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Transaction trends The Official Publication of the Electronic Transactions Association

| May 2011

Time to say

Goodbye Effective strategies for parting ways with merchants

See page 8

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Transaction trends The Official Publication of the Electronic Transactions Association

Vol. 16 | No. 5

cov e r s tory

14 Time to Say Goodbye

By Kim Fernandez Keeping your customers is important, but so is knowing when and how to let a merchant go. ISOs share their strategies for amiably parting ways, maintaining your contacts, and leaving your doors open for their return.



8 Setting a Standard

After years of research and development, ETA recently launched its Certified Payments Professional™ program. Learn more about eligibility requirements and how the certification can enhance your professional reputation.

24 Defending the Code 31

20 Making the Case for EMV

By Julie Ritzer Ross Experts agree that EMV drastically reduces cardbased transaction fraud, and the obstacles that have kept chip-and-PIN technology out of the United States may be shrinking.

Edited by Josephine Rossi In this second of a two-part series, ETA’s Technology Committee convenes a roundtable discussion on the state of data security in the United States and abroad.

d e partm e n tS


President’s Message


Industry News

10 8

Insights from ETA’s elected leader Trends, strategies, and news in the payments business

ISO Corner Is targeting micro-merchants the key to sparking growth?



Startup Stories: From the Ground Up

By Julie Ritzer Ross After filing for bankruptcy in 2009, Cynergy Data reinvented its entire business model to better serve ISOs, and currently processes approximately $1 billion in transactions each month.

Vertical Markets The education market is becoming a steady source of revenues for ISOs and MSPs.

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AmeriMerchant’s flexible and innovative solutions paved the way for its success.

Transaction trends | May 2011 3

Electronic Transactions Association 1101 16th Street NW, Suite 402 Washington, DC 20036 202/828.2635 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 Editor Josephine Rossi Contributing Editor Angela Hickman Brady Editorial/Production Assistant Teresa Tobat Art Director Janelle Welch Contributing Writers Kim Fernandez, Bryan Ochalla, Julie Ritzer Ross Advertising Sales Steve Schwanz or Fox Associates (800/440.0232; 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 202/8282635; 202/828-2639 fax. Postage paid at New Richmond, Wisconsin and additional mailing offices. POSTMASTER: Send address changes to the address noted above. Copyright © 2011 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.

4 May 2011 | Transaction trends

President’s Message

Opportunities Abound in San Diego


elcome to the 2011 ETA Annual Meeting & Expo issue of Transaction Trends. The final numbers aren’t in, but it looks like those of you who will be in San Diego will be joined by about 3,000 friends, colleagues, and potential business partners. ETA has gone to extraordinary lengths to make this Annual Meeting as productive and enjoyable as possible for everyone there. We have assembled some great speakers. Steve Wozniak, the co-founder of Apple Computer Inc., will be on hand to talk about a wide range of things from entrepreneurism to security and more.And former Senator Christopher Dodd, whose financial reform bill has had a “significant” impact on our industry, will be featured at the opening general session. If you want to improve your industry knowledge, we have a full slate of ETA University courses, an expanded set of educational breakout sessions, and preconference sessions, including Compliance Day, Prepaid Day, and the Investment Community Forum. You’re going to hear an awful lot about mobile payments, in all its various forms. ETA’s Technology Showcase will give you the chance to see demonstrations of innovative new technologies, including mobile acceptance solutions.Throughout the Expo hours, there will be a dedicated mobile payments pavilion, featuring some of the leading mobile companies that aren’t normally part of the ETA universe, including the leading hardware and platform makers. And, of course, you’ll be able to find out all the details about ETA’s new Certified Payments Professional program.The staff and volunteers who have created the program and will administer it will be easily identifiable and ready–eager, in fact–to answer your questions. Finally, more than 150 companies will be represented on the floor of the Expo hall.They’ve invested in that presence because you’re going to be there. Now it’s up to you. There are opportunities all around the Annual Meeting: opportunities to learn, to make a connection, to add a new and profitable product, to get that all-important competitive edge. But the opportunities don’t mean much unless you take advantage of them so your part is to do just that. All of us at ETA have good reason to encourage you to make the most of the Annual Meeting.There are at least two sides to every opportunity:The benefit you receive typically benefits someone else, as well.And sometimes the benefits accrue to several others.And that multiplier effect is only possible at an event like the ETA Annual Meeting.When it happens, we’ve succeeded. I look forward to seeing you in San Diego. Sincerely, Rick Pylant Rick Pylant is President of ETA and President & Chairman of COCARD Marketing Group, LLC

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INDuSTRYnews Experts Advise on Missed Revenue By not innovating or seeking new revenue streams, the electronic payments industry is missing out on valuable opportunities, says a panel of global payments professionals. In “Payments Innovation 2011: The Global Jury Decides,” a report sponsored by electronic payments provider Ixaris, 22 banking executives from MasterCard,Visa, SWIFT, PayPal, Amazon, First Data, American Express, and IBM discussed challenges and opportunities in the global payments market and identified potential innovations of 2011. When asked how innovation can help address missed revenue opportunities, respondents suggested: • “Payment for virtual goods. It’s a new economy and being systematically ignored by conventional players in the same way that P2P was before PayPal.” • “There is a tremendous opportunity to make cross-border B2B and B2C payments lower cost and faster. Customers would love it.” • “A universally accepted, global, and convenient mobile payment solution.”

• “Leveraging ‘smart’ payments (i.e., rich, context-specific meta data).” • “Better linking and embedding of payments into the consumer purchase process (e.g., location-based, search-driven, impulse buying, etc.).” When asked which payment types will see the most innovation, experts said: • “Evolution of payment technology always moves more slowly the higher the payment value.Youth and the affluent will continue to drive acceptance of non-cash payment methods in low-value payments.” • “Removing bulk coin from economies has many benefits for merchants, consumers, banks, and central banks and therefore initiatives that reduce bulk coin are likely to receive broad support.” • “Card and ACH as such are not going to change that much but their usage will be embedded in other innovative payment methods (e.g., PayPal transaction funded by card, P2P solution over the ACH rails, card as a mobile wallet, etc.).” • “Dedicated B2B solutions, e-invoicing and non-bank international transfers will drive innovation in commercial payments.”

info graph Importance of Challenges Facing the Prepaid Industry Scale: 1 (not at all important) to 5 (extremely important)

Regulatory pressures


Market awareness


Consumer advocacy groups/media


Lack of scale


Limited number of partners or distributors that can help scale portfolios


Competitive pressures


Lack of flexibility of processing systems


Lack of reliability of processing systems


Source: Aite Group

6 May 2011 | Transaction trends

Researchers are predicting a boom in nearfield communication (NFC) services over the next three years, with North America accounting for use of nearly 150 million NFC-capable smartphones—about half of all worldwide—by 2014. The growth will be driven by mobile network operators that are launching services in 20 early adopting countries before the end of 2012, according to a new Juniper Research report. Further, the firm predicts that at least one in five smartphones worldwide will have NFC contactless functionality by 2014, and NFC-based payments, coupons, and smart posters will become common in Western Europe, North America, and other developed regions. “Although there are still hurdles ahead, NFC prospects have been boosted by the succession of mobile operator and device vendor announcements. France is a case in point where operators expect to sell one million NFC devices this year,” says Howard Wilcox, author of the report. NFC is attracting the attention of major players including Google, France Telecom Orange, and Telefonica, according to Juniper, which sees mobile commerce capability as vital. The report pinpoints the main revenue opportunities but warns that business model structures still require development before NFC services will achieve critical mass.

