Transaction Trends by Content Communicators, LLC

Transaction trends The Official Publication of the Electronic Transactions Association

| December 2010

ALSO INSIDE: How To Attract Star Sales Agents

2010 Strategic Leadership Forum Recap SPECIAL INSERT: 2010-2011 Product and Services Directory

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Transaction trends The Official Publication of the Electronic Transactions Association

Vol. 15 | No. 12

cov e r s to ry

10 Business Without Borders

By Richard H. Gamble When data security, monopolies, and the U.S. ISO model are barriers to global acquiring, some ISOs and processors have turned to e-commerce, while others have found success south of the border. All say the right partnerships, personnel, and research are crucial. 10

F EATU RES

14 Hooking

20 With Change Comes

By Julie Ritzer Ross Advanced Merchant Group has come a long way from its founder’s basement. An untraditional approach has fueled its success.

By Josephine Rossi Despite a shaky economy, regulations, and fears of disintermediation, industry experts say there is plenty of room for market growth and innovation.

SPEC IAL SER IES

the Big Ones

Startup Stories High Risk, Big Rewards

By Bryan Ochalla Getting solid merchants on board means having a great sales team to bring them in and keep them on board. How do you find the right people for critical sales positions?

Opportunity

d e pa rtm e n tS

President’s Message Insights from ETA’s elected leader

Industry News

ISO Corner

22 24

Ad Index Industry Insider Business is decidedly different at Century Payments Inc.

Trends, strategies, and news in the payments business Successful strategies for adding new merchants to the rolls

SPECIAL INSERT: 2010-2011 Product and Services Directory Annual guide to companies serving the electronic transactions business—the essential reference tool for ISOs. Transaction trends | December 2010 3

Electronic Transactions Association 1101 16th Street NW, Suite 402 Washington, DC 20036 202/828.2635 www.electran.org ETA Chief Executive Officer Carla Balakgie ETA Director, Communications & PR Thomas Goldsmith Transaction Trends Publishing office: Stratton Publishing & Marketing Inc. 5285 Shawnee Road, Suite 510 Alexandria, VA 22312 703/914.9200 Publisher Debra Stratton Features Editor Angela Hickman Brady Managing Editor Josephine Rossi Editorial/Production Assistant Teresa Tobat Art Director Janelle Welch Contributing Writers Richard H. Gamble, Bryan Ochalla, Julie Ritzer Ross Advertising Sales Steve Schwanz or Fox Associates (800/440.0232; adinfo.eta@foxrep.com) Fox Associates Offices Chicago 312/644.3888 Atlanta 800/699.5475 Los Angeles 213/228.1250

New York 212/725.2106 Detroit 248/626.0511 Phoenix 480/538.5021

Editorial Policy: The Electronic Transactions Association, founded in 1990, is a not-for-profit organization representing entities who provide transaction services between merchants and settlement banks and others involved in the electronic transactions industry. Our purpose is to provide leadership in the industry through education, advocacy, and the exchange of information. The magazine acts as a moderator without approving, disapproving, or guaranteeing the validity or accuracy of any data, claim, or opinion appearing under a byline or obtained or quoted from an acknowledged source. The opinions expressed do not necessarily reflect the official view of the Electronic Transactions Association. Also, appearance of advertisements and new product or service information does not constitute an endorsement of products or services featured by the Association. This publication is designed to provide accurate and authoritative information in regard to the subject matter covered. It is provided and disseminated with the understanding that the publisher is not engaged in rendering legal or other professional services. If legal advice and other expert assistance are required, the services of a competent professional should be sought. Transaction Trends (ISSN 1939-1595) is the official publication, published monthly, of the Electronic Transactions Association, 1101 16th St. N.W., Suite 402, Washington, DC 20036; 800/695-5509 or 202/828-2635; 202/828-2639 fax. Postage paid at New Richmond, Wisconsin and additional mailing offices. POSTMASTER: Send address changes to the address noted above. Copyright © 2010 The Electronic Transactions Association. All Rights Reserved, including World Rights and Electronic Rights. No part of this publication may be reproduced without permission from the publisher, nor may any part of this publication be reproduced, stored in a retrieval system, or copied by mechanical photocopying, recording, or other means, now or hereafter invented, without permission of the publisher. Nonmembers, government agencies, $150 per year; single copy, $20. Subscriptions are available for 12-month periods only, at the quoted rates.

President’s Message

It Just Keeps Getting Better

TA’s celebration of its 20th year this past April highlighted the changing state of the acquiring industry and the Association’s efforts to mature right along with it. Repeat attendees to the ETA Annual Meeting note that each year the trade show floor brings into sharp relief how the industry has morphed, and how the ETA has changed shape to match that growth. As a member of the ETA Board of Directors over the past 10 years, I have been privileged to have witnessed firsthand, and participate in, that change. And as president over the last 18 months, I can declare with no hesitation that it just keeps getting better. The foundational building blocks are now in place. In the past 18 months alone, the ETA: 1. Revised the definition of ETA’s “core member” to recognize that companies other than traditional ISOs sell payment processing services to merchants. 2. Launched and fully committed resources to an industry certification program. 3. Expanded the government advocacy effort significantly. 4. Initiated the Voice of Payments web portal, enabling participation in grassroots promotion of policy positions. 5. Improved information resources, providing access to economic trends, ETA white papers, and industry news via the internet and webinars. 6. Kicked off the inaugural Investment Community Forum. 7. Built bridges to the card brands through better communication. 8. Launched new ETAU Online courses, on sales and marketing, operations, and technology. 9. Reoriented ETA’s fiscal year to a calendar year, improving ETA’s ability to manage its financial affairs. 10. Celebrated ETA’s 20th anniversary in April. Much deliberation went into deciding on which of the many possible initiatives the ETA should concentrate. Not an easy task. But the ETA Board of Directors was up to it. Note the names at the back of this magazine.And when you see those people—individuals who volunteer for the better of the industry on which your livelihood depends—please thank them for their dedication. My heartfelt gratitude goes out to each of them. Yes, the foundation is there.Yet we find ourselves in the most uncertain environment in the acquiring industry’s history.The IRS reporting requirements.The Durbin Amendment.The TCF legal challenge to it.The Department of Justice settlement with Visa and MasterCard.American Express’ refusal to join in that settlement. The looming threat of credit card interchange regulation.Yikes. How to wade our way through? The ETA is now, more than at any time in its 20 years, able to assist you with those challenges. Starting next month, a new Board will take over the helm. ETA staff, that talented group of association executives led by uber-competent CEO Carla Balakgie, pulled off each of the above-listed accomplishments with aplomb. That group, guided by the Board and led by incoming President Rick Pylant, is sure to be able to meet whatever challenges lie ahead. My deepest gratitude to each of you for enabling me to contribute to the growth of the ETA as president over the past 18 months. Warm regards, Holli Targan Holli Targan is president of ETA and a partner at Jaffe, Raitt, Heuer & Weiss, P.C. Transaction trends | December 2010 5

