Swipe, tap, or dip.
Most people use a credit or debit card to make purchases on a daily basis.
And if you can sell credit card processing services to the people they buy from (merchants), you can make money. Maybe even a good chunk of it.
In this article, I’ll show you three different ways to cash in on this opportunity.
What Is Credit Card Processing?
Credit card, or payment processing, is a series of interconnected events allowing consumers to pay merchants for products and services with a credit or debit card.
This also includes online payment gateways, but for the sake of this article I’m focussing on the face to face process.
Here’s a breakdown of the key players involved:
- Credit card processing company (explained below)
- Credit card networks (eg. Visa, MasterCard or Amex)
- Merchant and card issuer banks (eg. Bank of America)
According to the 2017 IBISWorld report, this is a $75 Billion per year industry and has seen strong revenue growth over the past five years. The outlook for the next five years is just as promising, which means there’s plenty opportunity for ambitious entrepreneurs.
Ways To Sell Credit Card Processing To Merchants
There’s three main ways to make money selling merchant services. I’ll start with the most complex approach and finish with the simplest, but the income potential is high for each strategy. It comes down to how much time and money you are willing to invest, and what appeals to you personally.
1) Start Your Own Credit Card Processing Company
This is by far the most elaborate approach, and requires the most capital. Done correctly though, it can potentially be very lucrative.
As the owner of this business, your objective is to connect the merchant with credit card networks such as Visa or MasterCard. In doing so, you collect both the initial setup fees and the ongoing transaction fees, residual income.
This can also include selling POS systems and the credit card machines themselves, among other related products and services.
There’s no license required to start a business of this kind, but to get started you will need to do one or both of the following:
- Register to become an Independent Sales Organization (ISO) with Visa
- Register to become a Member Service Provider (MSP) with MasterCard
Registering with either company costs $5,000 per year and is subject to a stringent approval process.
The biggest requirement is getting yourself ‘sponsored’ by a bank or financial institution. Essentially, you will need a full business plan in place and be in good financial stead, which includes having a good credit history. As you can imagine, they take the time to make sure all principals involved in the business check out so it pays to have everything in order.
Assuming all goes well, the bank will offer your company a contract which you can accept or reject depending on the terms.
It pays to be especially careful of the terms and conditions you accept within these contracts according to UniBul’s Money Blog. Some banks require a set number of transactions to be maintained each month, while others require a set number of merchants to be signed up.
In any case, these fees are sometimes more like hefty penalties, which can single handedly destroy your business in a short period of time. As in, if you don’t meet their quotas, the fees can range well into the $10,000’s each month.
How much money you can make depends on the individual contract you have with the sponsoring bank/ institution.
As a merchant processor, you buy the wholesale transaction fee rates and sell your service to merchants for a profit. What percentage you put on top and how you structure your fees is entirely up to you, but this is a highly competitive landscape so you need to know your numbers and what your competitors are charging.
Like any business, there are other costs to take into consideration too such as insurances, legal fees, premises, and staff among other costs. And it goes without saying, you’ll have the responsibility of coordinating the various departments within the company such as sales and marketing, accounting, underwriting, customer relations and tech support etc.
There’s definitely potential to create a profitable business this way, but there’s also a lot of work involved and a relatively high level of risk depending on how you approach it.
My point being, this really only makes sense if you are going to take the business all the way.
Not to say it can’t be done, but this is a big undertaking depending on how you go about it so it’s really for entrepreneurs with enough capital, know how, and who are ready for such a big undertaking.
This is exactly why most people take the following route.
2) Become a Sales Agent For An Existing Business
Sales agents work for an ISO or MSP as an independent sales person or employee, tasked with bringing on new merchants.
They source leads, educate merchants and ultimately, close sales.
This is much simpler than starting your own company since you don’t need to register to become an ISO/ MSP or run a company. This also means the cost of doing business is much, much lower. Depending on the company and the position available, there may be a small fee involved, but nothing crazy.
There are many successful companies you can work with, each offering different perks and each with different terms and conditions.
For example, Beacon Payments offers their sales reps up to $500 for signing up a new merchant, and a bonus of up to $1,250 per month. They also pay out up to 60% of the transactions fees they collect from merchants, for life. So, anytime a client you’ve signed up runs a card through the system, you make money.
This is residual income and it’s one of the biggest selling points of this business/ job. Like anything though, it’s also something that comes with a lot of hard work and persistence.
There are many other sales consultant opportunities out there, it’s really a matter of doing your research and figuring out which companies are legit and which ones will best suite your goals.
Since your primary role is generating leads and making face to face sales, it goes without saying that this will be more suited to an ambitious salesperson. You will likely suffer many knock backs and rejections throughout your career, and the pressure can be high. Some will thrive in this environment, others won’t.
It also doesn’t offer you a great deal of location or time freedom, at least until you hit the massive residuals. Which is why the following may be worth considering.
3) Promote Credit Card Processing As An Affiliate
This is probably the least obvious, but potentially best way for anyone to get started in this space.
Why? The startup cost is much lower than the first option, and you don’t have to hustle for another company to make money. You simply promote merchant services online, and earn commissions when you make sales.
This is called affiliate marketing, and it’s something anyone can do.
The idea is to build a simple website, attract the right visitors (business owners), and promote merchant services as an affiliate.
You can join a merchant services affiliate program for free and (generally speaking) it’s pretty easy to get accepted if you follow the right process.
Here’s some examples of free affiliate programs:
Authorize.net offers affiliates 30% of everything other than the monthly transaction fees run through a merchants account. For this they offer a smaller residual commission of 0.01% which isn’t much, but there’s no limit to how many merchants you can sign up and depending on their sales volume, it could work out to a nice residual commission after a while.
World Payment Services offers their affiliates upfront commissions of $50 to $200 for a new account and an ongoing 20% residual commission on any transactions.
The second example certainly has a higher residual, but it still pays to do your research as it’s all in how their fees are structured. In other words, be sure to examine the details closely as the affiliate program you choose can make a massive difference to your bottom line as an affiliate.
There are many ways to do affiliate marketing, but the great thing about the website approach is that it doesn’t cost you a cent to get visitors to your website. You create useful and relevant content for the right audience, and it will rank in search engines like Google and Bing. When your website ranks, you get traffic and make sales.
It does take time and effort, yes. But the costs are very low, anyone can do this, and the income potential is arguably just as high as the previous two options.
There’s money to be made by processing credit cards regardless of which approach you choose. That’s the great thing about this business, there’s potential for people from all walks, ability and resources to create an income.
For some it’s building their own merchant services empire, for others it’s becoming a successful sales agent. Then there’s thinking outside the box, and making money as a merchant services affiliate.
By carefully considering the ins and outs of each model, you can make the right decision for you and be well on your way to achieving your income and lifestyle goals.