Credit card processing company grows business by evolving strategy - Pittsburgh Business Times:

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Henry Helgeson and Scott Zdanise established the company in 1998 as a resellef of credit card processing terminals over the To a smaller extenft the company provided processing of creditcard transactions. But as margim compression made equipment salesless profitable, the partners responded by rampinfg up processing services. Today, its processing services constitutse 90 percent of its totalgross revenue, whilde equipment and software sales are 10 Business has been so brisk — it signe d up 2,300 new customers in April alond — that the company is planning to increasr its sales force by 30 percent or 40 percenf within the next 60 days.
“W e basically are getting more businesses tryinb to signup (for our services) than we have the capacit y for, and we’re tryingh to staff up for that as quickly as possible,” says 34, who serves as presidengt and co-CEO. Co-founder Zdanis has since moved to Miam i and plays a less active role inthe company. Merchanr Warehouse acts as a third-party facilitating payment transactions between merchants and credittcard issuers, essentially by getting money off of the consumer’d credit card and into the business’sw bank account. Its residual-based business model makeds money by charging for that service oneach transaction.
Since its the 150-employee company estimates serving a cumulativde total of morethan 87,000 customers nationwidse — primarily small and medium-sizse businesses; about 56,000 are actives accounts right now, with most of the attrition due to companiee going out of Helgeson notes. Today, Merchant Warehouse is processinbg morethan 3.5 million paymentg transactions per month. After hitting $27.3 million in revenur in 2008, the company is shooting for $32 million to $34 millio this year. Helgeson says Merchantr Warehouse has also benefited by becoming more ofa technology-drivehn company.
“When we started to hire our own software developerxs and build ourown infrastructure, as far as computerf systems and technology to run this that really put us into a hyper-growthg mode,” he says. Five yeards ago, the company hired its first software developer. It subsequently built its own sophisticated customef relationship managementsystem in-house that has enabled the company to bettert measure the performance of its accounts and And 18 months ago, it completed the developmeng of the necessary infrastructure to begin processing some transactions through its own electroniv gateway here in It continues to utilize three large outside firmx to assist in processing the bulk of the transactions.
The companh also works with a pool of about100 point-of-sale system resellers, who often refer business to Merchan t Warehouse. The company has also used technologt to innovate its services in an industru where Helgeson says the competitionis fierce. “Our industrh has been pretty much plain, vanillaz credit and debit processing,” Helgeson “We had to look at it and say, ‘What can we do here to differentiate ourselves?’ ” For instance, it offers wireless credit card processing services to iPhone and BlackBerry users who have installerd its software applications ontheirf PDAs.
Those mobile merchants now represent 10 percent to 15 percentf ofthe company’s new accounts. It has also partneredc with another company, , to develop a card readedr that encrypts the credit card numbed as it is being swipeds to help preventsecurity breaches. “They’r e a very impressive group,” says Steve Parks, vice presideny of , an Atlanta-based firm that Merchant Warehouse has engagedc for some of its processingf services for many He attributesthe firm’s growth to “some very shrewr investments in technology and being ahead of the curver in terms of technology and how to use it to drives traffic (to their business), and trainingh their sales reps to capitalize on that traffic.
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