INDuSTRYnews Size, Type of Small Merchants Drive PCI Compliance Small merchants’ behavior and attitude toward security and PCI compliance vary widely based on their size, according to a new study released by ControlScan and Merchant Warehouse. In a survey of nearly 630 Level 4 merchants, 45 percent of micro-merchants (businesses that employ one to 10 employees) reported familiarity with PCI Data Security Standards. In contrast, 91 percent of large Level 4 merchants (those that employ 51 or more employees) confirmed their familiarity with PCI DSS. “We as an industry have an opportunity to create better educational tools that can help the small- to

mid-sized merchants understand the importance and process of protecting cardholder data from the start,” says Henry Helgeson, co-CEO of Merchant Warehouse. “Educating both merchants and partners on why PCIDSS compliance is good for business and how to easily achieve it is the first step toward achieving more compliance.” Other key findings include: n Data security is a “high” priority for 61 percent of small e-commerce companies. Only 41 percent of small traditional retailers rate it on the same level. n T he top three sources

where micro-merchants find information about data security and PCI compliance are merchant banks, their POS/ payment application vendors, and their hosting providers. n Half of smaller merchants believe PCI compliance is mandatory for their smaller companies; the other half weren’t sure or thought it was optional. n S eventy-nine respondents are not PCI compliant because they don’t understand it. n F ifty-five percent of micro-merchants spend $500 to $20,000 on compliance, while 43 percent spend nothing.

info graph Same Store Dollar Volume Growth by Region 0% - 7%

Oct. 2010 New England Mid Atlantic South Midwest Southwest West

7.2% 6.9% 6.8% 7.5% 7.1% 6.3%

Source: First Data

6 December 2010 | Transaction trends

7% - 11%

Merchants Warming Up to Alternative Online Payments Although 54 percent of consumers use alternative online payment systems, only 35 percent of merchants currently provide these payment options, according to a recent study released by Javelin Strategy & Research. But half of merchants say they plan to add PayPal as a payment option in 2011. Using data collected from merchants that are members of shop.org, a division of the National Retail Federation that serves as a community for digital retailers, the study shows that merchants are increasingly likely to offer alternative e-commerce payments because they encourage higher sales at a lower cost.About 38 percent of merchants say their average order value for transactions using alternative payments is higher than for traditional payments, and two thirds report that transaction rates for alternative payments are lower than traditional payment rates. The study also predicts that consumer demand for e-commerce will continue to flourish. By the end of 2010, Javelin estimates that U.S. e-commerce spending will comprise 6 percent of total retail sales or $237 billion, an increase of almost 16 percent when compared with 2009.

Fast Fact More than one billion people globally will be using mobile payments by 2014, resulting in more than $1 trillion in transactions that year. Source: MarketResearch.com

ISO Corner

Finding Your Siren Song

Savvy ISOs attract new merchants with benefit programs, a consultative approach, and more By Julie Ritzer Ross

n these days of heightened competition for clients’ business and a tendency among many merchants to jump ship at the drop of a hat, staving off attrition remains a priority for ISOs. However, with some loss inevitable and market conditions unlikely to change drastically in the near future, undertaking strategies aimed at boarding new merchants—and building those strategies around enticements other than pricing—is critical to success going forward. “There needs to be something besides rates in the mix,” says Terry Hirsberg, owner of a Total Merchant Services ISO partner office in Birmingham, Alabama.“In many merchants’ view, opportunities to save a penny or two by switching alliances aren’t that much of an enticement.”

Programs Galore Among the incentives that do bring many merchants to the table are programs and services they are less likely or unlikely to find elsewhere. For instance, sales agents of Hampton, New Jersey-based United Bank Card have had “unprecedented” success in attracting new merchants with a free electronic cash register (ECR) program introduced several months ago. The program includes two different packages: one for retailers and one for restaurants; each includes integrated PCI-secure payment processing. While the concept of offering free terminals is not unique, other elements render the program a standout, says Jared Isaacman, CEO. Notably, merchants can obtain multiple ECRs for a single location. An online “wizard” developed in-house allows end users to customize the keypad layout for each complimentary ECR so that it is preprogrammed to their exact specifications when it arrives on site. The intuitive wizard requires no technical expertise on merchants’ part, and those who prefer not to customize their units can use default layouts configured for a variety of common retail and restaurant businesses.The hospitality application also

includes several capabilities that are in high demand among restaurateurs, such as tip adjustment and support for tracking transactions by server (employee) number. Similarly, Leap Payments Inc. of Agoura Hills, California, elicits the interest of many prospects with a free alternative to credit card terminals. Merchants are given the option of reducing their costs by integrating the ISO’s “virtual terminal” utility with their POS software.“Some merchants just don’t want to incur the expense of extra equipment, and this initiative has become a true competitive differentiator for us,” says Will Detterman, CEO. The virtual terminal initiative is only one of several programs and services that have enabled Leap Payments to board several hundred new merchants within the past six months, for a total of more than 2,000 accounts with transaction volumes of $500 to $500,000 per month, says Detterman. Along with an “interchange plus” pricing plan, merchants pay the interchange rate on card transactions, plus a small markup. The markup stays the same for every transaction processed by an individual merchant, but varies in accordance with each client’s transaction volume. Like United Bank Card’s free terminal offering, the “interchange plus” pricing plan is not something new, but a pricing structure of this type is usually available only to large merchants.“That’s the beauty of it,” Detterman explains. “Sure, it’s a bit of a risk for us, and we may be making less money on each account we board, but we’re boarding a larger number of merchants so it more than evens out in the end.” Talking up ancillary services centered on rates serves to further pique merchants’ interest in inking a deal with Leap Payments. Topping the list is a monthly statement review wherein each merchant’s documentation undergoes a thorough review to ensure that it continues to receive the best rates for its particular circumstances. Further, the ISO promotes

the idea that instead of separate monthly statements and deposits from Visa/MasterCard, Discover, and American Express— each with its own attached fee—Leap Payments’ customers can receive a consolidated statement from the company with no monthly statement fees.The ISO makes one monthly deposit for all transactions processed by each merchant, simplifying bookkeeping and yielding faster access to payments. In a somewhat different vein, a number of ISOs have augmented their menu of hard-to-find value-adds with services available through National Benefit Programs (NPB) in Atlanta. NBP provides such basic consumer benefits as dental, legal, Transaction trends | December 2010 7

ISO Corner vision, prescription drug, and chiropractic services, purchased in bulk and sold exclusively through the ISO channel at heavy discounts. “We wholesale discount consumer benefits and have aggregated seven core benefits with the intention not just of reducing merchant attrition and increasing ISOs’ revenues, but of attracting new business,” a company spokesperson says.“These are benefits that are very expensive to buy on the outside, and they work” [to attract merchants] because “they can’t be gotten any other way.” Each benefits package af fords merchants comprehensive coverage provided by large, reputable entities; for example, dental services are by Aetna Inc., the largest provider in its category. The legal package features access to a network of more than 20,000 attorneys with an average of 19 years of experience. Services, which encompass all business and landlord/tenant issues, among others, are rendered at 40 percent off the attorney’s customary fee or $125 an hour, contingent on the specific arrangement. Free services constitute another perk of program membership; on the legal front, these include the review of leases and other documents.

