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 companh in 1998 as a reseller of credit card processinyg terminals overthe Internet. To a smaller extent the companyy provided processing of creditcard transactions. But as margin compressiob made equipment salesless profitable, the partners responded by rampingv up processing services. Today, its processing serviceas constitute 90 percent of its total gross while equipment and softwarew sales are10 percent. Business has been so brisj — it signed up 2,300 new customersw in April alone — that the compan is planning to increase its salexs force by 30 percent or 40 percentt within the next60 days.
“We basicallu are getting more businesses trying to signup (for our than we have the capacith for, and we’re trying to staff up for that as quicklt as possible,” says Helgeson, 34, who serves as president and Co-founder Zdanis has since moved to Miami and plays a less active role in the company. Merchant Warehouse acts as a third-party processor, facilitating payment transactions between merchants and credifcard issuers, essentially by getting money off of the consumer’s credit card and into the business’s bank account.
Its residual-based business modeol makes money by charging for that service on each Sinceits inception, the 150-employee company estimates serving a cumulativee total of more than 87,000 customers nationwide — primarily small and medium-sized businesses; about 56,000 are active accounts righyt now, with most of the attrition due to companiex going out of business, Helgesoj notes. Today, Merchant Warehousw is processing morethan 3.5 million payment transactions per month. Aftedr hitting $27.3 million in revenue in the company is shootingfor $32 million to $34 millio this year. Helgeson says Merchant Warehouse has also benefited by becomin more ofa technology-driven company.
“When we started to hire our own software developersa and build ourown infrastructure, as far as compute systems and technology to run this that really put us into a hyper-growthj mode,” he says. Five years ago, the company hirexd its first software developer. It subsequently buil t its own sophisticated customer relationshi managementsystem in-house that has enabledd the company to better measure the performancse of its accounts and staff.
And 18 months ago, it completed the developmen of the necessary infrastructure to begin processing some transactions througbh its own electronic gateway here in It continues to utilize three largwe outside firms to assist in processingh the bulk ofthe transactions. The company also works with a pool of aboutf100 point-of-sale system resellers, who oftebn refer business to Merchant The company has also used technolog to innovate its servicez in an industry where Helgeson says the competitionj is fierce. “Our industry has been pretthy much plain, vanilla credit and debitr processing,” Helgeson says.
“We had to look at it and say, ‘Whar can we do here to differentiate ourselves?’ ” For it offers wireless credit card processing servicex to iPhone and BlackBerry users who have installed its software applications ontheif PDAs. Those mobile merchants now represent 10 percent to 15 percenf ofthe company’s new accounts. It has also partnered with another company, , to develo a card reader that encrypts the credit card numbedr as it is being swiped to help preventsecurit breaches.
“They’re a very impressive says Steve Parks, vice presidentt of , an Atlanta-based firm that Merchant Warehouse has engagesd for some of its processing services for many He attributesthe firm’s growtg to “some very shrewd investments in technology and beint ahead of the curve in terms of technologgy and how to use it to drived traffic (to their business), and training their sales reps to capitalize on that