Learn how residuals work, how to evaluate a payment company’s partner program, and how to maximize your revenues.
Ever dream about having the money roll in without doing any more work? Keep reading. “Passive income” is defined as earnings from a business in which a person isn’t actively involved. Selling credit card processing is one potential source of passive income — and it can be quite lucrative.
How credit card residuals work.
Selling merchant services doesn’t just provide one-time income. It’s ongoing. Merchants pay payment processing fees on each transaction, typically between 1.3 percent and 3.5 percent of the sale. A portion of those costs is interchange fees to the bank that issued the payment card. The payment network (i.e., Visa, Mastercard, Discover, American Express) also takes an assessment fee. Your payment company partner also charges a fee for managing the transaction — and you receive a residual on each of your clients’ transactions.
How much are those residuals? Several factors determine what your portion of payment processing fees will be, but as an example, estimate it’s 0.1 percent. It seems like a small number, but if you sell merchant services to a business that processes $100,000 per month in payment card transactions, you receive $120. Again, it may not seem like much, but that account may not have required any maintenance that month. That means you received $120 in passive income. Furthermore, if you’re selling credit card processing, you probably have multiple clients. If you only have 10, your monthly passive income increases to $1,200 — that’s $14,400 annually. Over time and as you acquire more clients, this income can really add up.
All compensation plans are not the same.
When you’re selling credit card processing, the smart move is obviously to partner with a company that will provide you with a competitive margin. This is one of the reasons that you need to evaluate potential payment company partners carefully and insist on complete transparency regarding the fees they charge and residuals they pay their partners. Keep in mind, though, that compensation plans include more than residuals. Therefore, when you’re considering two prospective partners, ensure you are comparing apples to apples.
North American Bancard, for example, provides partners bonuses for newly signed contracts, activation, and approvals, which can increase your monthly income substantially. With any partner, ensure you understand the terms around this income, for example, the length of the claw-back period requiring you to repay the money if a client decides not to proceed. Also, if your partner provides free equipment with a merchant service account, look into bonuses for selling accounts that don’t require hardware, which can increase your revenue even more. Income may not be “passive” as you work to close a deal and help merchants implement their new payment solution, but the effort you put in upfront will lead to passive income as clients continue to use the payment services you provide.
Of course, residual income doesn’t have to be passive.
It’s common for NAB Sales Partners to build their businesses around more than simply selling merchant service accounts. Some partners provide point of sale (POS) software and hardware, develop industry-specific management solutions, or sell products and services to businesses that benefit from setting up merchant services accounts. Although payment residuals may represent passive income for your business, you are probably anything but passive as you interact with your clients, maintain their systems, provide services, and look for ways to sell deeper into your accounts. Similarly, if you put effort into selling credit card processing — including keeping current accounts updated on new technologies and adapting to change — you can build residual income even more.
The right partner makes all the difference.
In addition to offering you a competitive compensation plan, the right payments technology partner will help you maximize your revenues and overall business success. They will enable you to provide the payment functionality and service your clients need. Finally, they’ll provide you with marketing support, technical expertise, and problem-solving capabilities that will help you win more deals and build revenues.
Contact NAB today to learn more about building passive income — and a successful business — by selling credit card processing!