Fast Fact


Lack of product innovation

Other technology issues

1 in 5 Smartphones Will Have NFC by 2014


In 2010, the number of identity thefts fell 28 percent to 8.1 million, from an estimated 11 million in 2009. Source: Javelin Strategy & Research


SETTING A STANDARD ETA’s Certified Payments Professional Program Gets Underway


n February 2011, after more than two years of research and development, the Electronic Transactions Association announced that it would launch a certification program to award the Certified Payments Professional™ credential to those who meet the program’s minimum eligibility requirements and pass a rigorous written examination that tests their knowledge of the payments industry. Program details are now finalized, and those who attend the ETA Annual Meeting & Expo will, for the first time, get to hear what the program is all about. Details also are available on ETA’s website.

ETA Appoints CPP Certification Commission The Electronic Transactions Association has appointed of six professionals to oversee its new Certified Payments Professional (CPP) program. The CPP Certification Commission will be chaired by Holli Targan, a partner at Jaffe, Raitt, Heuer & Weiss, P.C., and immediate past president of ETA. Other members include John Barrett, senior vice president of sales at First Data; Deborah Brown, executive vice president and chief operating officer at TriSource Solutions; Deirdre Paone Cohen, vice president of channel management and business development at Wells Fargo Merchant Services; Stephanie Lusher, executive vice president of sales at Fifth-Third Processing/ National Processing Company; and Georgia Stavrakis, director of loss prevention at Heartland Payment Systems. ETA’s Credentialing Commission establishes and enforces the policies, procedures, and eligibility requirements for the CPP program.

What Is a CPP? Most business people are familiar with educational programs that offer certificates for those who successfully complete a course, or licensing programs, like those for a Certified Public Accountant or a civil engineer, in which a specified degree and exam lead to a license that’s required for a practitioner to do certain kinds of work. The CPP program is different from both of these. Instead, the program verifies that someone who has earned the CPP credential has met the program’s eligibility requirements and has successfully completed the rigorous written examination to demonstrate the knowledge, skills, and abilities of a practitioner in the electronic payments industry. “The CPP credential tells an employer or customer that the person who has earned the designation has demonstrated an appropriate level of professional knowledge, as determined by dozens of industry subject matter experts,” says ETA’s Director of Education and Professional Development, Rori Ferensic. “These experts worked for more than two years to define the required body of knowledge and actually write the exam questions, all under the guidance of Castle Worldwide, an independent testing company that specializes in development of industry certification programs, who will ensure that ETA’s credentialing exam meets all testing industry standards and is statisti8 May 2011 | Transaction trends

cally sound, legally defensible, and content reliable.” To be eligible to take the exam, a prospective CPP will have to demonstrate that he or she has one year of industry-related work experience and a high school diploma, associate’s, or bachelor’s degree, or three years of industry-related experience. Candidates also must provide a signed recommendation from a supervisor or management-level individual at a payments industry company and a signed “attestation” agreeing to abide by the terms of the program. ETA members will pay a $325 fee to take the exam; nonmembers will pay $425, which includes a $125 nonrefundable application processing fee. The CPP examination will take place at testing centers around the country, two times per year, during 30-day testing “windows.” Candidates will make an appointment at a testing center and take the exam on a secure computer terminal. Test-takers will have three hours to complete the 125-question exam. Results will be released four to six weeks following the end of the exam window, and those who pass will be added to a public registry of CPPs maintained by ETA. Operation of the program will be governed by a Certification Commission (see sidebar), which set the program policies

and guidelines, and will oversee its daily operation.

Setting a Standard ETA says the program is designed to be fair, objective, and based on real-world knowledge, and it sets a standard for what a knowledgeable professional should know. It should give employers and customers confidence that the person who has the credential knows how to do his or her job. “The CPP program is not in any way an attempt to ‘police’ the industry or to enforce ethical standards of behavior,” says ETA’s CEO, Carla Balakgie. “But it also is important to recognize that anyone who is willing to invest in professional development—to prepare for and participate in the CPP examination process—is likely to be someone who places a high value on integrity and professional reputation.” The initial Certified Payments Professional exam will be administered November 1-30, 2011. Full details, including application deadlines and a list of testing centers, are available at CPP Candidate Handbooks also will be available online and complete program information will be available at ETA’s Annual Meeting & Expo, where a number of special events to showcase the CPP program are planned.

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ISO Corner

Bringing Home the Babies

Square’s success in serving micro-merchants piques ISO interest By Bryan Ochalla


an Francisco-based Square has been a media darling ever since it began sending its free card readers—which can be plugged into various smartphones (including the ubiquitous iPhone) and handheld devices, such as iPod touches and iPads—to micro-merchants across the United States early last year. It’s easy to understand the excitement. The company, which was founded by Twitter Chairman Jack Dorsey, enables “anyone to accept credit cards anywhere.” If reports that it’s processing millions of dollars a week and boarding 30,000 to 50,000 micro-merchants a month are accurate, Square is having a heck of a ride. Surely, acquirers and ISOs coast to coast are asking themselves: Should we get in on this action? The answer, as is so often the case, is, “It depends,” according to Allen Weinberg, managing partner and cofounder of San Francisco-based consulting firm Glenbrook Partners, and Todd Ablowitz, president of Denver-based Double Diamond Group.

Weighing the Rewards On the one hand, they say, there are plenty of micro-merchants—those too small to bother with merchant accounts, such as artists, babysitters, and massage therapists—out there ready and waiting to be served by the payments space. But “it can be a real hassle to get a merchant account today,” Weinberg says. “You have to jump through a lot of hoops.” ISOs interested in attracting and serving micro-merchants have to ask themselves, “Can we do this profitably?” That’s an important place to begin, Weinberg suggests, because “the biggest obstacle to achieving success in this market is [boarding] new customers cost-effectively. You certainly can’t send out salespeople to find them so getting new customers on the books is going to be predicated on viral marketing and being able to drive traffic to your company in a cost-effective manner.” Making matters more difficult for ISOs 10 May 2011 | Transaction trends

interested in entering this space is that Square charges its customers a flat 2.75 percent fee for each card-present transaction (card-not-present transactions carry a 3.5 percent fee plus 15 cents).  Also, Square provides its customers with free card readers. Micro-merchants “surely are going to look at that kind of information before they decide who to go with,” says Ablowitz. Another important question ISOs have to ask themselves, according to Weinberg, is,“Can we control the risk?” Unfortunately, those who decide to go after micro-merchants have to mitigate a slew of risks if they hope to be successful—one of the biggest being: “You don’t really know who these people are or what they’re doing,” Weinberg says. “You’re not going to do site visits like you would with a traditional merchant, and you’re probably not going to visit websites either, since you’re primarily going to be dealing with babysitters or people who sell things on Craigslist or mow lawns.” One way to decrease your vulnerability is to follow in Square’s footsteps and put specific verbiage in your terms of condi-

tions, such as, “You hereby agree you will not use this product to take deposits on services to be delivered later.”The problem is that “it can be difficult, if not impossible, to monitor that,”Weinberg says.“So there’s still going to be some risk.” If you can figure out how to attract and serve micro-merchants profitably while controlling the many risks that go along with it, both Weinberg and Ablowitz say “go for it.” But you have to be able to do both:“One out of two won’t cut it, though; you’ve got to be able to bring them on board costeffectively and you’ve got to be able to manage the risk cost-effectively, too.” “It’s been a viable business plan for PayPal so one can assume it could be similarly viable for ISOs,” Ablowitz adds,“especially since we’re talking about a lowerrisk, face-to-face environment. It will take changing your mindset and a lot of innovation, though, not to mention a lot of risk management.”

