The Sales Head Office; Selling and Sales Management

Selecting a merchant accounts provider can be an intimidating task. This post discusses how to go about selecting a merchant account provider in Canada.

All of the major financial institutions, and most of the Credit Unions, either have a partner that they refer processing requests to, or they own a processing company. The result is most people today are in a credit card processing relationship with the company that their financial institution recommended.

As I discuss in a post on payment processing, not all offers are equal and it is important for merchants to understand how to read their statement and to actively look for competing offers.

Below is a brief description on the major Canadian merchant account options :

Moneris

The payment processing industry is one of partnership and Moneris is no exception. Moneris was created Royal Bank and BMO in 2000. They are the biggest player in Canada by volume which is no surprise considering they have two of the 5 largest institutions sending them business.

TD Merchant Services

TD Merchant Services is a joint offer between TD Bank and First Data Canada. TD is a Visa house and provides the Visa, terminal and debit while the MasterCard is provided by First Data. As such merchants receive two statements; one from TD and one from First Data. TD Merchant Services is the referral partner of the Canadian Chamber of Commerce and a lot of their business comes from local chambers. TD is also the second largest bank in Canada so once again it isn’t a surprise that TD Merchant Services is the second largest player in Canada.

First Data

First Data is the largest processor in North America. Most of First Data’s business in Canada, today, comes from their relationship with TD for the MasterCard a, a previous relationship with Chase Paymentech and one of their business units UNPS. UNPS is a referral partner for a few hundred credit unions in Canada. In April of 2009 First Data was the first company in Canada give the ability to process all three major cards direct; Visa, MaserCard and AMEX. They are now in the market selling direct to merchants under the First Data brand.

Chase Paymentech

In 2002 Paymentech purchased Scotia Bank and Citibank’s merchant portfolio. They also have a referral relationship with the Canadian Federation of Independent Business (CFIB) that represents a large portion of their business.

Global Payments

Global Payments has an allance with CIBC. Like all the processors above they are an international player. In Canada a lot of their business comes from their relationships with the restaurant industry and of course from CIBC business clients.

The Independent Sales Organizations (ISO)

There are a number of ISO’s in the Canadian market re-selling credit card processing. Typically they develop a product line (terminals) and a relationship with a major processor (First Data, Moneris etc) and go to market direct. They mainly target small business and often small business that does not have the credit hsitory required to work with a major processor. The ISO’s make their revenue off the sale of the terminal and a trailing revenue/revenue share with the processor. Some ISO’s have a a significant portfolio and others operate on a very small scale. For most merchants there are better processing options. Examples of Canadian ISO’s include Monex, Pivotal Payments and Collective POS.

Each processors price model is different – in some cases are drastically different – and it is important to understand which provider has the price and service model to match your business. Covering the strengths and weaknesses of each processor will come in later posts!

I recently accepted a position as a Sales Manager for a large Canadian payment processing company. I’ve created a new category at SaleHO.com to reflect my thoughts on where the industry is headed, and this is the first post under that new category. I’ll try to stay unbiased and talk about the industry as a whole rather than specific providers

Knowledge is Power – Sir Francis Bacon

When it comes to payment processing, nothing could be more accurate. The industry has changed drastically the past 12 months and merchants are feeling the pinch. Prior to 2008, all a merchant needed to understand was his discount rate for each card type (Visa, M/C, Amex) and his fixed fees (statement, machine rental, push fees).

Fast forward to fall 2008 and the card associations introduced a new set of fees. Today, on top of their discount rate, a merchant needs to understand two new layers of fees; assessment fees and non-qualified transaction fees. Here is a breakdown of the new fees.

Assessment Fee’s
MasterCard went Public in mid 2006 and Visa followed suit in mid 2008. In 2008, in Canada, both card brands levied a new fee in order to increase revenue. MasterCard’s rate is 0.069% per transaction and Visa’s per transaction charge is 0.06%

Non-Qualified Transactions
In 2008 Visa and MasterCard began differentiating between card types (corporate, infinite) and the manner in which cards were being handled by merchants. Any card – manner of processing – that was deemed unqualified was assessed a surcharge. As an example, a domestic Visa that was keyed into a merchant’s terminal no longer qualified for the negotiated discount rate. Extra Interchange fee’s applied.

Whether the changes that came down were fair or not is, in my mind anyways, less interesting than the way some of the processing companies handled the change. Most of the major Canadian providers saw this as an opportunity to take margin on these new fees – as much as 500% mark-up!

So what can a merchant do?

1) Make sure that you are receiving your statements and understand the new fees. Believe it or not we come across merchants every day that were opted out of a paper statement for an online one, and have no idea how to access their billing.

2) Shop around. Most people are with the payment processor that their bank represents, they don’t even realize there is choice in the market. Contrary to what your bank may have told you, changing processors is simple and straightforward. All the major processors can settle to any bank account with next day settlement.

3) Read your processors communications and understand the changes coming down the pipe. If you don’t understand a change, call your service rep or the 1-800 number on your terminal and hold your provider accountable!