Five years ago, NXGEN, an ISO/MSP headquartered in Whitefish, Montana, needed a new processor. After investigating several candidates, COO Tom Nitopi selected a large organization he believed would be a good fit primarily because it was an “industry legacy” that had forged many long-term relationships with other ISOs. It was, Nitopi says, one of the worst business decisions he has ever made.

“Yes, I was able to secure a good rate, and yes, the staff were nice people,” he notes. “But did what the processor offered allow our independent agents to effectively sell our services? No. Were our merchants able to get the assistance they needed? No. Were the back-end systems appropriate for our needs? No—and these problems represented just the tip of the iceberg.”

As Nitopi’s experience illustrates, myriad issues beyond industry tenure, size, and competitive rate structure require careful consideration when evaluating processor candidates. Getting answers to the following questions will ensure these issues are addressed, and increase the likelihood you’ll strike a deal with the right processor partner.

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The recession weighed heavy on the minds of electronic payments professionals gathered at the ETA Annual Meeting and Expo in Las Vegas April 21-23. The biggest question: How long will it last? Although several experts weighed in, Visa Advisory Services’ Wayne Best perhaps said it best: “Recovery depends on the optimism of consumers and businesses.”

Conversations among meeting participants indicated optimism about this business’ future. Several ISOs and technology companies talked about expanded forays into international markets, about smaller, more strategic mergers and acquisitions, and about exciting new technologies expected to open new doors.

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Having watched the number and value of their business transactions drop off instead of grow over the past eight months, ISOs, acquirers, and merchant processors anxiously await the months ahead. But while those who predict future economic activity say the worst is probably over, they hesitate to forecast much improvement this year.

The most likely prognosis for the remainder of 2009 is that the economy will stall at a depressed level, says Richard Hoey, chief economist at Bank of New York Mellon. Middleclass spending will depend largely on job prospects; upperclass spending will depend largely on wealth, principally stock portfolios.

“We’re forecasting a negative 0.5 percent growth for 2009, with modest gains in the second half, but those are compared to weak 2008 numbers,” reports Scott Krugman, vice president of the National Retail Federation in Washington, D.C. “Everyone is afraid to declare a bottom to this recession.”

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Besides stimulating the economy, the new American Recovery and Reinvestment Act aims to modify the Privacy and Security Rules under the Health Insurance Portability and Accountability Act of 1996 (HIPAA). For ISOs and MSPs in the health-care market, that could mean new levels of risk and responsibility.

The issue of whether an ISO or MSP qualifies as a “covered entity” under HIPAA, and is therefore required to comply is not entirely clear-cut, says Mary Dees Griffith, president and COO of Preferred Health Technology in Carrollton, Texas. Griffith, whose company provides electronic payment, processing, and ancillary services to health-care entities, notes that while “a financial institution or payment processor may not be technically exempt from HIPAA, it also may not necessarily fall into the covered entity category in accordance with Administrative Simplification Standards adopted by Health and Human Services (HHS) under HIPAA.”

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