Processing Network

The

everywhere Payment GatewaySM

8 December 2010 | Transaction trends

Relationship Management Regardless of their value, programs and products constitute only part of the necessary bait for cultivating new accounts. Adopting a consultative stance as a means of enticing customers aboard, rather than engaging in a hard sell revolving around rates and even equipment, is equally important. When attempting to sign merchants, Hirsberg and his staff explain up front that they are interested in forming a long-term partnership. During initial meetings with prospects, employees touch on various aspects of the electronic payments industry, the factors to consider in deciding on a processor, as well as how transactions will be processed. While it is impossible to determine how many merchants sign with his office as a result of this approach, Hirsberg deems it sufficiently “nonthreatening” as to always lead to a follow-up conversation and, quite often, a commitment. Meanwhile, at PFC Payment Solutions in Greeley, Colorado, sales executives emphasize to prospective customers that although the sales representative who boarded their account will continue to serve their “buying” needs, they will also

be assigned to a designated account manager and/or customer service manager who will act as an ongoing consultant for routine needs and problem resolution. “Merchants like this business model,” says President Kenneth Salazar.“The sooner the ‘sell’ comes out of the discussion” and the other “perks” become the focus, the greater the opportunity to convert a prospective account to a new one. In working with merchants, Hirsberg and his staff communicate to merchants at the outset that they are not trying to sell to the merchant but, instead, to educate them. “We go to great lengths to explain various facets of the industry to merchants so they can make educated, informed decisions about their choice of processor as well as about the way they process,” he notes.“This informative approach to sales is nonthreatening. Most merchants are appreciative, not only for the information, but also for the fact we are not ‘selling’ them,” and a natural barrier to attrition is born. TT Julie Ritzer Ross is a contributing writer to Transaction Trends. Reach her at jritzerross@gmail.com.

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KEY NOTES 8

Governments in less-developed regions have prioritized moving payments onto electronic networks, partly to squeeze out underground economies, get greater fiscal control, and collect more taxes.

hile no U.S.-style ISO exists in Mexico, W the opportunity is there, say some in the field. The hurdle is finding an acquirer because banks would consider the ISO a competitor.

For many ISOs and processors, the path to global acquiring starts with e-commerce. U.S. ISOs can sign up U.S.domiciled merchants that sell globally over the Internet. For Europe-minded ISOs, cross-border expansion has also focused on card-not-present growth.

Personnel decisions in global expansion are crucial. You need a seasoned international marketing pro in charge, not a rising star from your domestic business.

10 December 2010 | Transaction trends

Business

[ COVER STORY ]

Borders Without

By Richard H. Gamble

WHILE DOMESTIC ISOs AND PROCESSORS STILL FACE HURDLES IN GOING GLOBAL, THEY’RE GETTING EASIER TO CLEAR

ith U.S. markets highly saturated and margins compressed due to intense competition, ISOs and processors are tempted to export the highly successful U.S. model for merchant acquiring.What they see across borders is both a dream and a nightmare, but the dream is getting brighter and the nightmare is starting to fade. “The potential is huge,” says global payments consultant Les Riedl, president of Speer & Associates in Atlanta. “Even in Canada, where debit transactions have flourished, 50 percent of consumer purchases are uncarded. In less-developed regions, that level is more like 75 to 80 percent.” Governments are trying to change that trend and have put a high priority on moving payments onto electronic networks, partly to squeeze out underground economies, get greater fiscal control, and

collect more taxes, he explains. That may look like land-rush opportunities for shrewd ISOs that can field scalable sales forces and help eager governments move merchants to card-based electronic terminal transactions, but in fact most foreign markets are anything but virgin territory. Many are nearly monopolized by established players and exclusivity deals between card brands and local banks. In theory, these established players could acquire merchants faster by using ISOs. In practice, this rarely happens, Riedl notes. For the smaller ISO that isn’t a processor and concentrates on sales and service, the opportunities are limited, Riedl says. “It’s very difficult. Foreign markets have unique characteristics and established players who fit those characteristics. It’s hard to export the U.S. ISO model and make it work.” Transaction trends | December 2010 11

[ COVER STORY ] The U.S. model is distinct because U.S. issuers and acquirers split and acquirers chose to outsource much of their processing, sales, and service. In other countries, no such split occurred, but different brands require different processors and often different terminals, notes Will Rossiter, head of worldwide marketing for Hypercom Inc. in Phoenix. “It’s a different structure. Outside the United States, banks have generally tried to hold onto all of the business. The issuer, acquirer, and brand are packaged as one entity. The sales function is not separate.There are a handful of players; they are all regulated and they are often integrated with the government.” China, with its huge, dispersed population, rising middle class, and low penetration of card payments looks like a perfect opportunity for ISOs, but the market is dominated by China Union Pay, which is owned by the government. There is not much room for U.S. ISOs to enter, Rossiter points out. Data security requirements also vary from country to country, putting up a multiple compliance hurdle for cross-border acquirers and ISOs, Rossiter notes. “We have no plans to expand outside the United States at the moment,” reports Emil Billman, CEO of TransPay Processing, an ISO based in Palm Desert, California.“We have looked at it, but it is complicated. It would mean signing up with new processors, and we don’t know these people and their track records.We might revisit the possibility when we learn more about who our potential partners might be.” His thinking is pretty typical of small ISOs.

Mexico Beckons But for a sign of growing opportunity, consider Mexico, where Elavon is making a major push for share in the largest Latin American market after Brazil, and is now the third-largest acquirer there. Jaime Domingo, who helped Elavon position itself in Europe, is heading business development there, and he sees a role for U.S.-style ISOs. Elavon believes in using an ISO channel for sales and service.“You do find true ISOs in Europe. We work with about a dozen, and many of them came from U.S. partners,” he reports. But you don’t find true ISOs yet in Mex12 December 2010 | Transaction trends

