January 13th, 2009 by Jamie Estep
Merchant accounts as a measurement of the economy
Filed in: Merchant Accounts | 3 comments
During a recession or a downturn in the country’s economy, we typically see the unemployment rate go up. In the current situation, the unemployment rate has gone up a lot.
One of the few good things that comes from unemployment, is that it creates situations that allow new businesses to start up. What better motivation to start your own business than getting laid off?
One of the interesting facts about the credit card processing industry, is that we generally see an increase in new businesses during an economic downturn, especially when it involves a lot of lay offs and lost jobs.
This is blatantly apparent when comparing Google’s trend graph for the term “Merchant Account” to the S&P500 Index. The increase in searches for merchant account is a delayed inverse to the crash in stock price, which in this case is a good indicator of the country’s economy.
This is a positive trend to me, because it’s apparent that people are still getting out there and trying to open their own businesses. Financing is a major hurdle right now, but there are signs that we will see an increase of new businesses in the months to come. Real-estate is cheap, competition is evaporating, and those businesses who can get established in a difficult economy should excel when things do pick up again.
I think your point is a good one. During the teeth of a recession, more people are apt to launch an entrepreneurial venture. Perhaps it is easier to put up a shingle and open doors to one’s own business than look for and land a suitable job during challenging economic times.
Many large, successful companies, including Microsoft, opened for business during the throes of a recession. New, smaller businesses, too, have discovered success, overcoming the inherent obstacles of a financial storm.
On a side note, many established businesses now find a diminishing return in their profit margin, and note that they are not processing as many credit card transactions. (Customers seem more reluctant to use plastic with the current state of the economy.) I suppose all businesses have to look for ways to become more recession-proof.
But at least the recession is not waning our collective entrepreneurial spirit, and in fact, intensifies it – either by necessity or design.
This is a fantastic article in it’s clarity and originality. You make some very good points. I’d like to add that because of the current economic climate, the approval rate for merchant account applicants does not look encouraging for those who get an entrepreneurial seizure who don’t have good credit.
It’s certainly apparent that there is bold correlation between the approval rate of merchant accounts, and the state of the economy.
I’ve applied for several merchant accounts in the past month – including Authorize, Nochex and 2CO, of which 2 I was refused due to “high risk factors”.
I guess anyone that could pose a slight risk in such a hard economic time would not be a good potential customer for a merchant company.
What alternatives do I have – or shall I just move on and keep applying to others?