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ISO Corner

vice from Bryce Thacker, executive vice president of sales and marketing at Lehi, Utah-based ProPay, which has been serving micro-merchants for most of its 14-year existence. Much like Square—and a number of others, including Intuit, North American Bancard, and Sage Payment Solutions— ProPay allows micro-merchants to accept payments anywhere and at any time through the company’s mobile solutions. “We’ve built a lot of flexibility into our program over the years because that’s what these people need when they’re out and about selling their wares and services,” says Thacker. Also like Square and others, ProPay keeps things simple.“We have a low annual fee, and then we have a discount rate and a transaction fee,” Thacker says. “So, if you have a ProPay account, you might pay $40 for the entire year, rather than $40 for a single month, and then you might pay 2.9 percent per transaction plus a few cents. “That’s it,” he adds.“There are no hidden fees, no monthly statement fees, no gateway fees, no cancelation fees.”

Keeping things straightforward and simple is important when you’re trying to serve micro-merchants, Thacker advises, “because it can be confusing for even experienced business people to figure out what they’re paying for when it comes to their merchant accounts.” Such customers “don’t always understand the ins and outs of merchant accounts,” adds Scott Nelson, ProPay’s vice president of marketing.“They need something that’s simple, minimizes their concerns, and allows them to get on their way to accepting credit and debit cards.” As both Ablowitz and Weinberg have already suggested, though, boarding micro-merchants isn’t an altogether simple process. “It’s definitely a challenge and there can be a steep learning curve to it,” Thacker warns. “The underwriting process can be a real hassle,” he says. In other industries,“if someone comes running to you and says, ‘I’ve just got to have your service,’ you count your lucky stars and bring them on as a client. In this industry, though, if someone comes running to you and says the very




4:38 PM

same thing, you ask,‘Whoa, why are you so eager?’ Red flags pop up and sirens go off because in this business everything you’ve done can be undone by chargebacks, fraud, or any number of other issues.” Figuring out how to underwrite micromerchants is no small or simple task.“It can be a real challenge,”Thacker stresses.“After that, you have to worry about PCI compliance—and that can be a real challenge, too.” And then there’s the challenge that Weinberg addressed earlier: Finding these merchants cost-effectively.“  You can’t spend more to find them than they’ll ever be able to generate for you,” T   hacker explains.That said, finding them—lots of them—is a must, since serving micro-merchants “is a volume game,” according to Thacker. “When you’re taking just a few basis points on each transaction, it takes a lot of volume—as well as a lot of different approaches and different thinking—to produce a profitable business.” TT Bryan Ochalla is a contributing writer to Transaction Trends. Reach him at








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14 May 2011 | Transaction trends


Time to say


By Kim Fernandez


No one likes to lose merchants, but merchants involved in unethical behaviors need to be dropped right away. You have to protect your brand and partners.


When price demands become unreasonable and you start to lose money, it’s time to let a merchant go.



t’s the letter no ISO wants to receive:After months or years of seemingly business as usual, a merchant writes to cancel a contract. Many times, the quit letter comes because of price—the merchant was approached by another ISO who offered a better deal, at least on paper. Sometimes, it’s the result of what they perceive as poor customer service.And once in awhile, it’s due to something completely out of left field that no one could have foreseen. No matter the reason, a termination letter usually fires an ISO into action, launching phone calls and letters to try and save the business relationship. But sometimes, the relationship has lived its useful life, and it’s time to part ways. For the ISO, the trick then becomes leaving the door open to future business with that client without causing any hard feelings or embarrassment if the merchant’s new service provider doesn’t quite work out the way it hoped. Sometimes, you just need to let go—for the good of both organizations.

No ISO is 100 percent perfect. Own your mistakes and work to fix them.

Moving On


“Customer retention is very important,” says Sam Caine, president of Dallasbased Card Payment Services. “It costs a lot more to acquire a customer

Whether the relationship ends over price, service, or something else, never burn bridges. That customer may be back when a too-good-to-be-true deal is just that.

Transaction trends | May 2011 15


“Never burn bridges. We find that most customers do come back. They leave for what they think is a better deal, and then they have the opposite experience.” —Drew Freeman, Merchant Data Systems than it does to keep one. Ninety-eight out of 100 times when a customer calls us with a major issue or because they want to leave, we’re going to do whatever we can to make it right or get them to stay.” “A lot of people don’t give the attention to a customer who wants to walk out the door that they should,” agrees John Lewis, president of Security Card Services in Oxford, Mississippi, which recently partnered with NCP in Louisville, Kentucky.“We have processes and procedures in place for this very subject, and we incentivize our people so that the person who calls doesn’t become a flight risk.” That said, there are times when it’s just best to wish the merchant well and let the business relationship go. Most times, that comes down to simple bottom-line numbers. “The time to let them go is the point at which you start to lose money,” says John Barrett, SVP sales with First Data in Oxford, Mississippi.“There is a point at which you don’t have any more room to do any kind of price reduction. When the demands of the merchant in terms of price are unreasonable, you do walk away.” “There is a time to let go,” agrees Drew Freeman, president of Miami-based Merchant Data Systems. “If somebody is offering a deal that is underwater, that’s it. People are giving everything away right now.” 16 May 2011 | Transaction trends

“We see some pricing situations that we don’t understand,” adds Lewis. “We’re here to service, but we’re not here to work for free. I bring other people in on occasion to see if there’s something I’m missing, but generally, we’re not missing anything—somebody’s priced something so low that we’re not interested in competing anymore.” Still, it’s smart to negotiate a rate if you can still make profit and if the merchant is a good customer in other ways. “If you have that flexibility, you can try and address it that way,” says Barrett. “But it’s important to reiterate the value you have, and ask the right questions to be sure that’s really why they’re leaving. If you’ve engaged the merchant, you probably have a good relationship and you can ask those questions.” And then there are the times when something is the ISO’s fault—poor customer service or misunderstandings can and do happen, and merchants can get upset enough to want to jump ship. In those cases, admitting the mistake and following up with a solution can help. “Every organization thinks it’s 100 percent perfect. You have to own your mistakes and work to fix them,” says Henry Helgeson, co-CEO of Boston-based Merchant Warehouse.“The ISOs can fix problems and save customers, and the first step is owning your mistakes and your own issues.”

