Episode 12: Oasis & WSAA | Portability and Profitability

Our guest today is Deb Camm, Managing Partner of Oasis Consulting and President of the Western States Acquirers Association. Our conversation is far-reaching, covering the subjects of BINs, ICAs, portability, and profitability.

Read the full transcript below.

Episode 12: Oasis & WSAA | Portability and Profitability

Deana Rich (00:09):

Welcome to It Pays to Know, a podcast brought to you by Infinicept. My name is Deana Rich, I am our co-Founder and co-CEO. Today my guest is Deb Camm, who is the Managing Partner of Oasis Consulting and the President of Western States Acquirers Association. Today we are going to chat about BINs, ICAs, portability, and profitability. Without further ado, please enjoy my conversation with Deb.

(00:43):

Deb, thank you so much for joining me today. I’ve been looking forward to our conversation here on our podcast, and I know that our listeners are going to enjoy speaking with you or hearing from you today. So as we have planned and discussed, Deb, I want to learn more about BINs, what are they, old-fashioned, new-fashioned, how important are they specifically with payment facilitators. But I’m going to start at the beginning, Deb, tell me about BINs. What is a BIN?

Deborah Camm (01:16):

A BIN is basically an identifier for whoever’s an acquirer. So it could be a sponsor bank, it could be an acquirer, an ISO, could be a PayFac, a payment facilitator, or an ISV. But the BIN is what is sponsored into Visa and the ICA for MasterCard, I should say, by the sponsor bank. And generally, I think what you and I are going to pretty much talk about here today is the payment facilitator, or the ISV, or the ISO, do they really need a BIN, and what are they going to get for that. But it really is, I guess, some people look at it as being the most direct to the brands, but you still have to have a bank. So an acquirer or sponsoring bank has to sponsor a third party into that BIN, into the brands, so people think that this is probably the most direct option that you can get and that’s probably why a lot of them seek it.

Deana Rich (02:04):

That makes sense. I’ve been in the industry, like you, for a number of years and there was a time where BIN also equaled portability. So BIN stands for bank identification number, as you just stated, and portability is when an ISO, and I’ll start there, wanted to be able to move their portfolio easily. Is there any other reason to have your own BIN?

Deborah Camm (02:31):

When people ask me that question, Deana, I start more with them, I push it back to say, “What really are your goals?” Because if portability is your only goal, you don’t need a BIN to get portability. So we can talk a little bit more about that in a second. But if you are already a very large organization, you’ve got a lot of volume, you’ve got the infrastructure supporting that volume, maybe having a BIN makes more sense for you because, number one, it’s expensive to have a BIN, it’s expensive to have a direct sponsor bank relationship, and it takes volume to scale that pricing, especially with the platforms of Fiserv, or a Global, or a Worldpay, whoever you’re working with, FIS, sorry, it takes scale to get better pricing. So if you’re going to be at that level because you feel like you want to sell someday, you want all this supposed portability, and you want the most direct relationship and the best pricing, then you better bring volume to get it. Because at that level, without volume, you’re not going to get it. You don’t need to have a BIN to have portability.

Deana Rich (03:28):

So let’s start with what do you mean when you say the word portability? What does that mean?

Deborah Camm (03:36):

Well, how does everyone define portability? To me, portability, when people are asking me about it, I think, okay, you’re telling me that you want to easily move your portfolio, the portfolio of merchants that you’ve built, you want to be able to take that and maybe move it elsewhere. That doesn’t mean that everyone’s got the same definition. Some people say portability, but what they really mean is I want to be able to sell this easily in five years, whatever. Some people say portability and they’re thinking I have ownership of contracts, which is a whole different conversation. It’s far beyond where we are today. But simply portability, I just want to be able to move my portfolio that I built. I want to move it easily. And again, as I stated earlier, you don’t really need a BIN to do that.

(04:16):

And I used to sell BINs, as you know, at the bank we did direct BIN sponsorships, and so if you’ve got a lot of volume and eventually your goal is to sell, you would probably look a little bit more appealing to someone who’s buying your BIN because then they can easily maybe move it to somewhere else. But it takes a lot of effort, it takes a lot of time, and it takes cost to move a BIN. You’re not going to get away from that with a BIN. It doesn’t make it cheaper, it doesn’t make it easier. So you can still get portability in a shared BIN, you can get portability as a payment facilitator, or as an ISV, because some people are coming in as ISVs. You can get portability. It’s all about how you negotiate your contract.

