Hot Merchant Acquiring Issues

15 Jan

There are a few hot-button issues keeping merchant acquiring business owners up at night.  Below is a run-down of these concerns, and potential cures for the insomnia that results.

1.  Aggregation.  Just thinking about the requirements imposed on those who want to take advantage of the payment network aggregator rules makes everyone’s head spin.  But the Rules spell out specific qualifications required of master merchants and clauses that must be included in contracts.  A bit of analysis about the requirements clarifies this new murky opportunity.

2.  Merchant Movement.  Sales representatives that believe the grass is greener elsewhere and who then violate non-solicit agreements.  An effective agreement that is enforceable under the relevant state law, followed by a strong cease and desist letter may provide relief.

3.  Pot of Gold Syndrome.  The suspicion that portfolio/asset valuations and acquiring opportunities will never be better than right now.  This discomfort tempts owners to explore options to take some money off of the table, either by selling portfolios, selling the company, or looking for investors.  A good strategy, but advice to the wise:  clearly identify your goal before going down this path.  Investigating the possibilities is expensive, from both a monetary and time resource perspective.  Figure out what you want out of a transaction before you start.

4.  Weak Sponsorship Contracts.  Heavy handed, one-sided contracts and proposed amendments affording little if any protection of residuals, confidential information, or ultimate liability.  Mandatory minimums are popping up as the bane of ISOs.  Other problems include no portability, and the ability to change pricing.   Mindful negotiation can alleviate unfavorable initial proposals.

5.  Mobile.  Uncertainty about how the new normal of mobile payments will affect future prospects.  Bigger companies are barreling full steam ahead, coming up with their own solutions.  Smaller players are taking a watch and wait attitude, but fear that sitting out for now may lose them market share.  There’s not much time to waste:  keep your options open but once you settle on a course of action, do your due diligence and negotiate the contract to fully protect the company.

Change is endemic to the acquiring business, and now the stakes are higher than ever.  With so much insecurity out there, let us know if we can help.

Holli Targan

Attorney & Partner

htargan@jaffelaw.com

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