For Europe-minded ISOs, cross-border expansion has focused on cardnot-present growth, which presents lower barriers to geographic expansion than does the brick-andmortar world. ico, and Domingo hopes that will change. “There are sales organizations, but they mostly work with issuers. Those that sign up merchants to accept cards have a very short-term revenue horizon and don’t really add value,” he says. “They’re not the partners I want. I have yet to find a true U.S.-type ISO in Mexico, but there is certainly an opportunity for those that do it well.” The sales techniques that work in the United States would work in Mexico if given a chance, Domingo says.“The biggest hurdle is finding an acquirer. It’s not easy to find a bank that won’t consider you a competitor. It’s a very fragmented, static market that is dominated by banks,” he explains. Elavon got its number three position in Mexico by contracting with a bank, Santander, which essentially outsourced its merchant sales, processing, and underwriting to Elavon last February. “We run that business now, and we have almost 150 people in Mexico, 60 of them in sales. We are making a real push to grow the portfolio,” Domingo says. So far, Elavon’s Mexican sales force is made up of direct employees, but Domingo is looking for ISO partners. “We think that an ISO could bundle card acceptance with other services and do well here. The merchants aren’t used to good service. A U.S.-based ISO wouldn’t face much competition from other ISOs. And if they worked with us, they wouldn’t need to find an acquirer because we already have one. We’d be happy to find a partner and give them

a target market.” Discussions are still in the exploratory stage, he reports. To see how cross-border opportunities are available to those that seize them, consider Grupo Credomatic. Before that bank/ ISO/issuer/acquirer was started in 1971 in Nicaragua, Central America was often seen as a bunch of small, poor, backward markets. But Credomatic put together a pan-Central America organization that in 1981 crossed over into the United States and opened a Miami office. It is now the dominant player in the card-based payment services market for six Central American and Caribbean countries and active in Mexico and Florida, reports Joe Criggen, national sales manager for Credomatic of Florida. Credomatic now has a greater than 70 percent share of the merchant acquiring business in Central America, Riedl reports. The prospects are less rosy to the north. The foreign economy that most closely resembles the United States is Canada, Riedl notes, and there the merchant services market is shared by just four dominant players: Moneris, Global/CIBC, Paymentech/Scotia, and TD Canada Trust.

E-Commerce Launching Pad For many ISOs and processors, the path to global acquiring starts with e-commerce. U.S. ISOs can sign up U.S.-domiciled merchants that sell globally over the Internet. To sign up a merchant domiciled in another country, they would need to connect to a processor that has an established relationship with a BIN sponsor in that country, explains Chuck Fillinger, an independent consultant based in Boca Raton, Florida, and an associate of The Strawhecker Group. The European Union is more attractive because one processor and one BIN sponsor can open up the entire E.U., he points out. ISOs that have their own front-end gateways should modify them to handle multiple currencies. ISOs that rely on a processor for the front-end gateway may not be able to process card-present transactions in other countries but have a better chance to capture card-not-present transactions from online merchants, where political borders and bank monopolies are much less of a constraint, Fillinger reports. For Europe-minded ISOs, cross-border expansion has focused on card-not-pres-

ent growth, which presents lower barriers to geographic expansion than does the brick-and-mortar world. Trying to follow e-commerce merchants into the physical commerce world has proved “not very successful so far,” says Jared Kleitz, Amsterdambased senior consultant at First Annapolis Consulting. “Multi-national merchants would like to channel all their card sales to one processor, but opportunities are not there except for e-commerce where gateway products are closer to meeting cross-border demand,” Kleitz says.“SEPA was supposed to change that, but this change is slow, not fast. Global-scale acquirers have also been reluctant to make the massive investments necessary to be truly pan-Europe.” Even in the very sophisticated, very western E.U., local practices are diverse and very different from U.S. practices. “You find local debit networks and private-network cards that are unique to those countries,” Fillinger notes. “You could offer Visa and MasterCard transactions to merchants in Germany, but direct debit is far more popular there,” he notes. The more transaction types you can support, the more business you can get, but that can mean supporting multiple payment types and using either multiple processors or a processor that supports the

required payment products. For an ISO to enter a European country, its leaders need to weigh the size of the market, the barriers to entry, and the degree of saturation, Kleitz advises. In the U.K., there are few barriers to entry and the market is large, but it’s a very saturated, competitive market with thin margins, he reports. In France, MasterCard and Visa are popular, but the market is controlled by local banks and you have to be a member of the club to play. In Germany, many payments are cleared through Netzbetreiber, which are local debit arrangements. In Holland, two processors own the market. Norway and Sweden have decent size and use MasterCard and Visa, he notes. Only three U.S. players—Elavon, First Data, and Global—have a European presence of any size, Kleitz notes.“We regularly receive inquiries about ISOs interested in making the leap to Europe.” He declines to provide names.

Right and Wrong Ways Major obstacles have kept most U.S. ISOs from trying to cross borders, but experience has shown that there are right ways and wrong ways to make such moves. If ISOs aspire to sell card services to merchants in other countries, they should hire locally and look for ways to partner with

sales organizations that know the local laws and customs and that have established relationships with local merchants, Fillinger advises. For example, they could partner with a POS systems vendor that may have reps calling on local merchants.That equipment salesperson could then sell card processing as well, he points out. Opportunities to establish partnerships with “business brokers” exist in many countries; they can be effective for easing entry and supporting business growth, he says. The keys to success for ISOs wanting to expand outside the United States, says Glenn Goldman, CEO of Capital Access Network Inc. in Scarsdale, New York, are to take time to study the markets, select the right partners, start small, and grow patiently. “Don’t rush in,” he cautions. “Be selective about the partners you choose. Study the competition to see what they’re doing right. Then swing for singles, not home runs initially.” Be sure you understand your tax obligations, he adds. Also, be sure you know about free-trade zones and enterprises that get tax breaks. Be culturally sensitive, Goldman adds. “The safest, most effective way to enter a foreign market is to find a local partner that is respected and well connected.” Someone who has been selling insurance or telecom services, or a banker who makes small business loans, might be a good prospect, he points out.Also look for a payments processor that is seeking greater penetration but already has connections to the telecom and banking systems. Personnel decisions can be crucial.“Put a seasoned international marketing pro in charge,” Goldman insists. “Don’t send in a rising star from your domestic business, at least not in the top role.You need someone who has made a career developing international markets.” Pick the right compensation model for the market you are targeting, Goldman emphasizes. Commission structures typical in the United States, as they pertain to ISOs, may be unfamiliar in many markets, he reports. So is the idea of earning money over time from ongoing residuals. TT Richard H. Gamble is a contributing writer to Transaction Trends. Reach him at gamble10@earthlink.net. Transaction trends | December 2010 13

[ FEATURE]

THREE ISOs SHARE HOW THEY LURE—AND EVENTUALLY EMPLOY—STAR SALES AGENTS

Hooking the

Big Ones By Bryan Ochalla

14 December 2010 | Transaction trends

f all the valuable components that have to come together for an ISO to be successful, the most vital may be its sales force. “Sales agents are the lifeblood of our company—and I would imagine they’re the lifeblood of any company in this space, too,” says Jeremy Wing, president of Atlantabased Payscape Advisors. They’re also “a reflection of us as an organization” since they spend so much time in front of an ISO’s clients, adds Rick Stanford, senior vice president of sales at McLean, Virginia-based Sage Payment Solutions.“We invest a lot of time and money and energy in best-in-class products and services and technology, so we’ve got to have a best-inclass sales force to sell those things.” The alternative, he adds,“is an expensive gamble.You spend all that time and money and energy on things that you can’t sell.” Recruiting and hiring a sales force that will help you do just that—sell your company’s products and services—isn’t as simple as finding professionals who can make a sale, of course. Just as important is the ability to maintain the relationships that start with said sale, explains Stanford.“Sure, salespeople have to be able to obtain new deals, but in a residual-based business like ours, it’s just as important for them to be able to keep those customers—and keep them happy—over time.” That’s especially true at Merchant Warehouse, a Boston-based ISO that invests significant financial and staff resources on outbound marketing.“Our merchants come to us, and we spend a lot of money to get them to do that,” says Co-CEO Henry Helgeson.“So, for us, if we don’t have capable people on the other end of the line when those merchants contact us, we’re going to waste a lot of money. “If our close rate drops a bit, it can be a near catastrophic event for our company,” he adds. “It’s imperative for us—and perhaps more imperative than for ISOs that don’t have direct sales forces—to put the right people in these positions and then keep them as trained and motivated as possible.”