Deana Rich (04:54):

So portability with a BIN is both physical, and then if you also have it contractually, you’ll have it legally and physically. Can you just pull out a chunk of a BIN even if you legally have portability? Can you do that if it’s not your BIN and you’re an ISO?

Deborah Camm (05:14):

You can’t just take merchants. A lot of times people are asking, “I’m in this shared BIN,” so that means that there’s those six identifying numbers associated with that BIN. So all of your merchants, their merchant ID numbers, their MIDs are associated with that BIN. So you can’t just take your merchants that are in a shared BIN and move them to another BIN with the same merchant number. That’s maybe the first identifiers. You still have to change their MID. So it requires some sort of technology or manual intervention to move those merchants over to your new provider. What you’re looking for is you want the ability to do that. It can be done. You can go in and assign new MIDs to your merchants. You can do an assignment and assumption if it’s in your agreement to do so between the banks so that the merchant agreements can move over.

(05:58):

There’s a process to go with it, but it does require manual intervention. Whereas in a BIN transfer, if you’re doing a BIN conversion, you don’t have to reassign those merchant numbers. And I’ve mapped a lot of these out. There’s so many, Deana, components, I’m going over the most simple ones, but it all depends on what people negotiated in their contract, it can get a little messy, but the main thing that people want, a good example is retail programs, today, a lot of people say retail, so they’re like a Fiserv retail, so they’ve got the bank and the platform altogether, and they submit their merchants, they don’t underwrite, they don’t do risk, they just submit the merchants, they don’t have portability in that. Most of those, probably I’d say maybe 90% or more, don’t have the ability to move those merchants if they want to.

(06:39):

And even if they thought they did, there’s a lot of clause in it. So I think it all starts when you’re negotiating, regardless of what kind of BIN or shared BIN or program you have is do I have the right to move those merchants? And if I do, how do I map out doing that?

Deana Rich (06:53):

Got it. So let me ask you this, when the companies, the PFs or the ISOs get the right to move merchants, do they typically also have to have liability to get that right?

Deborah Camm (07:08):

Most of the program, I don’t want to say 100% of the time, Deana, yes, but most of the programs I’ve seen, they’ve either shared the liability or had 100% of the liability.

Deana Rich (07:16):

That makes sense to me. I want to circle back to one of the things you said in the beginning, which is to get your own BIN, you have to have a lot of volume, you have to be a big entity. What does that number look like?

Deborah Camm (07:31):

And also, I want to make sure, I recommend that you’re larger because certainly there’s new players who come into the space and say, “No, we got to have a BIN. That’s all we want. That’s all we know. So that’s what we’re going to move forward with,” and then I do see them struggle when they’re trying to ramp up the volume, or they’re trying to get this pricing to compete with everyone else. So you can do it if you’re new, but I suggest, I recommend that you have larger volume. And everybody’s numbers are different. I have seen usually it’s much more successful, and brace yourself, if you’re at least doing over 200 million a month in processing.

(08:04):

If your goal is to do that, or if you’re already doing that, probably getting your own BIN is not a bad idea at that point, you’ve got some scale, but the transaction count’s also really important, not just the volume because you’re talking about per transaction fees with the platforms, and so they’ll really start to play and negotiate numbers in a better way if you’re doing over a million, a million and a half transactions a month. Again, these are just my recommendations, but that seems to be the sweet spot where I see people do a much better job of having their own BIN versus growing it, or being in some sort of different program. Which isn’t to say, by the way, that a large, large client who’s doing 500 million a month or more couldn’t be in a shared BIN. I work with them all the time.

Deana Rich (08:44):

Fair. So when you look at it from a bank’s perspective, and I know we keep using BIN and you mean, as you pointed out in the beginning, BIN and ICA, ICA being MasterCard’s word for it, is it easy for them to get BINs and ICAs?

