A Bank CEO’s Guide To Merchant Services

A Bank CEO’s Guide To Merchant Services

As a bank CEO looking down at Merchant Services, it can be hard to determine where your program stands.  Is your program doing great, or are you missing out on a significant source of non-interest income? Merchant Services is a completely different animal from the rest of banking. How do you know if your program is living up to its earning potential?

Here are 3 steps you can take to see if your program is doing well. We also have tips for identifying missed income potential, and planning for future growth.

Step #1:

Take your bank’s asset size and divide that by your annual merchant services revenue.  Your minimum number depends on your bank program.  If you are an Agent Bank and handle Merchant Services in house, your Merchant Services revenue should be a minimum of .06% or higher of your bank’s asset size. If you are a Referral Bank and simply refer customers to your processor to handle, your minimum should be .03%.   Is your ration lower than these benchmarks?  If so, how much income are you leaving
on the table annually?

That brings us to Step #2.

If your number came out less than .06% for Agent Banks or .03% for Referral Banks, take your asset size and multiply it by either .0006 or .0003. So let’s go ahead and run a quick scenario.  Let’s say you are a $1.5 billion bank and you have an Agent Program and are currently earning $272,000 annually from Merchant Services.  If we take $272,000/$1.5 billion= .018%.  This is much lower than the .06% baseline.  To figure out our missed opportunity, if we take our asset size again of $1.5B and multiply it by .06%, we get $900,000 in potential annual income.  If we subtract $272,000 from that, we now realize we have a missed potential of $628,000 annually.

Step #3 is to plan for growth.

You may be asking, what is the income potential to the bank for each customer we add to our merchant portfolio?  This again depends on the bank program that you are running and how much involvement your team has with the program.  If you are a Referral Bank where you simply send the referral and the processor handles it, you can expect to make $566 annually per customer.

If you are an agent bank where your employees handle the program, you can expect to make $1,236 annually per customer.

So, as you are planning future growth of your program, you can quickly see how promoting your merchant program and adding new customers each month to the program can have a significant impact to the bottom line.  If you are interested in learning the specific steps to grow your portfolio, watch 6 Steps To Maximize Your Merchant Services Revenue.


About BASYS Processing

BASYS Processing provides credit card and debit card processing services, and solutions that include terminals, virtual terminals, e-commerce, mobile, and point-of-sale; customized to fit any need.  Banksassociations, 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 & 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 Personalized Payment Processing.

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