Baiting the Hook So how do smart ISOs attract the “right

What the Best Reps Have in Common What qualities do the three ISOs included in this article look for in a would-be sales agent? “It’s like any sales job,” says Henry Helgeson of Merchant Warehouse. “We’re looking for people who are aggressive, people who are go-getters, and people who will be on the phones as much as they need to be in order to make money and succeed.” At Sage Payment Solutions, Rick Stanford looks for “people who are, first and foremost, honest, fair, and ethical. “We also look for people who are goal-oriented and are great listeners,” he adds, “and people who can build rapport with our clients.” “ ‘Social creatures’ who are inexperienced in the payments space are particularly effective,” says Jeremy Wing of Payscape Advisors. “We look for people who know their city, because that means they know people, they’re connected and they can walk in and out of plenty of doors.”

people” for these critical sales positions? All of the ISOs interviewed mention the usual suspects—such as job sites (like CareerBuilder and Monster) and social networking—but they also rely on other methods. For example, Sage Payment Solutions’ main weapon is dedicated recruiters. “That’s No. 1 for us—having people on hand, on staff, year ’round who hunt for great sales people,” says Stanford. The second-most important recruitment tactic is employee referrals. In fact, “that’s probably just as important” as having dedicated recruiters, Stanford says. Merchant Warehouse also vouches for the tactic. “Overall, I wouldn’t say we do anything out of the ordinary” to attract and recruit sales agents, Helgeson says.“We advertise online and we go to trade shows like everyone else, and both are pretty effective, but even more effective for us has been word of mouth. We’ve had a lot of success when [currently employed] agents refer other agents.” Payscape Advisors’ Wing agrees. “We’ve run reports on where our most successful sales reps come from, and they tend to be friends or family members” of current agents. “In fact, I’d say there’s six degrees of separation that runs through our whole company. “In our experience, they’ve got a vested interest in becoming successful because their brother or friend introduced them to us,”Wing continues.“It’s one of the ways we get buy-in.We call it ‘drinking the Kool-Aid.’” Although Wing describes his company’s

word-of-mouth-centric recruitment efforts as “organic” and “grassroots-oriented,” he also admits to spending a lot of energy supporting and encouraging word-ofmouth efforts. For example, the company has a 12-month marketing calendar that calls on agents to push a specific type of gift card one week and help recruit additional sales reps another. “Sometimes we’ll start our weekly ‘managers’ call’ by saying we want to increase our recruiting efforts in a specific market,” Wing says. “Our managers then have a Monday morning meeting with all of their reps, during which they’ll tell them something like, ‘We’ve come up with a

KEY NOTES 8

ever forget that sales agents are a N reflection of your organization—and they are the ones that can make or break the business with the relationships they build … or don’t build.

se a multilayered hiring process that U includes background checks, personality and skills assessments, noncompete agreements, and plenty of interviews.

edicated recruiters and employees D may be the best source for identifying potential new agents that will be successful in the business.

hat do hot agents have in common? W They are go-getting social creatures who are goal-oriented and excellent listeners.

Transaction trends | December 2010 15

[ FEATURE] new incentive and anyone who sends us a potential candidate in Nashville will receive double the recruitment bonus’” of $500 or $1,000.“When you pull the lever on that sort of thing,” he adds,“the needle moves.” Although Payscape Advisors has achieved significant success thanks to word-of-mouth referrals, it hasn’t completely given up on job boards and other, more traditional, recruitment tactics. “We do some of that stuff,” Wing says, “though, to tell you the truth, I think we spend way too much on it on a monthly basis—because it ends up being like trying to find a needle in a haystack. We continue to do it because we feel like we’d be doing ourselves a disservice if we didn’t do it, but at the end of the day we know that the majority of our reps are hired as the result of six degrees of separation.”

Reeling Them In Of course, attracting or recruiting the “right” agents is just part of what an ISO needs to do to produce the best possible sales force.Also needed, according to the executives interviewed, is a multilayered hiring process that includes background checks, personality and skills assessments, noncompete agreements, and a handful (more or less) of interviews. “We spend a lot of time” with sales candidates, says Wing, adding that candidates are interviewed an average of three times before being hired. “We want to make sure they’re going to be a good fit.You need to know who you’re getting into

Hot Agents on the Market While the economic downturn of the last few years has negatively affected many ISOs, it’s actually provided a larger pool of agents. “We’ve seen a dramatic increase in the number of applicants for these positions due to the downturn in the economy and the increase in the unemployment rate,” says Sage Payment Solutions’ Rick Stanford. Adds Merchant Warehouse’s Henry Helgeson: “The number of people who are applying for sales positions and who are qualified—or overqualified—for those positions has increased quite a bit” as unemployment has increased as well. “Because of that, we’ve gained a lot of good agents, many of whom are coming from the mortgage industry.” That opportunity also presents the ISO with a distinct set of challenges. For instance, such candidates don’t know much, if anything, about the bankcard business. As a result, “the chance of success can be a lot lower” than that of a more experienced applicant. The increase in candidates has caused other problems for Sage Payment Solutions, according to Stanford. “It takes a long time to review the sheer number of people who are applying for these jobs,” he says. “Also, we’re forced to interview more people to find the right person.” In better times, Stanford says it took his colleagues four or five résumés to find one good candidate. Today, it takes them 10 or 12. “So it’s taking us longer to wade through all of them. That said, we go through them carefully because it can mean a lot to lose even one good candidate.”

bed with, because they’re going to be your business partners.” And, he adds, “It’s a numbers game. At some point, you’re going to come across a bad apple. As long as you’re aware of that and you protect yourself, you’ll be OK.” Likewise, Merchant Warehouse protects the company and its clients by “screening the heck out of [candidates] before they’re hired,” says Helgeson. Most of the people who apply to become one of the company’s direct sales agents, for instance, are interviewed three or four times and are required to complete a few weeks of training (during which they’re tested) before they’re offered a position. “We take a really good look at them and make sure they’re up to our standards before they get any leads or get on the phone,” says Helgeson. “I really believe that if you put in a little effort up front—on screening and interviewing and training—you’ll save a lot of time and money on the back end because you won’t have to retrain or rehire—or recruit—so many sales reps.” TT Bryan Ochalla is a contributing writer to Transaction Trends. Reach him at bochalla@yahoo.com. 16 December 2010 | Transaction trends

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Startup Stories:

First installment of a series following successful and established ISOs.