Deborah Camm (09:04):

Once an acquiring bank’s set up to do acquiring, all the banks are going to be mad at me if I say it’s easy, I don’t know that it’s easy. There is a whole process that you have to go through as a bank to become an acquirer. So there’s all their due diligence and then the brands approve them. That bank is now responsible for every BIN that comes in for all of the due diligence on the BIN owner, similar to what the bank went through. So it’s a little bit more of a robust process than it would be usually if you’re coming in as a shared BIN. And people want to make sure, the bank wants to make sure that you can take your full liability on your own, that you can represent the bank the way that you should, that you can handle all the risk that you’re supposed to be handling.

(09:45):

So one thing I always remind people about with BINs is that when all of your businesses sitting in one BIN, the brands see all that business, it’s much clearer. When you have a huge shared BIN portfolio, it’s a little harder to understand what all these different players are doing. It’s not as obvious. So when you have your own BIN, it’s important that you can be the best player that you can be for the bank and that the bank’s doing the best they can with their due diligence and oversight.

Deana Rich (10:08):

So it’s hard to get, or there’s a lot of diligence to get set up to be an acquiring bank, once you are an acquiring bank it is more about the cost of getting different BINs and ICAs than about you are no longer getting approved, the hard part’s done, but the cost just continues to mount. Is that a correct statement?

Deborah Camm (10:31):

Exactly right. And then I think from a bank’s perspective, I’m seeing a lot of new players, this is my second year consulting and I’m seeing a lot of new banks enter the market, which it can be both exciting. But having worked with a bank, it’s concerning too sometimes when I see the programs, because if they are just getting into this space because they think that offering BIN sponsorship’s going to be a ton of revenue, oftentimes they find, after they’ve gone through all of the work and they’ve gotten someone set up and they’ve got their own infrastructure in place, it’s not as much revenue as they expected. So I think it’s really important that the banks be careful, number one, of the risks they’re taking, of course. And then number two, just really understanding what does the revenue look like from a BIN perspective.

Deana Rich (11:14):

So that’s when they compare a BIN per ISO or a BIN per PF versus a shared BIN?

Deborah Camm (11:21):

Exactly right.

Deana Rich (11:22):

Is it harder for the banks to oversee their ISOs and PFs when it’s in a shared BIN?

Deborah Camm (11:28):

If they don’t have the infrastructure, I say yes. To have just a dedicated BIN, you can see all the businesses coming through that BIN. All of your reporting comes in at a BIN level generally, well, for sure from the brands and then from the platforms it’s much easier, so their infrastructure maybe doesn’t have to be as robust. But when you start to go payment facilitator or shared BIN, it’s important that the banks think about, number one, do they want to build this technology infrastructure themselves or buy it, but it takes the ability to break down all of the… They’re not called sub-BINs, but the sub-offices under that shared BIN, if you will, the payment facilitator, so whatever’s in there, the agents, they have to be able to report that separately, and reconcile it separately, and understand the risk in it separately and provide that to the end user. Not to mention you’ve still got all your merchants in there, somebody’s got to be servicing those merchants. So I think it is a heavier lift for sure, and they need to determine, again, if they want to buy it or build it.

Deana Rich (12:23):

Fair. And if they want to buy it, what are you saying? Buy the oversight layer? What are you saying they should buy?

Deborah Camm (12:30):

Well, I was talking more the technology. So the ability to put the merchants into a system that’s allowing them some sort of hierarchy reporting, maybe some sort of residual reporting, that kind of stuff, and pulling everything from the platforms, from the brand reports, the things that the bank needs to look at, and putting it into one system, some of them have multiple systems, so that you have the output that you need for your bank oversight for sure for your underwriting and risk teams, but then also for the end users, the ISV, the agent, the sub-ISO, whatever’s in your shared BIN.

Deana Rich (13:01):

Got it. I have found that banks are great partners for the innovative companies that are out there, the tech companies out there, banks are great at compliance, and then the tech companies that are out there, when you combine them, you get something that’s greater than the sum of its parts. Now that you’re consulting, Oasis Consulting, I couldn’t recommend you more, what are you seeing differently about the banks and combining with the technology companies?

Deborah Camm (13:36):

There’s some banks that are just really letting the technology companies do their part, and to be honest with you, right now I still think that’s a good solution. So the bank brings what they’re supposed to bring from a finance perspective and an oversight perspective, like you said. So reconciliation, whatever products they offer, if it’s ACH, if it’s credit card, what have you, but I do see some of the banks starting to enter and saying, “Hey, we want to play in payouts, we want to offer all that great stuff too so we can help people compete with Stripe.” Maybe it’s coming. I just don’t see the strength at the bank level to offer the technology to support all those.

