Independent Banker - March 2018 - 82

Nuts & Bolts
Nevels, senior vice president, card
risk and merchant services at ICBA
Bancard, this approach aligns with
today's merchant services programs.
" The bank tends to be the pillar of
the community, " he says. " A merchant
services program becomes a larger
relationship tool for mom-and-pop
businesses in that community. "
And in today's digital era, momand-pop
businesses are looking for
competitive solutions that allow
them to do everything from take card
payments on mobile devices to offer
rewards programs, opening doors of
opportunity for bank partners.
The small-business opportunity
With America's 3.8 million microbusiness
employers (firms with one to
nine employees) making up 74.8 percent
of all private-sector employers in
2016, how banks define " merchant "
may need a shift in perspective.
" Coming from a bank, historically,
merchant solutions were perceived
to be a service you'd offer a
midsized-to-large business; it wasn't
beneficial to offer them to a small
business, " points out Tina Giorgio,
president and CEO of ICBA Bancard.
" But with the migration of payments
to digital, it becomes an essential
payments solution. For small
businesses, the ability to swipe a
card on their mobile device has
become an essential piece of collecting
payment. If you're a community
bank who's not offering those
solutions to your small businesses,
you're at a disadvantage. "
Beyond cards
Today's merchant services programs
go far beyond simple card acceptance.
Providers like linked2pay, FIS
and FiNet, Inc. offer comprehensive
suites of products and services with
customized credit, debit, check
and gift card processing solutions,
including e-commerce, virtual
terminals and mobile processing-
all uniquely tailored to the specific
business needs of the community
bank and its businesses.
" Don't look at these programs
with tunnel vision; look at the whole
value-add, " advises Giorgio. " As a
banker, it's not just giving [business
customers] a device; it's about how
I deliver those solutions. I want to
become that advisor to say, 'Not only
can I do your loan, I can do your
small-business point-of-sale, card
processing, remote deposit capture,
ACH, gift cards, etc.' I become
" A merchant services
program becomes a
larger relationship
tool for mom-andpop
businesses in
that community. "
-ALAN NEVELS, ICBA BANCARD
the one-stop-shop for all of their
payments needs. "
In the past, many community banks
shied away from merchant services
programs because of risk, but in
today's market, varying models (see
sidebar, below) allow banks to select
programs that best meet their needs-
and minimize liability.
From the traditional direct model,
where the liability rests solely with
the bank, emerged two options where
the liability shifts to the provider: the
agent model and the referral model.
In the agent model, the bank
can be involved in the program
implementation to the degree that
syncs with its payments strategy.
In the referral model, the bank
sells the product to its business
clients, directing the customer to
a trusted provider and keeping
Three types of merchant services models
» Direct model
In this model, the bank runs its own
merchant services program and
manages everything from fostering
relationships to handling contracting
and pricing. The bank is responsible
for full operational and regulatory
compliance, and holds the liability for
the merchant and the portfolio.
»Agent model
The agent model offers maximum
flexibility. For example, a bank's
strategy may dictate that it retains a
high level of customer-facing interaction,
so it can determine the level of
support and interaction the provider
has with its customers. The provider
then scales its level of support based
on the contractual arrangement,
offering a commensurate percentage
revenue share. In addition, the
provider holds the liability for the
merchant and the portfolio.
»Referral model
The referral approach is the least
risky. It allows a bank to offer merchant
services through a relationship
with a provider. In this model, the
bank functions in a sales role, turning
its customer over to the provider for
80 ICBA Independent Banker March 2018
services. The bank's contractual relationship
with the provider includes a
percentage-based revenue share, and
the provider holds the liability.
" Every community bank who
does not have a program may want
to start with an agent or referral
program, " says Tina Giorgio of ICBA
Bancard. " There's no downside. It
doesn't cost you anything to offer it.
Whether you have one client or 10
clients, you're benefiting. "
-Colleen Morrison
» For more information, visit
icba.org/bancard.
http://www.icba.org/bancard
Independent Banker - March 2018

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