For many credit unions, the sweet spot in the small business market is the mom-and-pop sector-those shops that generate respectable annual revenue and employ a handful of staffers.
However, regardless of their size, some family businesses tend to pay costly fees comparable to what larger businesses pay for services such as merchant processing. A new alliance between the Illinois Credit Union League Service Corp. and Primax aims to help CUs set up merchant programs for businesses with various outsourcing options. An agent program also allows CUs to refer their merchants to Primax, which then takes care of the details and operations support that allows the merchant to set up business. The deal aims to reach the 3,100 CUs that are served by the league's subsidiary in 45 states.
Based in Wakefield, Mass., Primax, formerly known as T.K. Keith Co. Inc., designs, implements and supports credit, debit and commercial card programs, products and services. For its merchant clients, Primax offers advanced card processing systems and product options including MasterCard, Visa, American Express and Discover credit cards, as well as signature and PIN-based debit cards.
"Usually smaller organizations pay higher premiums because they have low volume," said James Byrnes, executive director of national accounts at LSC. "Primax offers economies of scale to bring the cost down to a level that will help small businesses."
The partnership works like this: A credit union pairs up with a business in the community that takes credit card payment through Primax. When a merchant signs up with the company for processing, it is provided with a swipe machine, Byrnes said. Primax serves as the link between the merchant and Visa, MasterCard or another card issuer. The settlement is handed back to the merchant for goods and services.
The individual CU or merchant is getting a discount paid by the card issuer and the league gets a referral fee. Byrnes said that although the service is "not a big money maker" for LSC, it provides another way for credit unions, especially those with community charters, to build relationships within the small business market.
"Credit unions in the marketplace don't usually serve large corporations and chains," Byrnes said. "We thought this would be an excellent opportunity for them to step up to the plate" with smaller businesses.
To help educate credit unions about this new partnership, ICUL Service Corp. recently hosted a Webinar detailing how the program works. By providing processing services for merchant retail, mail order, telephone and Internet transactions, credit unions assume no liability and at the same time can benefit from a new revenue stream, the league said.
"Primax is pleased to make this direct connection with ICUL's members, and we look forward to supporting their individual members' merchant program needs," said Ted Keith, president/CEO of Primax. "Our customized card processing solutions support credit unions' unique relationships with their individual business clients."
Byrnes said the league's service corporation looked at several providers. It had acquired credit and debit card business from the North Dakota and South Dakota leagues, both of which had an existing relationship with Primax. After talking to reps there and some of the CUs that worked with the merchant processing provider, the Illinois league decided to ink a deal last year.
"Local merchants in particular are looking for lower cost processing options, and these services are a great opportunity for credit unions and can lead to other business relationships," said George Fiegle, LSC executive vice president. "Our partnership with Primax is another way in which we are fulfilling our mission to help credit unions compete."