The Acquiring Business is Back: Banks and ISOs Engage in Strategic Partnerships

In recent years, banks have been re-evaluating their acquiring business strategies in response to the growing popularity of POS debit and increasing electronic transaction volumes. As a result, the acquiring business has experienced a resurgence, with banks seeking to strengthen their processing services and transaction volumes. One key element in this strategy is the collaboration with independent sales organizations (ISOs), which can provide expertise and reach in emerging markets. However, this new competitive landscape poses a significant threat to ISOs, as banks become more aggressive in their pursuit of market share.

Key Takeaways:

• Banks are re-entering the acquiring business due to the growth of POS debit and electronic transaction volumes.
• ISOs have historically taken advantage of banks' lack of aggression, but now face increased competition as banks become more aggressive in their pursuit of market share.
• The large acquirers in the past primarily targeted big-box retailers, but now banks and ISOs are moving down a tier to mid-sized regional retailers.
• ISOs have regional calling efforts aimed at middle-market regional retailers, which creates opportunities for banks to partner with these organizations.
• Banks may choose to pursue merchants outside of their natural franchise using ISOs, which do not require the bank to build an additional sales force in a new market.
• Bank of Boulder is a notable example of a bank that has built a successful business model around partnering with ISOs.
• Bank of Boulder has formalized a process for bringing in new ISOs, including a relationship management group that closely directs the business between the bank and its ISO partners.
• The bank checks the background of each ISO to ensure financial soundness and no record of fraud or crime before forming a partnership.

Statistics:

• 60-70% of ISOs fail to respond to Bank of Boulder's detailed information packet after being approached for a potential partnership.
• Bank of Boulder holds two formal conferences per year in Boulder with its 20 ISO partners to review industry developments and educate the ISOs on the EFT business.
• The bank provides financial assistance for transportation to facilitate the conferences.
• The bank holds an open forum at each conference where executives from the ISO can address managers from the bank about issues affecting them during the past six months.
• The bank's ISO account managers act as advocates for the ISO, taking the ISO's position when dealing with conflicts that arise in the ISO relationships.

Sources:

• Source 1: John Soderlund, principal at First Annapolis Consulting
• Source 2: Rusty Shaffer, vice president of marketing and sales at Bank of Boulder, speaking at the POS Today conference in Denver sponsored by Faulkner & Gray
• Source 3: Bank of Boulder's official website and marketing materials
• Source 4: Faulkner & Gray's website and marketing materials