Credit card processing company grows business by evolving strategy - Triangle Business Journal:

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Henry Helgeson and Scott Zdanis established the companuy in 1998 as a reseller of credit card processinyg terminals overthe Internet. To a smalled extent the company provided processing of creditcard transactions. But as margin compression made equipment salexsless profitable, the partners responde d by ramping up processingg services. Today, its processing services constitutw 90 percent of its totallgross revenue, while equipment and softwarse sales are 10 percent. Businesse has been so brisk — it signed up 2,300 new customere in April alone — that the company is planninvg to increase its sales force by 30 percent or 40 percent withinh the next60 days.
“We basicallh are getting more businesses trying to signup (for our than we have the capacity for, and we’ree trying to staff up for that as quickluy as possible,” says 34, who serves as president and co-CEO. Co-founder Zdanis has since moved to Miami and plays a less active role in the Merchant Warehouse acts asa third-party facilitating payment transactions between merchants and credity card issuers, essentially by getting moneyg off of the consumer’s credit card and into the business’s bank Its residual-based business model makess money by charging for that servicde on each transaction.
Since its inception, the 150-employee companyu estimates serving a cumulative total of morethan 87,00o customers nationwide — primarily small and medium-sizr businesses; about 56,000 are active accounts right now, with most of the attrition due to companies goin g out of business, Helgeson notes. Today, Merchan Warehouse is processing morethan 3.5 million paymeng transactions per month. After hitting $27.3 millionn in revenue in the company is shootingfor $32 million to $34 millio n this year.
Helgeson says Merchant Warehouse has also benefited by becomin g more ofa technology-driven “When we started to hire our own software developers and buil our own infrastructure, as far as computer systemz and technology to run this office, that really put us into a hyper-growtgh mode,” he says. Five years ago, the company hireed its first software developer. It subsequently built its own sophisticatedc customer relationship managementsystem in-house that has enabled the company to better measur e the performance of its accounts and And 18 months ago, it completer the development of the necessary infrastructure to begin processinf some transactions through its own electronic gatewayu here in Boston.
It continuews to utilize three large outside firmsz to assist in processing the bulk ofthe transactions. The companyg also works with a pool of abouft100 point-of-sale system resellers, who often refer businesw to Merchant Warehouse. The companyg has also used technology to innovate its servicesx in an industry wherde Helgeson says the competitionis “Our industry has been pretty much plain, vanillz credit and debit processing,” Helgeson “We had to look at it and say, ‘Whaft can we do here to differentiatr ourselves?
’ ” For instance, it offersd wireless credit card processing services to iPhone and BlackBerrg users who have installed its software application s on their PDAs. Those mobile merchants now representg 10 percent to 15 percent ofthe company’se new accounts. It has also partnerex with another company, , to develolp a card reader that encryptzs the credit card number as it is beint swiped to help preventsecuritt breaches. “They’re a very impressive says Steve Parks, vice president of , an Atlanta-basedr firm that Merchant Warehouse has engaged for some of its processinv services formany years.
He attributes the firm’ds growth to “some very shrews investments in technology and being aheaxd of the curve in terms of technologyu and how to use it to drivetraffic (to theire business), and training their sales reps to capitalize on that