Sometimes, having the merchant talk to someone higher up in the company can help—even if the answer there is the same as from customer service, notes Caine.“We have escalation procedures if something can’t be resolved.Those calls generally get escalated to me, and I get involved quite frequently. T   he customer generally gets the same answer from me as they did from the service person earlier, but they feel like our business is important.” Reaching out and asking pointed questions can help keep a customer on board. Sometimes, the underlying issues are situations managers had no idea were perceived problems.“There are times when a customer is unreasonable or isn’t willing to understand what the problems really may be, such as third-party software or that sort of thing,” says Caine.“But when it becomes a lost cause, we let them know the door is open if they don’t get better results, and that we’ll do whatever we can to get their business back.” Sometimes, ISOs receive quit letters from merchants and find, on follow-up, that the merchants have been offered something a little on the shady side from some of the competition. That’s a huge problem, experts say, and the only answer is to bid them goodbye and good luck. “You have to look at whether there are other issues with the merchant,” says Barrett.“All merchants are good merchants un-

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less they cause you legal or compliance issues.The ISO has to keep this in mind:This is our business strategy and this is my business model, and if what they’re saying falls outside of that model, you have to ask if they’re worth keeping.” Freeman agrees. “I don’t like to lose any merchants, but if you have one who’s involved in unethical behaviors, you need to get rid of them right away,” he says.“It’s important to us to protect our brand and our partners. If a merchant is involved in illegal or unscrupulous behaviors, we let them go.”

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Sometimes, merchants and ISOs just can’t reach terms to keep working together, despite the best intentions of everyone involved. In those cases, end the relationship on a good note and with the door wide open in case the merchant wants to come back.That means maintaining the same respect as when the relationship was new, and letting the merchant leave without losing face if things don’t work out quite the way they planned. Leaving the door open is critical because many find that an unbelievable deal is just that, says Freeman.“Never burn bridges. We find that most customers do come back. They leave for what they think is a better deal, and then they have the opposite experience.” But relying on a great rep who takes a quit call is probably too little, too late. “We call every one of our customers,” he continues.“By the time you get a letter, it’s too late.You can’t turn into the good guy after they send their letter of cancellation.” Helgeson says his company is calling ex-clients this year to see how things are working out and inviting them back if the new relationship isn’t working out.And while he thinks that might encourage some to re-visit his business, he’s not counting on a landslide, and for good reason.“We’re dealing with the other guys’ termination fees at that point.That can be problematic.” Still, he says, it’s critical to stay on the merchant’s good side, even as they leave one company for another more attractive suitor.“If you’re nice to them on the way out, you have a better chance of getting them back,” he says. Making one last effort to show off your customer service skills can make a world of difference there, even if the dividend seems to be a long way off. Helgeson says that, in most cases, he lets customers go with a friendly warning that what they see on a competitor’s offer may not be what they’re going to get. “It happens in the rate game quite a bit,” he says.“The ones that are really painful are when you know the merchant is being misled. We do our best to educate them, but there comes a point at which you realize you can’t lose money on a customer, and you have to let it go.” TT

Kim Fernandez is a contributing writer to Transaction Trends. Reach her at

18 May 2011 | Transaction trends

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the case

EMV By Julie Ritzer Ross


ill the United States see widespread migration to terminals that comply with the EMV (Europay/MasterCard/Visa) international standard for chip-and-PIN technologies? If it’s going to happen, when—and what is impeding EMV adoption? These are not even “$64,000 questions,” but “$1 million ones,” says Jim Schlegel, senior product manager at ACI Worldwide, a Louisville, Kentucky-based provider of electronic payment solutions to financial institutions, payment processors, and merchants around the globe. More than three quarters of financial institutions surveyed by ACI late last year (all but a few of which are headquartered in North America) don’t issue payment cards with EMV technology. Of these, only 15 percent planned to adopt EMV by year-end 2012. But 94 percent of companies polled agree EMV reduces fraud on card-based transactions, and 82 percent agree that the savings resulting from EMV’s fraud reduction would cover the cost of adopting the technology.

“Such results are almost difficult to believe, with so many respondents saying that EMV would reduce fraud enough to cover the costs of implementation, and yet so few with any active plans to start rolling it out,” Schlegel says. “When we asked participants to cite the greatest barrier to EMV in the U.S., 46 percent said the cost to migrate and 33 percent said a lack of motivation, which seems to almost contradict the views we saw elsewhere.” EMVCo LLC, which is jointly owned by American Express Co., JCB International Credit Card Co., MasterCard, and Visa, oversees the development and implementation of EMV standards, and estimates that twothirds of the world’s EMV cards and devices are deployed in Europe. Anecdotal evidence also demonstrates a paradox.To date, only one of approximately 17,000 card-issuing U.S. financial institutions—the $3.1 billion, 90,000-member United Nations Federal Credit Union (UNFCU) in Long Island City, New York—offers chip cards. UNFCU reportedly made the transition in part as a response to negative feedback from individuals whose magnetic stripe cards had been rejected abroad, especially for offline transactions executed at unattended kiosks and in taxis. On the merchant side, mega-retailer Walmart Stores Inc. has publicly expressed a desire to convert to chip-and-PIN technology as a means of quashing credit card fraud at the point


EMV reduces fraud on card-based transactions, agree 94 percent of companies polled in an ACI survey, but only one of approximately 17,000 card-issuing U.S. financial institutions offers chip cards.


Mercator estimates the investment needed for U.S. card issuers to issue chip cards to replace all existing magnetic stripe cards at $2.4 billion to $2.8 billion.


Many merchants are reluctant to invest once more in terminal upgrades or replacements so soon after having spent an estimated collective $18 to $20 billion to achieve and maintain PCI DSS compliance.


A push from the Federal Reserve Board and the Durbin Amendment could be a possible catalyst for inducing issuers to introduce chip cards.

of sale. Walmart’s European stores, which operate under the Asda moniker, already accept EMV payments, and all of its U.S. payment terminals are EMV-compatible. In late December 2010, the merchant revealed that its technology teams had recently begun to update the terminals, which until that point had lacked the software necessary to execute chip-and-PIN transactions, to include an EMV-compliant solution. Walmart plans to continue to make known its perception of EMV as “a much more secure transaction” than any transaction completed with a traditional magnetic stripe card and, as such, encourage other merchants to follow its lead, said James Henry, Walmart’s director of payment services, when the EMV initiative was announced. While a few chip-and-PIN pilots are on tap for early 2012, the retail sector—like its counterparts in the electronic transactions arena—is still at the very early stages of the EMV journey, Schlegel says.

Reluctance and Uncertainty Indeed, impediments to EMV adoption exist at seemingly every turn. Bankcard issuers and the card associations hesitate to move forward in part because of the anticipated cost involved: Estimates by Mercator Advisory Group of Maynard, Massachusetts, peg the investment needed for U.S. card issuers to issue chip cards to replace all existing magnetic stripe cards at $2.4 billion to $2.8 billion. “There have been some rumblings at Visa and MasterCard with regard to issuing chip cards to ‘big-ticket’ international travelers to eliminate the problem of credit card acceptance overseas, but whether they will take it to a broader cardholder base is still unknown,” says Scott Henry, director of marketing, North America, at VeriFone Systems in Alpharetta, Georgia. “They’re questioning whether they want to incur the expenditure of rolling out EMV based solely on the hope, rather than the assurance, there will be terminal compatibility. It is really a ‘chicken-versus-egg’ scenario.” Uncertainties surrounding proposed new federal rules that would limit transaction fees to between seven and 12 cents apiece, or roughly three- tenths of a percent of the value of a given transaction total, are playing a part here as well. In early February, Visa announced a new Pay-

