Advice From a Veteran ISO Exec: Build Scale Fast, And Be Ready to Work With—Or Buy—ISVs

The twin imperatives for independent sales organizations these days are to get bigger fast and to collaborate with independent software vendors, Todd Linden, chief executive of Paysafe North America, tells Digital Transactions News.

Linden, a veteran acquiring-industry executive, should know. Paysafe North America’s parent company, London-based Paysafe Holdings UK Ltd., last week announced its acquisition of Westlake Village, Calif.-based iPayment Holdings Inc. in a deal that, when it closes in June, will make Paysafe one of the five biggest non-bank payment processors in the U.S. market.

This transaction followed Paysafe’s $470-millon cash deal last year for Delta Card Services Inc., parent company of Shenandoah, Texas-based Merchant’s Choice Payment Solutions, where Linden was serving as chief executive. Terms of the deal for iPayment have not been disclosed.

The lesson in all this merger-and-acquisition activity is that size is more crucial than ever in merchant processing, Linden says. “It’s about scale and distribution,” he notes. Heft brings with it operating efficiencies that can be a competitive edge at a time when fractions of a penny can make or break a contract with a price-sensitive small merchant.

From that point of view, Paysafe’s acquisition of iPayment “changes the landscape of the U.S. acquiring industry,” Linden says while viewing the action from Paysafe’s booth this week at the Electronic Transactions Association’s Transact 18 trade show in Las Vegas.

But building scale is only part of the puzzle for ISOs now, Linden says. Another trend is what he calls a “blurring” of the lines that once sharply defined ISVs and ISOs. “ISOs are becoming ISVs. ISVs are seeking out ISOs,” he says. “It’s a mix. It will just continue to blend.”

The reason for this blending is not hard to fathom. ISVs, which supply the code that runs checkout and inventory-management systems for merchants, have proven to be hugely successful. In the past 10 years, the number of ISVs has boomed from about 10,000 to more than 100,000, with some projections predicting a total of more than 1 million by 2030, according to a white paper distributed by Paysafe.

That proliferation offers both collaboration and acquisition opportunities for ambitious ISOs, Linden says. “This is going to be another growth stage” for ISOs, he points out. The ISV may know software, but the ISO knows how to peddle it as part of an overall package, he says. “If you know how to sell, it’s a new world,” he adds.

But these acquisitions and collaborations bring challenges, as well. A big one involves betting on the technology at a time when it remains unclear whether mobile wallets and contactless cards will succeed at the point of sale. “Just a couple of years ago, you could make a safe bet. Today, you’ll have to make a big bet on something that’s not going to be obsoleted very, very quickly,” he warns. “You have to be careful.”