(14:09):

So there’s still that marriage of find a bank that offers all those things you need, if it’s same day funding, if it’s RTP, whatever, they offer all the different payouts that you may need in addition to merchant processing, but then find a really good technology partner who can support processing all of those things in the right way and provide you with the reporting that you need for your merchants so you can give good statements and make sure you’re paying the people that you need to pay properly.

Deana Rich (14:34):

That makes sense. The processors in the background have been around for a really long time and they have some archaic technology, and it’s good, it works, it’s solid, however, the needs aren’t as stayed as the technology is, so adding that technology layer on top of the processor and then the bank can use makes sense, and certainly that’s what I’ve been seeing out there. And it’s interesting to hear now that you’ve been out there as well, not just working with one single bank, but as a consultant you’re seeing the same thing.

Deborah Camm (15:10):

Yeah, absolutely.

Deana Rich (15:11):

Perfect. So the newfound difficulty of bringing partners together, maybe it’s not a newfound difficulty, but when you look at this, what would it be great for people to understand out there about technology, banks, BINs, processors, getting it all together specifically for some of these new entrants?

Deborah Camm (15:34):

Well, it would be lovely if there was some sort of playbook that said, “Here’s what everybody does.” Because we do have a lot of new entrants coming in, maybe from outside the US or even in the US, but a lot of them unfortunately say, “Well, I want to be Stripe, or I want to be Stax, or whoever, and I say unfortunate because I want them to be themselves, I want them to be successful for maybe a different reason, but they’re coming in and saying, “We have something that we think we could sell and we just want to structure it like these other people.” But they have no idea who all the players are, how you bring all that together, and so that just requires a lot of time and vetting, hence how I’m so busy, because I’m vetting all these partners. So while that’s great for me, it would be really nice if there was some sort of playbook of here’s what each party does, or here’s what you’re looking for, you need a bank, you need a platform, you need a technology partner, you need all these great things.

(16:26):

So they can certainly come to us consultants and get those things, but I do think as an industry it would be great if we could do a better job of defining all of that for not just new entrants, by the way. I think people who’ve been in the business for a while sometimes they don’t know that there’s all these new players. And I’m talking more technology and processing, but I mean even from a risk perspective, the new risk products that are out there for oversight, training products. I’m president for Western States, this is my second year, and last year we sold out our exhibit hall, and Deana I was shocked by the new people exhibiting. I was busy with the show, I didn’t get a chance to get around and see what everyone’s doing, but there’s just so many new names, and what do you offer, and how does that work? It would be great if there was some sort of playbook.

Deana Rich (17:10):

It’s interesting, as you were talking about having a playbook, I thought about your role with WSAA and how you look to create that with your lineup of speakers. So while it may not be that you’re handing them a three ring binder with everything, you are setting them up to win if they listen to and pay attention to the speakers that you’re giving them and the trade show floor where they can learn. Is that just by luck or is that how you planned it?

Deborah Camm (17:41):

Even before I was president, I got to help a lot with the program committee, which comes up with the overall agenda, and I believe all the sister organizations do this, but I’ll speak to Western States, we try really hard to focus on what’s new and upcoming, but not to the point where it’s like, “You should go sell this because it’s coming.” That’s not really what people want to hear. What they want to know is what should I be focused on, and how do I get it, and what does that really mean to each level. There’s feet on the street guys, there’s the people that are the ISOs, and there’s the platforms, and brands, and everybody, so for me, when I sit down with our team for Western States and we talk about the agenda, I’m always asking them, “Guys, be mindful not only of the entire audience but how it works. Not how to sell it, how it works and how do they get it. And let’s try to be in front of what’s going on for that year.”

(18:30):

So payment facilitator has been one that’s come every year, over year, over year it just continues to grow, it’s not going away, and so that’s a good example of something for Western States. We’ll sit down and say, “Well, have we done that too much? Have we beat it to death?” And I always say, “Guys, there’s got to be a better way. There’s got to be something new that’s making that continue to grow, so let’s talk about what that is and bring those people in on stage.” So it’s definitely by design. I don’t know if we always hit the mark but we certainly try. And then the exhibit hall this year had so many people, that hall was really full, sold out, and one of the biggest comments we had was, “Hey, give us more time to get around and talk to all those new partners,” because it was awesome but we didn’t have enough time to get to them. So we’re taking that to heart and definitely trying to make changes for 2023 for that.

