More than a fifth of independent sales organizations claim to be ready to change their sponsor merchant-acquiring bank, according to a new Aite Group LLC report about ISOs' relationships with their vendors. A smaller but still substantial number also are likely to change some of their other vendors. From July through October last year, Aite polled 27 ISOs that represent 18% of U.S. charge volume. The firm asked them about their relationships with their acquiring banks and providers of front-end (authorization and draft capture) services, technology services, back-end processing, and telemarketing and customer service. Asked to rank their satisfaction with sponsor banks on a scale of 1 to 5 with one being “not at all satisfied” and 5 being “extremely satisfied,” 54% of respondents rated themselves as satisfied or very satisfied while 46% said they were not at all satisfied to somewhat satisfied. Fifty percent of ISOs were very to extremely satisfied with their main front-end processor and 50% were not at all satisfied to neutral. Regarding back-end processors, 58% of ISOs were very to extremely satisfied and 42% were not at all satisfied or neutral. Of 24 respondents, 21%, or five ISOs, indicated they were likely or very likely to change their acquiring bank relationship in 2010. Seventeen percent said they were likely or very likely to change front-end processors and technology providers. Similarly, 13% indicated a high likelihood of changing back-end and telemarketing services providers. Only 8% said they were likely or very likely to change customer-service providers. Overall, ISOs are “barely happy” with their service providers, according to Aite researcher Adil Moussa. Pricing often keeps relations between ISOs and their vendors lukewarm, though Moussa says griping about costs is nothing new in the acquiring business. “It's a given that everybody is going to complain,” he says. “We all want it for free.” Still, in a price-sensitive industry like merchant acquiring, vendors can ignore such concerns at their peril. Asked to rank seven factors in choosing an acquiring bank partner, pricing came out on top, with 92% of respondents saying pricing was important to very important. Next in importance were the bank's reputation and stability, both at 79%. And asked to rank 13 factors about back-end processors, pricing tied for No. 1 with system flexibility and processor reputation, with all three regarded as important or very important by 92% of respondents. Sponsoring banks and other vendors do have more control over such things as their reputations and service delivery than over pricing, according to Moussa. “Reputation is huge, and it's not a monetary thing,” he says. “I think a lot of banks should be paying attention to what's being said about them in the market.” One thing that enhances a sponsor bank's reputation is the perception that it helps its ISOs sign merchants even if it does little else in merchant processing, according to Moussa. “I don't think that's being done a lot,” he says.
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