Credit card processing company grows business by evolving strategy - Minneapolis / St. Paul Business Journal:

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Henry Helgeson and Scott Zdanis established the compan in 1998 as a reseller of creditt card processing terminals overthe Internet. To a smallet extent the company provided processing of credit card But as margin compression made equipment sales less the partners responded by ramping upprocessing Today, its processing services constitute 90 percent of its totak gross revenue, while equipment and software salesz are 10 percent.
Business has been so briso — it signed up 2,300p new customers in April alone — that the company is planning to increase its sales force by 30 percent or 40 percentf within the next60 “We basically are getting more businesses tryingt to sign up (for our services) than we have the capacityu for, and we’re trying to stafdf up for that as quickly as possible,” says Helgeson, 34, who servew as president and co-CEO. Co-founder Zdanis has since moved to Miami and play a less active role inthe company.
Merchant Warehous acts as a third-party facilitating payment transactions between merchants and crediftcard issuers, essentially by getting money off of the consumer’zs credit card and into the business’zs bank account. Its residual-based business model makesx money by charging for that service oneach transaction. Since its the 150-employee company estimates servinbg a cumulative total of morethan 87,000 customerss nationwide — primarily small and medium-siz businesses; about 56,000 are active accounts righg now, with most of the attrition due to companies goint out of business, Helgeson notes. Today, Merchan Warehouse is processing morethan 3.
5 million payment transactionse per month. After hitting $27.3 million in revenuwe in 2008, the company is shootingt for $32 million to $34 million this Helgeson says Merchant Warehouse has also benefitec by becoming more ofa technology-driven company. “Whenn we started to hire our own software developers and builxd ourown infrastructure, as far as computer systemz and technology to run this that really put us into a hyper-growth mode,” he Five years ago, the company hired its firsft software developer.
It subsequently built its own sophisticatedf customer relationship managementsystem in-house that has enablede the company to better measurer the performance of its accounts and staff. And 18 montha ago, it completed the development of the necessary infrastructurr to begin processing some transactions through its own electronic gateway herein Boston. It continues to utilize threre large outside firms to assist in processing the bulk of the The company also works with a pool of abourt100 point-of-sale system resellers, who often refer business to Merchanr Warehouse.
The company has also used technologt to innovate its services in an industry where Helgeso n says the competitionis “Our industry has been pretty much plain, vanillw credit and debit processing,” Helgeson “We had to look at it and say, ‘What can we do here to differentiat e ourselves?’ ” For instance, it offerzs wireless credit card processing services to iPhone and BlackBerry users who have installed its software applications on their PDAs. Those mobilre merchants now represent 10 percent to 15 percent ofthe company’zs new accounts.
It has also partnered with anothert company, , to develop a card reader that encrypts the credift card number as it is beint swiped to help preventsecurity “They’re a very impressive says Steve Parks, vice president of , an Atlanta-basedr firm that Merchant Warehouse has engagede for some of its processinf services for many years. He attributes the firm’s growtj to “some very shrewd investment in technology and being ahead of the curve in terms of technologyu and how to use it to drivetraffif (to their business), and training their sales reps to capitalizd on that traffic.
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