for mega-ISOs and reps selling on behalf of small ISOs. Everyone in the chain gets a fractional piece of the action. This ongoing payout of the percentages continues for as long as the merchant stays with that merchant service provider and is a residual commission.

The real value in the early merchant cash advance days wasn't the ROI on the advances, it was the merchant accounts you could pick up. The ability to offer merchants financing was an acquisition tool to get them to switch merchant service providers so that you would get the lifetime residual payout on that account. A few accounts won't do much but sign up 500, 1,000 or 10,000 accounts and you can eventually make a cool passive six figure A MONTH income... without doing any additional work.

The ability for every processor to split-fund for merchant cash advance companies cut into the residual income market for merchant cash advance reps. Some reps would leave merchants with their current processor and earn no residual just to close the deal and get the commission on the advance. The ACH market has further cut into the residual income market because fewer and fewer deals rely on processors to split payments.

People always talk about "building up a book of business" and if you are wise to the payments industry, you can build a real book of passive income without ever having to worry about whether or not a merchant renews their funding so long as they continue to stay with the same merchant service provider. I personally did not care much about cash advance commissions in my run as a merchant cash advance rep as I was in it to acquire merchant services accounts. That's a tough business to be in now because competing ISOs and funders will tell your prospect they don't have to switch. Also, industry disrupters like Square cut out the middlemen and go direct to the merchants, paying out no residual commissions to anyone. People like to tell me Square is not a threat because they only focus on the micro-merchant market but once they have enough data to be comfortable, they and copycats will threaten the status-quo.

Don't get me wrong, there is still plenty of money to be made on merchant accounts. Even if you fund the merchant on ACH, you can actually save them a few bucks a month on processing anyway just by switching them to Benchmark merchant Services or any of the other big companies like Integrity Payments, North American Bancard, First Data, etc. etc.

Hope that helps answer your question.

[Benchmark]

Thanks Sean.

Building a processing book of business is definitely a good way to secure a long term residual income. Feel free to contact us or our Director of ISO sales, Mike Jaffe @ 212-444-9565 or Mike.Jaffe@swipebms.com