ment Card Industry Data Security Standard (PCI DSS) compliance program intended to encourage merchant deployment of EMV-compatible chip terminals capable of processing either contact or contactless payments. The program, a similar version of which was recently unveiled by Visa Europe, renders merchants exempt from the requirement that they perform annual PCI DSS compliance validation for any year in which at least 75 percent of their Visa transactions originate from chip-enabled terminals. International merchants are eligible to participate, but U.S. merchants are excluded from coverage. “With the United States facing government price controls on debit and restrictive routing and exclusivity rules, it is not feasible or appropriate to drive the market toward major infrastructure investments, especially in an environment where financial institutions could lose billions in revenue as a result of the regulation,” says Bill Sheedy, group executive,Americas, for Visa Inc.“With such a dramatic potential for revenue loss, financial institutions will likely curtail investments in the future.” The structure of the U.S. banking system presents yet another roadblock on the issuer front.“I think the main problem here is that our banking system is very different from that of Europe or even Canada, where, of course, EMV has already been introduced,” offers J.D. Oder II, senior vice president, research and development, and chief technology officer at enterprise payment solutions provider Shift4 in Las Vegas. “In the U.S., almost any bank can be an acquirer or issuer of credit/debit cards,” he continues. “This open flexibility naturally limits how fast acceptance of any new technology can happen. And even if U.S. banks chose today to adopt EMV, it would take years for them to program the necessary back-end fields to prepare” for the migration. Meanwhile, merchants’ reluctance to move forward with EMV ties heavily into their reluctance to invest once more in terminal upgrades or replacements so soon after having spent an estimated collective $18 to $20 billion (by most accounts) to achieve and maintain PCI DSS compliance. Many players envision and/or fear a scenario wherein they invest in the technology necessary to accept chip cards, only Transaction trends | May 2011 21

[ FEATURE] to discover that such cards are not being issued on a widespread basis. Retailers’ overall financial woes are seemingly complicating matters. Because their financial resources are spread “so thinly,” they are waiting for “clearer direction” from card issuers and networks before making any big investment in chip-and-PIN EMV technology, suggests Richard Mader, executive director of the National Retail Federation’s Association for Retail Technology Standards (ARTS) in Washington, D.C. “As long as there is uncertainty from issuers about chip-and-PIN, retailers will hesitate,” he says. Henry agrees.“Issuers and networks are married to signature interchange, and as long as that continues,” it will hinder “U.S. adoption of chip-and-PIN technology,” he said during a panel discussion at the Smart Card Alliance Annual Meeting last May. The fact that EMV adoption would not release merchants from liability for credit card fraud is a factor here, too, Oder says. “In the U.S., we have a shared liability— equally split between the merchant and the cardholder—whereas European systems are black and white; liability is either with the merchant or the cardholder, not both,”

22 May 2011 | Transaction trends

“In the U.S., almost any bank can be an acquirer or issuer of credit/debit cards. This open flexibility naturally limits how fast acceptance of any new technology can happen.” —J.D. Oder II, Shift4

he explains. Outside the U.S., “merchants back the adoption of chip-and-PIN because it shifts all liability away from them. U.S. merchants do not have nearly the same motivation to undertake the expensive and often difficult task of migrating from a PIN debit system to one that supports EMV.”

Adoption Momentum Nonetheless, proponents of EMV cite some factors with the potential to set EMV on an adoption course among U.S. players. Schlegel ranks a push from the Federal Reserve

Board and the Durbin Amendment to the 2010 Dodd-Frank Wall Street Reform and Consumer Protection Act among possible catalysts for inducing issuers to introduce chip cards.This, in turn, could get momentum going among merchants. The Durbin Amendment grants the Federal Reserve Board broad authority to amend Regulation E—which pertains to consumer electronic funds transfer rules— to combat debit card fraud. “There is absolutely interest on the Fed side,” Schlegel insists, noting that in 2010, it convened a 1 4/1/2011 2:50:02 PM

forum of bankers, merchants, and other concerned parties to explore EMV’s future. Some sources predict a desire to compensate for reductions in revenue streams (debit card interchange and checking account overdraft fees), as mandated by recent legislation, may jolt banks into action.“It will almost definitely take a Walmartsize bank to get the momentum going, but once that happens and there is concern about losing accounts, other issuing institutions will probably follow,” Schlegel observes. Executives of Mercator Advisory Group make a related assertion in a recent report, entitled “EMV in the USA: Waiting on Debit, a Mandate, or Just the Opportune Moment.” They predict that the first U.S. bankcard issuer will roll out EMVenabled cards in 2011 to high net-worth clients on a fee basis. An overwhelming desire to minimize losses from fraud, and a harder look at the effect of EMV adoption abroad, constitute another factor experts foresee as potentially starting the trend stateside. By EMVCo’s estimates, card fraud loss rates decreased by 48 percent (from 18 basis points to 12 basis points) once the EMV engine began to rev up there. “While clearly nothing is going to happen overnight, stakeholders—particularly issuers—should come around to the business case, which cannot be ignored,” Schlegel asserts. He notes that U.S. card fraud losses totaled $6.9 billion in 2009 and are estimated to reach $10 billion by 2015. “With the total cost of migrating the U.S. to EMV estimated at $8.6 billion, the U.S. payment market could potentially save $44.8 billion in fraud losses over the next five years, assuming linear growth in fraud losses from 2009 to 2015. Assuming a twoyear phase-in, the cost of EMV migration could be recovered within one year.” Some retailers—namely, supermarkets and convenience stores that participate in electronic benefits transfer (EBT) programs—may not even have a choice as to whether they embrace EMV. Texas’ state government recently reported its intentions to transition EBT cards from magnetic stripe to chip. Other state governments may do the same, according to Mercator. Finally, more widespread adoption of near-field communications (NFC) has been tapped as a stepping-stone to EMV in the U.S. In the NFC scenario, radio frequency identification (RFID) is used for transaction authentication via an exchange with a chip embedded in a card, key fob, sticker, or smartphone.“Tap-and-go NFC programs are going mainstream, and even more NFC technology is coming in the form of iPad and iPhone devices due out later this year,” Henry says.“Additionally, contactless has the potential to make EMV more palatable to stakeholders because the form factor can be something other than a card, and to consumers because not everyone is comfortable with the swiping motion. In short, there’s a long road ahead for EMV in the U.S., but the obstacles are growing smaller.” TT

Julie Ritzer Ross is a contributing writer to Transaction Trends. Reach her at

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Thirteen thought leaders participated in the ETA Technology Committee’s roundtable discussion.

24 May 2011 | Transaction trends



the Code Experts discuss the real factors influencing data security mandates and merchant buy-in Edited by Josephine Rossi


ach year, the ETA Technology Committee convenes a group of thought leaders to participate in a roundtable discussion at the annual Strategic Leadership Forum. This past fall in Palm Beach, Florida, the group talked about data security technologies in the United States and abroad. Last month, we shared their insights on the value of fraud-fighting technologies and barriers to adoption. This month, we share the groups’ thoughts on factors affecting merchant buying decisions, of government regulations, and more.