Deana Rich (19:17):

Nice. So Deb, as we’re talking about WSAA and all of the new players, and everything you’re seeing, you sit in an interesting spot both with your consulting and then with being president of WSAA, are there any game changers out there that you’re seeing?

Deborah Camm (19:32):

Game changers for me would have to be ultra significant. So I would say, like I said earlier, we’re seeing a lot of payout solutions coming out there, people are still trying to really engage as a FinTech, but I don’t know if this is game changer worthy, but I still think we’re seeing more and more platforms trying to enter the space, technology platforms that would really… And by the way I work with Fiserv and I work with Global and FIS, and I think they’re great organizations but they are older and they’re so huge to work with, it just implementation takes a long time, and cost and things like that, so I still think the game changer will be these new entrants, these new platforms that are maybe smaller in size and newer but can move so quickly and they’re much more technology forward.

(20:18):

And really, I’m actually playing a lot in the payment facilitator and ISV space, so I am still seeing that a lot of them are card not present. I’d like to see more of them get to more to the card present as well. But I think they’re going to be game changers when they do. 2022 we were seeing a few of them come in, a handful of them hit the market more on the card not present, and it would be really interesting to see if in 2023 they bring in that card present component.

Deana Rich (20:41):

Fair. And before we leave our audience today, is there anything that is of value for them that we haven’t spoken about?

Deborah Camm (20:51):

Yeah, just going back to some comments earlier about BIN versus not BIN, again, I always go through what’s your goal. Is your goal to get portability? Because if that’s all it is, then there’s always a way to do that contractually. Is your goal to sell someday? Again, there’s ways to slice and dice that contractually. But I’m seeing a lot more people say, “Hey, I just want more control.” But more control of what? So I want more control of the underwriting experience for me because internally it’s a problem when I can’t get something through in the current program I’m in and I don’t have control over whether it’s approved, declined, if it’s pending, I want more control over the risk. So a risk situation happens, but I don’t own the liability maybe in the program I’m in today and maybe the merchant’s affected in a negative way and that affects me, that could be a major ISV referral source and because it got messed up in risk that I didn’t control, I’ve lost that opportunity. And then just overall control of the merchant experience.

(21:49):

So there are ways to get that, and that’s why it’s been an interesting year for me just having worked with a lot of retail clients, or people who are trying to get up to that BIN level that we talked about, and I’m finding more and more payment facilitator actually makes a little more sense for them. Just overall it’s giving them the control they need. And in some cases the shared BIN situation, once we sit down and we really talk about what they’re looking for, and their cost goals, I forgot to mention that, how much are you willing to budget for all this and how much time do you want to put into getting there, going live?

(22:19):

So a lot of times BIN, actually we start off there, but that’s not where we end up because the time commitment, the cost commitment, and really the goals that they have, while they could get it with a BIN, they could get it with other solutions, so just really mapping out their goals. I would say as people are looking to 2023 and how they want to grow, really think about and write down, especially before you call any of us, the consultants that are out there, just write down what ultimately is it that you need to make your business successful.

Deana Rich (22:48):

People are used to buzzwords, or they’ve had a cocktail conversation and BIN is what they heard and maybe payment facilitator is what they need, and that’s where you come in, to help them figure that out.

Deborah Camm (23:00):

Exactly right.

Deana Rich (23:02):

Well, Deb, I really want to thank you for joining us today on our podcast. I know that that whole BIN concept people ask about a lot and so having a podcast dedicated to it to educate those out there is very useful. So thank you again for joining and for educating the audience out there.

Deborah Camm (23:25):

Absolutely. Thanks for having me. This has been a great use of time.

Deana Rich (23:28):

Thank you. Thanks so much to Deb Camm for joining us today, and thank you for listening to us on It Pays to Know. To hear more from us, please head on over to infinicept.com, where you’ll also be able to learn more about our PayOps platform and how we get payments going your way. For Infinicept, this is Deana Rich. Thanks again for tuning in and we’ll pay you another visit real soon.