High Risk,

Big Rewards An untraditional approach to operations and diversification fosters one startup ISO’s growth By Julie Ritzer Ross

bout a decade ago, Michael Wiener, president and CEO of Langhorne, Pennsylvania-based Advanced Merchant Group, telephoned his son Errick and proposed that the two of them start a business together. Slightly taken aback because his father had just retired from a long and successful career in group health insurance sales, but nonetheless intrigued, Errick asked what kind of business the two would pursue. “I told him I would figure it out, and then we would get something going,” says Wiener, whose return to the working world was propelled by an inner entrepreneurial spark and an inability to exist entirely at leisure. Founded in Wiener’s basement in 2001 with a handful of his former insurance clients as customers, Advanced Merchant Group now has a portfolio of more than 7,000 merchants, 300 to 350 sales agents nationwide, and processing centers situated not only in Langhorne, but also in Chicago and Seattle.The ISO has doubled its sales over the past two years; its annual transaction processing volume exceeds $1.6 billion. Errick remains with the company and serves as vice president and chief technology and information officer; his brother Kevin joined the venture six months after its inception and holds the title of vice president of sales and chief operating officer. Moreover, Advanced Merchant Group no longer occupies Wiener’s basement. In rapid succession, the startup venture moved from that location to an 800-square-foot office and subsequently, to a 1,500-square-foot office. It now occupies an 8,200-square-foot building and has 14 staff members.

The Right Route Wiener attributes a portion of his startup’s success to the considerable amount of research he conducted in early 2001 before deciding to pursue the ISO route.“Some people go into it blind, which is not a smart course of action,” he states.“They aren’t familiar with the in’ and out’s of residuals, how interchange rates really work. I knew about residuals from the insurance world, and [I knew] that, for 18 December 2010 | Transaction trends

» Advanced Merchant Group, ISO We’re Following: Langhorne, PA

Founded: 2001 Portfolio: 7,000+ merchants Annual transaction volume: $1.6 billion+

practicality’s sake, whatever business we would start would need to have that as a base. But that was all, so I explored all of the options in the residuals category and narrowed it down from there. Credit card processing won out as the route to take because it appeared to be a recession-proof product—but even after it was obvious that that was where we were going, I read and absorbed everything about the industry before proceeding further.” However, myriad other factors have played a role in the ISO’s explosive growth. In 2006, Advanced Merchant Group introduced its own payment gateway, an initiative Wiener considers its most significant accomplishment to date.The ISO made the move in part to bolster revenues, but also to establish a payment industry brand presence, increase merchant “stickiness,” cultivate the Internet side of large banks’ business, and expand its service base to include merchants whose processing it does not handle. Advanced Merchant Group presently touts the gateway, established in-house with input from outside technology experts, as the only such entity to offer a guaranteed check program available on the Internet. Wiener says the gateway has definitely opened new doors. Merchant attrition remains below one percent because clients need not shop for processing services on their own—only to be enticed to switch ISOs while they are at it.Three banks, whose names Wiener

LET US PROFILE YOUR ISO

declined to reveal, avail themselves of the MOTO retailers, 25 percent; and medium- to Is your company a successful gateway; of these, one is a processing bank. high-risk retailers, 15 percent. Some merISO? Let us tell your story. E-mail Meanwhile, a seemingly untraditional apchants fall into more than one classification. abrady@strattonpublishing.com proach to equipment sales fosters growth Higher-risk merchants pay heftier rates than by giving independent agents an added intheir lower-risk counterparts, and a reserve for more information. centive to work with the ISO rather than has been put into place as insurance against with its competitors. Advanced Merchant financial fallout anytime down the road. Group provides the hardware to its agents at cost and allows them Wiener readily admits that going beyond his own comfort zone to keep all revenues earned from sales to merchants.“We want to fowas scary. It taught him and his sons an important lesson: New ISOs cus on our merchant services’ core competencies, and we’re in the should not be afraid to take risks to build their businesses, providing merchant services business, not the equipment business,” Wiener that a safety net—such as a reserve and a higher-rates for higherasserts.“Whatever money we don’t see because we aren’t partaking risk clients policy—have been put into place. The diversification in agents’ equipment earnings is more than compensated for by the enabled Advanced Merchant Group to escape relatively unscathed processing business they bring to us instead of to someone else.” from what Wiener deems its only true challenge to date.“We had a About two-and-a-half years ago, the Advanced Merchant Group major partner ISO that stopped paying us and subsequently went also established a sales channel on the Internet. Other ISOs, as well out of business,” he recalls.“It took us six years to recoup the money as other agents that are not affiliated with the company, can purwe lost, but because we had diversified, we were fine. I don’t conchase terminals and consumables (paper products) on the Web site; done doing anything illegal, but there is a ton of high-risk business Wiener claims it is generating “good revenues.” on the Internet waiting to be written. Someone has to write it up, and we’re doing it.”

Diverse Business Channels

Diversification, too, has proven instrumental in transforming the company from a small startup to the operation it is today.When Advanced Merchant Group first opened its doors, it concentrated on boarding MOTO and Internet merchants based on Wiener’s belief that serving too many markets right out of the gate was not in its best interests. About a year later, a large travel company approached the ISO about merchant and processing services, which it had had difficulty procuring after 9/11. Experience in the high-risk segment of the insurance market told Wiener that he would find a processor to handle the travel company’s processing needs. He was correct. “Expansion into the high-risk category marked the first foray into diversifying our accounts,” says Wiener, adding that Advanced Merchant Group has since started to board brick-and-mortar merchants. The latter now comprise 60 percent of the ISO’s portfolio; Internet/

WORDS FROM THE WISE Michael Wiener’s advice for startup ISOs

START SMALL. Get to know one market and how merchants within that sector operate. Use this expertise to grow before diversifying.

TAKE RISKS. Once the time appears right to diversify, go ahead and chart seemingly less desirable merchant waters—but put safeguards into place first.

ANSWER THE PHONE. New ISOs, especially, cannot afford to turn off customers by using automated equipment to handle incoming telephone calls. Customers much prefer a human voice, even if the person who initially answers the telephone cannot be

Exploring New Territories Father and sons aren’t content to allow Advanced Merchant Group to rest on its laurels. They continue to set new goals for the company and to take strides toward meeting them. This year, the ISO initiated an expansion into Canada through an alliance with First Data Merchant Services. An initial objective of setting up Web sites to promote merchant services in Canada’s 11 major provinces, and taking the Web sites live by Dec. 31, 2010, has already been attained. Current plans call for becoming fully operational in Canada next year. “The U.S. market is becoming somewhat saturated, but Canada is wide open—it’s where we were 10 years ago,”Wiener asserts.“For years, the banks had a monopoly on the payments space, but the doors to the ISO channel have just opened up.” He cites a perceived ability to capitalize, from a sales standpoint, on Canada’s migration to chip-and-PIN technology as another catalyst for the move because of the demand for POS equipment he expects it to incite. The original conversion deadline of Oct. 15, 2010, was recently extended to March 31, 2011, at which time MasterCard- and Visaaccepting merchants that have not upgraded to chip-enabled POS terminals will be liable for fraudulent transactions executed at the checkout counter. Plans also dictate keeping an eagle eye on new programs and products for merchants. Gift cards, loyalty programs, ACH check processing, and cash advances are already on the menu, but Advanced Merchant Group will add others that suit its scope of business. “Just as we’ve diversified our portfolio, we have tried to give our clients as many options as possible under one roof, to build their trust and keep them in the fold,” Wiener concludes.“As long as it involves moving money, and it’s legal, we will do it.” TT

of assistance and simply refers the caller to the appropriate party.