Participants included:

Tom Tesmer, EVP of processing operations, Cynergy Data, and Technology Committee chair Karin McNabb, assistant vice president, RDM Corp., and Roundtable Subcommittee chair and moderator John Arato, vice president of retail business unit, MagTek Inc., and Roundtable Subcommittee member and moderator Paul Coppinger, president, Apriva Scott Goldthwaite, vice president of product management, Planet Payment,

and Roundtable Subcommittee member and moderator Sarah Owen, vice president of mobile commerce solutions, First Data Corp., and Roundtable Subcommittee member and moderator Kiran Gandhi, vice president of business development, MagTek Inc. Tim Horton, vice president and Trans Armor product family manager, First Data Corp. Alan Lubitz, CTO, Planet Payment Inc. Sarah McCrary, director of product development, Heartland Payment Systems Mike Mulcahy, president and CEO, PAX Technology Inc. Paul Sabella, president and CEO, Charge Anywhere Drew Soinski, vice president, Voltage

Excerpts of the discussion follow. QUESTION: How are industry standards, PCI, and other organizations affecting data security buying decisions? Paul Sabella: We need to have a unified message within the industry, from the Transaction trends | May 2011 25

[ FEATURE] highest level, that will trickle down to the smaller merchant.They don’t need to know a lot; they just need to know that they must have data security, and it’s not a choice. It needs to be mandated, not by us, but by our associations. Currently, we have companies telling them they need to have it, and some other companies say they don’t. There needs to be a place—one place—where everyone can look, regardless of whether that’s on the Visa side or the PCI side. If we can get to that level, we will be able to get merchants to pay for some cost for having some service, whether it’s NFC-based payment technology, tokenization, card swipe, or secure card. It really doesn’t matter. Merchants want to collect money for their merchandise, and credit cards are just one payment type. So let’s not lose perspective. But if there is that uniform messaging, then people will be able to adopt whatever technology it is that they prefer, based on what’s right for their business. I don’t think that merchants are afraid to spend money and I don’t think that they would avoid paying for this service.A bunch of years ago, I didn’t have antivirus software on my computer, but I do now. I pay for it every year to keep my computer virus-free, and I’m glad that I have it because it protects me. Everyone was waiting for this October deadline as if every merchant in the United States who wasn’t compliant somehow was going to be identified and fined. But it doesn’t work like that. People try to create urgency and build up on these deadlines. But when the Security Council backs off or says,“We think maybe mobile is hard so we may take that out of PCI,” doesn’t that undermine the whole purpose of having this ruling? We need clarity that credit card data has to be protected.And, if we just agree at that

“I don’t think that merchants are afraid to spend money… . I didn’t have antivirus software on my computer, but I do now. I pay for it every year to keep my computer virus-free, and I’m glad that I have it because it protects me.”—Paul Sabella level and get that message across, then the ISOs will be able to do their job, the banks will do their job, and the processors will do their job. It moves the agenda ahead. Merchants will pay, the vendors can compete, and then the idea of being PCI compliant will be something more than filling out a questionnaire.

Drew Soinski: As the former owner of an ISO, my main goal was to convert business and I was always on the lookout for new enablers.Today we see processors and acquirers out there that are hanging their hat on security and end-to-end encryption, and they’re moving and converting a lot of business because of it. So it is probably a bit more effective than we’re giving it credit for—the potential is there. The reality is, since security is often an intangible if a salesperson doesn’t believe in it or understand it, or if it’s too complicated to explain, then you won’t move any transactions.There are processors that are moving a lot of business to their platform as a result of their very robust encryption and tokenization product offerings; they all are very, very serious about it and want to offer their merchants maximum choice.At the end of the day, there’s a trickle-down effect—if they’re not promoting security, then their ISOs won’t do it either.

“At the end of the day, there’s a trickle-down effect—if [processors are] not promoting security, then their ISOs won’t do it either.” —Drew Soinski

26 May 2011 | Transaction trends

Sabella: Only the big company actually recognizes the liability. If you are a corporation that has shareholders, then you understand it, and you’re going to mitigate your liability.  And maybe your business decision is to just take the risk and take the fine because it costs so much to upgrade your infrastructure. That’s your decision. But everyone needs to know that there’s no tolerance for the ISO that says you don’t have to worry about that.

QUESTION: Will encryption, tokenization, and card authentication become mandatory? When? Tom Tesmer: I sat on the X9 committee in 1971.And that standard causes track two to look like track two, globally, and track one to look like track one, globally. You could use your ATM card in Paris, Johannesburg, and Brooklyn. That’s an ANSI standard that became an ISO standard. It became a standard of the industry, globally. Until a standards organization along the lines of the standards organizations that created this, the card stripe specification or the ISO 8583 message structures, and all of us at this table sign up to those standards, I don’t know how you can cause significant global change without endorsing and complying with international standards. Karin McNabb: If all of the network carriers can get together globally and provide a standard for how SMS text is going to function, then I would challenge that the payments organizations should be able to do it as well. You need to get the key players, globally, of all of the carrier networks, to come together and agree on something that’s con-

[ FEATURE] sistent. I wholeheartedly agree that if you can get a top-down approach and make it easy and consistent, then merchants have the ability to adopt new technology more easily. They can benefit in a huge value because it’s not complicated for them. And the ISOs then can be given clear information on how to sell the benefits so that they’re not spending huge amounts of time trying to sell something that they don’t clearly understand.That’s a big problem. A lot of merchants aren’t getting the benefit of new technologies because the ISOs don’t fully understand it. There’s no toolkit or a help file that they can take and learn from because things just aren’t consistent.

Kiran Gandhi: You’ve got to have standards to mandate globally. But with risk and mitigation, there really needs to be two parties to that equation—the merchant and the issuer. If there is an investment to change the infrastructure, then they need to agree on how that investment benefits both parties, not just one. The only reason chip-and-PIN came about and is successful in the United Kingdom is that the merchant and the issuers agreed to a fraud-shift model. We’ve got to have both: a standard for what the technology is so that it can be globally available, but also how do we mitigate risk and who’s the beneficiary of it? McNabb: With mobile technologies and the whole concept between should they be NFC enabled or not, it all ended up going right smack dab in the hands of the Feds. There wasn’t one organization that was able to say, “I want to take the lead,” because they were a processor or an issuer. They just weren’t the accepted party. The common fallback seems to be that one accepting party is able to take that lead. Mike Mulcahy: You talk about mobile phones and the mobile industry and how hard it was, but the standard was put together for SMS and texting. It seems like this should be easier. Pull yourself back 10,000 feet: Visa and MasterCard control almost everything.Visa’s got 60 percent of that. So wouldn’t it be easy for them to just say,“This is what you have to do, and this is how you have to do it?” 28 May 2011 | Transaction trends

“There are merchants in our area who were issued terminal types that would accept the chip, but they’ve … put tape over them, and they want to take the mag stripe.” —Karin McNabb

Alan Lubitz: The issue is motivation. Gandhi: We need to understand where Most merchants are motivated by interchange, discount, and chargebacks. They understand those things. The reason why merchants might embrace EMV is simply that they might get a lower interchange rate, and/or they might have lower chargeback liabilities. It’s as simple as that. If Visa and MasterCard said that you had to execute EMV authentication for every card holder but you’d get an interchange benefit—doesn’t have to be a lot, just a little bit, or some sort of chargeback protection— everybody would be ready to implement EMV support.

