16 Sep 3 Things to Watch out for with Referral Bank Rep Compensation
Your referral bank sales reps are the lifeblood of your merchant services program. Their work will grow your portfolio and, in turn, your bank’s non-interest income.
How a processor compensates referral bank sales reps is a window into how they think about their bank partners. Are you just a tool to make them more money? Or are they invested in a mutually beneficial partnership?
Here’s what to watch out for:
For referral bank representatives, little base pay, if any at all, is an enormous red flag. This typically means reps are highly incentivized on equipment sales and leasing. In this type of compensation program, reps are encouraged to sell the equipment with the highest commission, even when it’s not a good fit for an individual merchant.
Many processors also push predatory leasing programs with over-priced equipment. Consider a standard FD130 terminal with a list price of $250. With a typical lease, that terminal would cost $50/month with a 5-year contract term. That means the merchant you referred ended up paying $3,000 for a terminal worth $250.
Now, consider whether you think that’s the sort of service you want to refer your bank’s valued customers to.
It’s an unfortunate fact that most processor’s compensation programs for reps offer residuals that expire after only 1 or 2 years. This leaves reps wondering how they’re supposed to make money on accounts, and the answer is simple: nickel-and-dime merchants up-front. With these compensation programs, reps receive a large chunk of setup fees, so it’s very common to see a high number of fees up front.
Here’s an example. A few years ago, First Data’s referral bank program was structured to pay out 27% for the first year, 18% for the second year, 10% the third year, then nothing. That same program paid out a whopping 50% on equipment and setup fees. You can see how this would encourage a rep to charge extraneous fees up front.
A successful banking relationship depends on trust, and your choice of processor will either enforce that trust or jeopardize it. Consider this. You refer your valued customers to a processor that traps them in a predatory lease and charges exorbitant setup fees. Then, when that 1 or 2 years is up and the referral bank rep is no longer receiving residuals, service is virtually nonexistent. After all that, do you think that customer will trust you with their future needs?
Finally, what happens when those one to two years of residuals are over, and a rep is no longer receiving money for a signed account? What incentive do they have to keep that merchant happy?
Compensation programs are often structured to emphasize equipment over residuals for a reason—because it promotes burnout and high turnover. Some processors actually want referral bank reps to leave, because that means they don’t have to pay out on the account any longer. You read that correctly. Some compensation programs exist to encourage referral reps to quit so the processor can make more money.
That model will stifle the growth of your program. When there is high turnover of referral reps, and accounts are being sold and serviced by inexperienced sales reps, retention, customer satisfaction, and your bank’s hard-earned reputation all suffer.
A massive 71% of engaged customers say they’ll use their current bank for the rest of their life. The key word there is “engaged.” When you turn your customers over to a 3rd party that emphasizes processor profit over the customer relationship, you risk losing their engagement. Engaged customers have, on average, more open accounts, and are more likely to come to your bank for future needs, like a mortgage, a business loan, or investment services. When choosing a partner, be sure their compensation program is structured to encourage lifelong service and retention.
Your processing partner should be just that—a partner. That means compensating referral bank representatives fairly. So, what’s fair? That’s simple—lifelong residuals. When an account continues to pay out, it’s in the rep’s best interest to take care of merchants up-front and for the long term. That means higher retention, and less risk to your bank’s reputation.
At BASYS, our compensation program for outside reps lives up to that high standard. Referral bank representatives receive residuals for the life of each account, and access to our experienced operations team to aid in retention efforts. We compensate our reps fairly, because we know the success of your bank’s program hinges on having the very best people representing you.
BASYS Processing as a business partner
If your processor isn’t delivering strategies to help grow your program and personal service to your customers, please call BASYS Processing at (800) 386-0711. Let’s talk about creating a business partnership that will help you meet and exceed your goals.
BASYS Processing features:
• A friendly, live voice will answer the phone when you or your customers call; no automated phone systems.
• In-house PCI Compliance team to walk your customers through the process step-by-step, improving security and reducing costs.
• A knowledgeable Account Manager assigned to your bank to support your needs.
• Thorough Market Analysis followed by mutual plans and goals to grow your portfolio.
• In-depth initial training and ongoing bootcamp training for bank staff.
• A full suite of turnkey marketing assets that can be customized with your bank branding.
About BASYS Processing
BASYS Processing provides credit card and debit card processing services, plus solutions that include terminals, virtual terminals, e-commerce, mobile, and point-of-sale, customized to fit any need. Banks, associations, and software partners depend on us to strengthen their reputations and relationships with their customers by providing remarkable service paired with ultimate flexibility and pricing. Merchants depend on us to make accepting credit cards and debit cards convenient, safe and affordable. BASYS was founded in 2002 on one philosophy: to take care of our merchants, partners, and employees so they never want to leave. We are dedicated to working one-on-one with our customers to design the perfect solution. BASYS is Personal Payment Processing.
Learn more at basyspro.com, and connect with us online at: