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Beating Margin Compression |
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Intense competition has driven down the prices ISOs charge for transaction processing and made margins painfully thin, an ailment that probably is chronic but not hopeless—and certainly not fatal—according to a new in-depth study from the ETA ISO Advisory Committee.
One key finding: Margin compression is not unique to the merchant acquiring industry. Rather, it occurs in most mature, market-saturated industries, especially those with low barriers to entry, notes Todd Linden, senior vice president of operations at National Processing Co. and chair of the ETA ISO Advisory Committee, which is preparing a white paper on the subject. “There are precedents that show how to combat it successfully—with technology, product development, sales strategy, and training,” he observes.
Payroll processing is one industry that has successfully met the challenge. “The market leaders there generally are the providers charging the highest prices,” says Linden. “But they continue to add technology and services that bring efficiency to their clients, who are happy to pay a little more to get a more efficient process. You can intelligently preserve margin when you increase the number and the value of the services you offer as a package."
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