QUESTION: Is there any indication that the government will get involved and start regulating from the top down? Sarah McCrary: I think that the government is getting more involved, which is not the same as saying that legislation is pending. The Federal Reserve Bank is actively involved in payment network security. We went to a meeting about a year ago to talk about upcoming technologies, like encryption, tokenization, and EMV.And, at the time, I thought these are not coming; these technologies are already here. Also the Federal Reserve Bank is actively driving and organizing in the conversations surrounding the integration of mobile payments and payment acceptance throughout the payment systems. So I don’t think it’s just what you see in Congress and the hearings. The government’s already involved and already looking to help push the industry on. But I cannot predict how that actually ends up in legislation.

the government is coming from. I really think there is a movement afoot in the government to stop the use of credit card fraud and the money the gangs gain to launch terrorist attacks. We work with Secret Service all the time, and there are a lot of examples that they have shared with us. I think that there are two motivations: consumer protection and how the money is used by terrorists.

QUESTION: What do you think are the roles ISO, ANSI, and SEPA should be taking, and should they be more public?

Mulcahy: There, obviously, are standards groups to develop what has to be done. Associations manage it and enforce it. So they’re the forward-facing or the customerfacing part. Depending upon who you’re asking this question to, your answer will be different. If we go back to the majority of retailers, no, it doesn’t matter. It’s whoever is going to enforce that law. And if you go into the other 25 percent of merchants— the Walmarts—they’re going to be directly involved with those guys and setting those standards. The bottom line is: Who is going to enforce it, and what is the standard? I don’t think merchants think about it for a moment. The way this is structured—the way the ISOs are set up to work with the banks, and the banks with the processors, and the processors with the associations—is so convoluted that the government, unfortunately, is probably the only entity that could come in and say,“In order to stop theft or fraud, this is what you have to have as a minimum standard in your

business to protect the consumer.” But, if I’m a merchant running the average 300 transactions a month, do I care? No. I care that if I’m going to invest a penny, then I’ve got to get two cents back. Otherwise, I’m going to put that penny somewhere else. I’m going to buy more merchandise or put a better sign out in front of my store. Bringing people in is my daily concern, not if somebody is going to breach and steal money from a $3 sandwich or $25 average ticket. It has to be an entity that is going to really be concerned about the merchant and, ultimately, the consumer.And I don’t know that that entity exists anywhere in the industry. Card associations have no vested interests.Why would they put billions of dollars into a situation that doesn’t protect any of their assets? Protecting somebody else’s assets is not in their vested interest as a public company, unless that’s part of their charter, and I don’t know that it is.

lot of, I don’t know what you call it, voice phishing. Let’s say you call up your insurance company and accidentally dial one of the digits wrong. Somebody has licensed all the numbers around the 800-number for your insurance company. You hit the wrong number, and somebody answers as Household Insurance Company and says they need to verify some information, which they commonly do with insurance companies. They capture information, just like the Internet phishing. Tim Horton: Consumers have to do the opposite. You get phone calls all the time saying, “This is Capital One,” banking on the fact that you have Capital One. Consumers have to ask, “If you’re really Capital One, what’s my mother’s maiden name?” But, normally, consumers do it the other way around.They give out all this free information.

QUESTION: Beyond credit cards, do you see fraudsters attacking more checking accounts, ACH information? Are fraudsters casting a wider net to get more information?

level, is one of the easiest things to do.With credit cards, you can do simple things like CVV2 and CVC2 validation, or you can add out-of-band voice authentication—there are a lot of things that could be done with authentication. And that’s the first step, in terms of security, to keep the bad guys out of the door.

McNabb: There was an interesting article about check fraud recently. Some company or group of hackers got into millions of checking accounts and somehow managed to remove $9 exactly from those accounts, and then they just disappeared. My understanding was that this particular check fraud was directed at a company that does image archive, and I know how incredibly protected that data is.

Gandhi: We see online banking, e-commerce fraud, even in Europe, with the chipand-PIN.There’s no chip-and-PIN online. It’s still the card number. Fraud is like a water balloon:  You squeeze in one place, it will migrate someplace else. Even if we plug all the holes, and I don’t think it’s not going to happen any time soon, EMV is going to solve this problem in the next 25, 30, 40 years.That’s because it’s not a card decline issue; it’s an infrastructure issue. Lubitz: Outside of credit cards, probably the biggest problem is phishing. There’s a

Lubitz: Authentication, at least at some

Sabella: I’ve seen some increase in my ACH merchant fraud this year. I’ve seen merchants committing fraud on bank accounts, and maybe even having someone supporting them at the bank. McNabb: The FFIC rulings that came out a while ago specifically dictate remote deposit capture. One of the main requirements is that the bank has to be

able to validate, during the audit, that they know their customer and they understand the risk of their customer. They understand the impact that customer might potentially have to commit fraud. But, in some of the alternative banking sectors like check cashing, for instance, they’re not currently covered by FFIC. So you have that opportunity for somebody to take a picture of a check and remotely capture the check.  And, if the check is not defaced, they can go to a check casher, cash the check, and, therefore, commit fraud. What’s interesting is there’s no provision for the bank to be held at all accountable, because the bank at first deposit, of course, gets its money. The check cashers are out of the money.Yet the bank, under the FFIC guidelines, technically, is supposed to know their customers. So they’ve offered that product and that service.Yet, their customer that they, for all intents and purposes, have vouched for, has committed fraud. So there’s a misalignment of guidelines and regulations that don’t ultimately protect the end user or the end customer. In this particular case, it’s this alternative banking sector, which is growing like crazy because of the economy.

McCrary: For me, my phone is an application on my mobile device. It can also be used for mobile payment presentment. I can also collect payment from apps on my mobile device, and I can use SMS to move money around. That operating platform is so powerful, and all of the existing lines of liability don’t necessarily align. There’s a misalignment where just consumers and merchants are able to go with taking check data, credit card data, loyalty account data, prepaid account data.

“The only reason chip-and-PIN came about and is successful in the United Kingdom is that the merchant and the issuers agreed to a fraud-shift model.”—Kiran Gandhi Transaction trends | May 2011 29

[ FEATURE] “...The government, unfortunately, is probably the only entity that could come in and say,‘In order to stop theft or fraud, this is what you have to have as a minimum standard in your business to protect the consumer.’ ” —Mike Mulcahy Soinski: In that mode, the mobile device really obscures or blurs the line between who’s a merchant and who’s a consumer. McNabb: So you’ve got a whole generation of new consumers coming into the fold. They are looking for fast, easy, quick, and they really don’t really understand fraud.They have this underlying acceptance that anything they initiate via their mobile phone, or via the Internet, depending on their age, automatically has to be secure.

McCrary: I think that the concept that younger people maybe think that it’s a secure platform is probably not accurate. It’s just that the risk to them is minimal.They don’t think it’s secure, but they don’t care when something bad happens. Gandhi: If you want to address the fraud, if you want to address the theft, you’ve got to have multiple solutions.And we need to think not only about prevention, but also about preventing redemption, using the information that’s obtained. If we can prevent redemption, then I think, no matter where the fraud migrates, we’re going to have our best solution. QUESTION: In Canada, what happens when the chip is disabled in your EMV card?

McNabb: It depends. Where I live, we were actually a couple of the beta sites. And we were all issued chip-and-PIN cards. And then we went on vacation up north, and that wasn’t a beta site, and we were dead in the water.There was no mag 30 May 2011 | Transaction trends

of the easiest attacks on EMV was terminal substitution. They put a cloned terminal in there.And when you put your chip card in, it would execute a series of commands so the chip would say,“Authen breach, I’m shutting down.”The card chip was doing what it was supposed to do, which was to shut off. It’s unusable, and you have to switch the mag stripe, and you’re getting track one, track two.And they use it all for e-commerce fraud. As long as there’s a mag stripe, there will always be e-commerce fraud.