Julie Ritzer Ross is a contributing writer for Transaction Trends. Reach her at jritzerross@gmail.com. Transaction trends | December 2010 19

[ FEATURE]

With Change Comes

Opportunity

Despite industry disruptions, experts remain optimistic about the future By Josephine Rossi

hile payments professionals can agree that the point of sale has forever changed, its evolution, coupled with a precarious legislative and economic environment, have many players wondering what’s next for the industry. But at the 2010 ETA Strategic Leadership Forum, industry experts countered their fears of ISO disintermediation with confidence for growth and innovation. More than 200 high-level industry professionals gathered in Palm Beach to discuss Keynote speaker Morton M. Kondracke discusses the impact of midterm elections on the payments sector.

where the industry is headed and the technologies and issues driving the change. As banks take on more risks in lending and companies emerge from survival mode, now is the time for ISOs to “keep their eyes on the horizon and strengthen their core,” panelists told attendees. “There are lots of opportunities, but ISOs 20 December 2010 | Transaction trends

need to be into all different aspects [of the market] so they can fully take advantage,”said one speaker.“Get your fingers in as many pies as possible and continue to innovate.”

Payment Dynamics No doubt one of those pies is alternative payments. David Allen of Glenbrook Partners offered his take on the state of emerging payments and where the action is—CHIP, online, mobile, and social. Declaring 20002010 the “PayPal Decade,” he pointed out how the company achieved huge success by finding an underserved market, decoupling the transaction, driving revenues, and layering access to payment systems, which works particularly well for cross-border payments. But the bottom line is that reducing expense isn’t enough. “To build a new payments system, you need a compelling consumer proposition and enough merchants to interest consumers,” said Allen. A balance between what merchants and consumers are using will mean success for alternative payments, according to Jim Van Dyke, CEO of Javelin Research. Currently, more than 50 percent of shoppers have access to emerging payment methods, but only one-third of merchants can accept them. Because merchants are most interested in increasing sales,Van Dyke suggests ISOs find ways to get alternative options to market cost-effectively.“Vet the ones that will drive

revenue and deliver them in way that the merchant can adopt and use easily,” he said. The rise of alternative payments also is giving way to opportunities to serve a new class of merchants, Allen explained. These “micro-merchants” are different than traditional merchants—namely in their unpredictable sales volume mobile locations. But if ISOs conclude they’re worth the risk, he suggests a simple enrollment process and usage-based pricing to board them.

Hot Technologies No talk of payments growth would be complete without also delving into the emerging security technologies—point-to-point encryption (P2PE) and tokenization. Neither is the silver bullet the industry is waiting for, but both mitigate risk. Tokenization involves collecting card data at the point of sale and the processor returning a token representing the data. The token has no value unless redeemed, and if handled properly, the merchant cannot decrypt the information. This process can reduce some of the PCI security requirements because no storage of the payment card data is done after collection, but data is still transmitted. With P2PE, data is encrypted at the point of sale by the swipe hardware. Merchants do not have the keys to decrypt the data, which gives P2PE the potential for large internal scope reduction. The problem is

Industry CEOs offer advice for seizing new opportunities.

that it’s not compatible with existing credit cards systems. The most promising technology is a format-preserving form of P2PE. Where traditional encryption tools turn credit card numbers into larger, binary fields, formatpreserving P2PE returns data in the same 16-digit format as the original credit card number.The result is a solution that can integrate with legacy software, reducing the need for database and application overhauls and lowering implementation costs. Still, break-ins can occur at the point of sale and at the provider/processor/acquirer level, experts warn. The reality of all current technologies is that they add complexity and processing time to transactions, which competes with consumers’ need for ease and convenience. “Compliance and security has to be transparent to the consumer,” says Bob Bartlett of Fifth Third Processing.“Providers need to integrate more security into core technologies. It should be a default.” Consumer convenience and control also are key drivers in the mobile commerce arena, which finally is catching on in the Unit-

ed States after more than a decade of talk, according to George Peabody of Mercator Advisory Group and Mark Horgan ofTravelex. Consumer adoption is at the heart of the tipping point: 4.6 billion people—two thirds of the world population—now own a mobile phone; more than 50 percent of 45- to 54-year-olds use text messaging; and by the end of 2011, the majority of U.S. mobile phones sold will be smartphones. But other conditions are necessary to push U.S. mobile commerce growth to the levels found in Japan. Most notably, says Horgan, solutions must function more like cash, which is universally accepted, reliable, backed by the central bank, and hard to counterfeit/ compromise.

Critical Business Issues Arguably, the one topic that was top of mind for all attendees was interchange and how the Federal Reserve will interpret legislation set forth by the Durbin amendment. Jim Oberman of NPC moderated a session led by economist Stuart Weiner, former director of payments systems research for the Federal Reserve of Kansas City, who gave his take

Watch It Online Didn’t make it to Palm Beach? Watch Keynote Speaker Morton M. Kondracke’s presentation from your desk. Visit www.electran.org, click on “events,” and follow the links to the 2010 Strategic Leadership Forum. Access the video using the “Keynote Video Replay” button at the top of the page.

on the provisions will affect the industry. “The Fed has a difficult job and will be cautious and methodical,” he said.“Staff will be guided entirely by language of Durbin because it will be the way that the Fed can defend its actions.” Weiner anticipates that the Fed will incrementally lower interchange fees, with sharper decreases on the signature side rather than PIN, which is deemed safer. Banks will likely react with fewer, less generous reward programs and higher annual fees. The Fed also has some “wiggle room” regarding incremental costs, which will be very difficult to separate from all the other costs found in the payments chain.The same goes for the mandate to allow for fraud expenses. Because these costs extend across all payments,“it will be hard to pull out the part that has to do with debit card transactions,” he says. The October settlement between the Department of Justice and Visa/MasterCard will further allow merchants to discriminate between network brands and gives them new options to manage payment acceptance practices. In addition,Weiner expects credit cards to be next on the chopping block but says issuers may be able to self-regulate in the meantime to help deter congressional action down the road. TT Josephine Rossi is managing editor of Transaction Trends. Reach her at jrossi@ electran.org. Transaction trends | December 2010 21

ETA 2009-2010 BOARD OF DIRECTORS OFFICERS PRESIDENT Holli Targan Partner Jaffe, Raitt, Heuer & Weiss, P.C.

Kim Fitzsimmons Senior Vice President–First Data Services First Data Corporation

Advisory Council Robert Baldwin President & CFO Heartland Payment Systems, Inc.

