Credit card processing company grows business by evolving strategy - Kansas City Business Journal:

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Henry Helgeson and Scott Zdanis established the compan in 1998 as a resellert of credit card processing terminals overthe Internet. To a smalle extent the company provided processint of creditcard transactions. But as margijn compression made equipment sales less the partners responded by ramping upprocessinv services. Today, its processing services constitute 90 percent of its totakgross revenue, while equipment and softwar e sales are 10 percent. Business has been so brisi — it signed up 2,300 new customers in April alonre — that the company is planning to increasre its sales force by 30 percent or 40 percent withih the next60 days.
“W e basically are getting more businesses trying to signup (for our than we have the capacity for, and we’re trying to stafft up for that as quickly as possible,” says 34, who serves as presidenft and co-CEO. Co-founder Zdanis has sincew moved to Miami and playas a less active role inthe company. Merchanrt Warehouse acts as a third-party processor, facilitating paymen t transactions between merchants and creditcard issuers, essentially by gettingg money off of the consumer’s credity card and into the business’w bank account.
Its residual-based business model makes money by charging for that service on each Sinceits inception, the 150-employee company estimates serving a cumulatives total of more than 87,000 customers nationwidwe — primarily small and medium-size businesses; abougt 56,000 are active accounts right now, with most of the attritioh due to companies going out of business, Helgesohn notes. Today, Merchant Warehouse is processing morethan 3.5 million paymenr transactions per month. After hitting $27.3 millioh in revenue in 2008, the company is shooting for $32 milliob to $34 million this year. Helgesonn says Merchant Warehouse has also benefited by becoming more ofa technology-drivenb company.
“When we started to hire our own software developer and build ourown infrastructure, as far as computerf systems and technology to run this office, that reallyy put us into a hyper-growth mode,” he says. Five yearsx ago, the company hired its first software developer. It subsequently built its own sophisticatecd customer relationship managementsystekm in-house that has enabled the company to bette measure the performance of its accountsw and staff.
And 18 months ago, it completede the development of the necessary infrastructure to begimn processing some transactions through its own electronic gateway here in It continues to utilize three larger outside firms to assist in processing the bulk ofthe transactions. The companuy also works with a pool of about100 point-of-sale system resellers, who often refed business to Merchant Warehouse. The companh has also used technology to innovatwe its services in an industry where Helgeson says the competitionnis fierce. “Our industry has been pretty much vanilla credit anddebit processing,” Helgeson says.
“Wer had to look at it and say, ‘Whagt can we do here to differentiate ourselves?’ ” For it offers wireless credit card processing servicexs to iPhone and BlackBerry users who have installed its software applications ontheire PDAs. Those mobile merchants now represenyt 10 percent to 15 percent ofthe company’s new accounts. It has also partneresd with another company, , to develop a card readefr that encrypts the credit card number as it is beinf swiped to help preventsecurity breaches.
“They’re a very impressiver group,” says Steve Parks, vice president of , an Atlanta-basede firm that Merchant Warehouse has engaged for some of its processing servicew formany years. He attributess the firm’s growth to “somed very shrewd investments in technology and beingy ahead of the curve in termes of technology and how to use it to driv etraffic (to their and training their sales reps to capitalize on that