Heidi Goff Senior Vice President, Global Strategic Accounts Hypercom, Inc.

Joe Cohane CEO Veracity Payment Solutions

PRESIDENT-ELECT Rick Pylant President & Chairman COCARD Marketing Group, LLC

Robert McCullen CEO Trustwave

TREASURER Eddie Myers President & COO Payment Processing, Inc. SECRETARY Roy Banks CEO ACCELERATED Payment Technologies™ IMMEDIATE PAST PRESIDENT Nick Baxter Senior Vice President First National Bank of Omaha DIRECTORS Todd Ablowitz President Double Diamond Group

Jeff Rosenblatt President EVO Merchant Services Debra Rossi Executive Vice President Merchant Payment Solutions Wells Fargo Bank Dave Siembieda President & CEO CrossCheck, Inc. Tom Wimsett President & CEO National Processing Company

Dean Leavitt Chairman & CEO Unicorn Partners, LLC Ed Myers U.S. President Global Payments, Inc.

ex-officio Carla Balakgie CEO Electronic Transactions Association Jan Estep President & CEO NACHA Sameer Govil Head of Acceptance Solutions Global Acceptance Visa Matt Johanson Vice President Acquirer Relations Discover Network

Deana Rich President Rich Consulting

Steve Carnevale Senior Vice President/ Group Head Commerce Development MasterCard Worldwide

Kurt Strawhecker Executive Partner The Strawhecker Group Buzz Stryker President & CEO POS Portal, Inc.

Bryan O’Malley Vice President American Express LEGAL COUNSEL Dave Goch Attorney at Law Webster, Chamberlain & Bean

Greg Cohen President Moneris Solutions

Advertisers index Company

Phone

Web

212-779-2100

www.amerimerchant.com

Authorize.Net

866-437-0491

www.authorize.net

Cynergy Data

800-933-0064 x5147

www.cynergydata.net

eProcessingNetwork

713-880-0326

ssotis@eprocessingnetwork.com

Fifth Third Processing Solutions

513-534-7678

www.ftpsllc.com

Network Merchants Inc.

800-617-4850

www.nmi.com

Total Merchant Services, Inc

888-84-TOTAL x9411

www.upfrontandresiduals.com

AmeriMerchant

Page

TransFirst

214-453-7711

www.transfirst.com

USA ePay

866-872-3729

www.usaepay.com

22 December 2010 | Transaction trends

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Industry Insider

Differentiation... and Then Some Innovative ideas, such as ‘Every Swipe Counts,’ set Century Payments apart in a crowded market By Bryan Ochalla

n the commoditized world of electronic payments, most companies say they are satisfied if they can differentiate themselves from their competitors in even one way. But the leaders of Dallas-based Century Payments Inc. are ecstatic. They’ve differentiated their still-young payments processor, which consists of four distinct business units, from its industry peers in not just one but three ways, according to Co-Founder and CEO Rob Wechsler. “Our mantra is that we’re the only game in town when it comes to three of those four business units,” says Wechsler, who served as executive vice president of global sales and service for Dallas-based Chase Paymentech and its predecessor Chase Merchant Services for five years before founding Century Payments.

“When you’re growing as fast as we’re growing, it can be really hard to find and retain highquality employees.”

Business Segments

Although Wechsler considers Century Payments’ agent compensation and services program par for the course in the industry, he says its other business units are decidedly different. In 2006, Wechsler and his business partner at the time were ap—Rob Wechsler proached by RBS WorldPay. “They wanted to grow their agent-bank and ISO business, but they didn’t know how to do it,” Wechsler says. “So we opted to do it for them [by catering to and servicing the ISO community on behalf of the sizable payments processor] and started the company.” Century Payments’ second source of differentiation: It develops, builds, and manages sales forces for clients—primarily banks and POS companies—looking to expand their offerings and services to include electronic payments. “We’ll actually build an entire whitelabeled sales force and brand it on behalf of that client

24 December 2010 | Transaction trends

and then give them a true ownership in that merchant contract, versus just a revenue share,” explains Wechsler. Finally, there’s Century Payments’ cause-based payments program, Every Swipe Counts. For each new account activation, the company donates $25 to the American Society for the Prevention of Cruelty to Animals or to Susan G. Komen for the Cure, as well as an additional percentage of ongoing gross profits. “This program allows us to provide our clients with great services at a great price point while also providing them with an opportunity to give back to one of these two great causes without having to dip into their own pockets,” Wechsler explains. Clients can expect to see more causes supported by the program in the coming years, he adds.“We’ve always envisioned that we would add three or four more partners to the program. But based on the reaction we’ve received from our customers, I could see it eventually evolving into the kind of program where they can choose to support a cause or organization that’s nearest and dearest to their hearts.”

Fast-Growth Challenges Shoring up additional partners for the Every Swipe Counts program isn’t the only challenge on Wechsler’s plate, he admits. Finding the right employees and managing growth also are priorities for the company, which was named the 11th fastest growing private company in the nation in 2010, according to Inc. magazine’s annual Inc. 500 list. “When you’re growing as fast as we’re growing, it can be really hard to find and retain high-quality employees,” Wechsler shares. Also, as you continue to add more and more of those high-quality employees to the mix, “you have to deal with all of the inevitable challenges that come from that.” Specifically, he adds,“growing fast means your culture evolves quickly, too. So you’ve really got to keep a close eye on things to be sure the culture that’s being created is the one that’s right for your company and your customers.” TT Bryan Ochalla is a contributing writer to Transaction Trends. Reach him at bochalla@yahoo.com.

Building Partnerships –

One Gateway at a Time

More and more ISOs are choosing NMI as their trusted gateway to new opportunities. Here’s why you should too! 1.

Our Focus Is on You. NMI is in the business of supporting its ISO partners, not competing with them. We are the only payment gateway in the industry that offers a 100% non-compete guarantee. It’s simple – we do not board merchant accounts.

Build Your Brand, Not Ours. NMI’s transparent branding program allows you to position the gateway as your own. We work behind the scenes so you get the credit you deserve from your merchants.

Achieve Higher Residuals and NEW Growth Opportunities. As an NMI Affiliate Partner, you’ll gain exclusive access to our multi-tiered merchant and sub-agent control panel that allows you to build your business portfolio and earn residuals on every merchant you sponsor on the gateway.

Have a Deeper Support Network. You’ll find NMI’s “whatever it takes” culture and nimble service structure will provide “one-call resolution” to most of your needs. That’s why our ISO Partners think we offer the best support in the industry.

Your Merchants Will Enjoy the Most Advanced Processing Tools and Security Applications Available. From our Advanced Transaction Routing Interface™ and patentpending load balancing system to security tools like iSpyFraud™ and the Customer Vault,™ our products put you and your merchants in control, and more control means greater opportunities.

Choose the Gateway that Opens More Doors! To learn more about how NMI’s products and services can help you grow your business, call or visit our website today.

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PH: 847.352.4850 800.617.4850 FX: 888.829.3631 sales@nmi.com

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