Gandhi: We have a technology that prostripe, and they refused to do manual entry. So we had to call in to our bank and say,“Listen, you’ve issued us this payment type, and we can’t use it because you’ve only enabled certain parts for this beta test.” A few weeks later, we were issued another card, and it had a mag stripe on the back. But now, there are merchants in our area who were issued terminal types that would accept the chip, but they’ve covered them over. They won’t accept the chip. They put tape over them, and they want to take the mag stripe.

Lubitz: If a certain percentage of merchants are not executing EMV transactions—if they put tape over the chip readers—the acquirer would be fined. With respect to the fall-back mode, that option and others like it are chip specific and are all issuer determined. McNabb: Merchants don’t have to accept chip. If they think that you look like a criminal, they don’t have to accept anything but cash from you. There’s nothing that says,“Thou must accept that person’s chip card or that person’s Visa card.” Sabella: So the issuer can not only control the card at that level, but they can actually control the amounts that you’re allowed to use [on] the card, and if the card has been used online and offline. So there are different authorization limits for stand-in and online authorizations, and the issuer can really lock down their program, or take more risk. Scott Goldthwaite: Early on, one

tects the mag stripe without going to EMV. There is a way to do this, if we have a desire to do so.You can eliminate the fraud.We are doing it right now in the country of Chile. We have absolutely zero fraud.

QUESTION: To have a kind of true best-in-class kind of protected environment, what are the components that would be necessary? Soinski: EMV, chip-and-PIN, point-topoint encryption and tokenization, and getting the data off premise.That is, right now, what the tier one and tier two merchants are looking to do.They don’t want to keep any data at all, encrypted or not. Sabella: But you still need to manage what happens when you swipe that card, notwithstanding using your technology where you’re encrypting the mag. Something is reading that card.At some base level, you’re reading the real data off the card. Gandhi: All of those layers are important, but why not just protect the whole card? Authenticate the card, and do all the things that we’ve said. Now, you have the perfect solution. I think the fundamental thing that we have to do is, no matter how the information is compromised, you have to prevent the redemption. And the only way you can do that is by authenticating the card. Either mag stripe or EMV, both of those technologies allow you to authenticate the carrier of those two technologies. TT Josephine Rossi is editor of Transaction Trends. Reach her at jrossi@


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Reinvention brought the once-thriving Cynergy Data back from bankruptcy and into an even brighter future By Julie Ritzer Ross


lmost from the time of its inception, Long Island City, New York-based ISO/MSP Cynergy Data—founded in 1995 by Marcelo Paladini and John Martillo—rode a wave of success. By 1997 the “support organization for those selling electronic payments to merchant businesses,” as Paladini and Martillo positioned it, had grown from a two-person operation to one with more than 100 employees. Between 1997 and 2002, its sales grew by 510 percent. In fact, a 33 percent sales increase in 2001 landed the organization at number 451 on Inc. magazine’s annual list of the fastest growing companies in the United States. In 2002, New York City’s Hispanic Chamber of Commerce named Paladini and Martillo Entrepreneurs of the Year. Three years later, Cynergy Data once again made the Inc. magazine list, ranking at number 459 based on a growth rate of 295.5 percent. In 2006, the Cynergy Data name appeared on the list once more, ranking number 36 on the publication’s 2006 Inner City 100, a roster of the fastest growing inner city companies in the United States. In 2007,The Nilson Report ranked Cynergy Data number 31 of top U.S. merchant acquirers; in 2008, it moved up to number 25. Additionally, 2007 brought the acquisition of Abanco International’s merchant portfolio and payment gateway services and, the next year, a cooperative agreement with Dejavoo Systems, a valueadded reseller (VAR), to develop point-of-sale solutions. In May 2008, AccuPOS formed an integration partnership with Cynergy Data’s LUCY payment gateway while the ISO/MSP itself was added to Inc. magazine’s 500 Hall of Fame for having been named to the annual Inner City 100 list for five consecutive years. That year, Ernst & Young bestowed on Paladini its Entrepreneur of the Year Award for the New York Metropolitan Area, in the services category. But by mid-2009, the bottom had dropped out. On September 1, Cynergy Data filed for bankruptcy.“Excessive debt and a challenging economy left the company in a position where financial restructuring was necessary,” says Kevin Smith, executive vice president of sales. Two months after the bankruptcy filing, Cynergy Data was getting back on its feet.The Comvest Group, a private investment firm, purchased Cynergy Data’s assets for $81 million and committed to investing $35 million in the business. Martillo had long since

Cynergy Data Long Island City, New York Founded: 1995 ISO Partnerships and Portfolio Size: More than 300 ISOs serving 100,000 merchants Transaction Volume: $1 billion per month

departed the company, but Paladini remains as vice chairman and executive vice president of business development. In the last year and a half, Cynergy Data has rapidly rebounded. It currently maintains partnerships with approximately 300 ISOs serving more than 100,000 merchant locations, is consistently adding to its ISO partner roster, and processes roughly $1 billion in transactions monthly. Chalk it up, says Thomas Tesmer, executive vice president, to a massive—and ongoing—reinvention initiative.

Corporate Makeover While the “former” Cynergy Data had, toward the end of its run, concentrated heavily on servicing merchants and developing its internal sales force, a 360-degree turn away from such a focus comprised the “new” ISO/MSP’s first order of business.“We took a long look, and it was clear that our core competency is in developing, servicing, and providing solutions for ISOs, rather than for merchants,” Tesmer explains.“We adopted a new credo—that our customers aren’t merchants, but are ISOs, and that we are not here to compete with them, but instead to support them in boarding, servicing, and growing their merchant portfolios as well as decreasing attrition.” Accordingly, the direct sales force was eliminated. Management then turned its attention to enhancing the VIMAS ISO management software platform, originally developed in the late 1990s to offer risk underwriting and customer service capabilities to sales organizations that Tesmer and Smith say would otherwise have teamed up with “much larger” ISO partners. VIMAS now facilitates the management of all aspects of ISOs’ Transaction trends | May 2011 31


Startup Stories:

Cynergy Data

payments business. Users can access, update, and maintain the details of their merchant portfolios, viewing data in accordance with numerous pre-set variables or in customized queries and reports exportable to Excel.An online merchant application with a digital signature component allows the boarding of merchants at their locations and gives ISOs an electronic paper trail. VIMAS also lets ISOs set pricing for their sub-offices or sales representatives and control access to the information these parties see; pay residuals in any manner they desire; receive text or email notification of unusual actions and events; and tap into an issues resolution component to determine the status of all issues and questions pertaining to merchant accounts.

Building Muscle Continuing its momentum, Cynergy Data plans several growth initiatives this year—all born of Cynergy Data’s intent to raise the bar in servicing and supporting, rather than competing with, its ISO partners by providing the tools, strategies, and technologies that enable ISOs to differentiate themselves in an array of vertical markets. In January, the company introduced LaunchPad, a program targeted to ISOs that have just signed on with Cynergy Data, and Brand Central Station, which the company positions as a“virtual marketing agency” available to its ISO partners via VIMAS. Under the LaunchPad umbrella, ISOs receive 90 days of personal attention, hands-on training, and assistance, starting with a visit to their office from a seasoned Cynergy Data trainer and senior account executive. “If there is one challenge in reinvention, it’s ensuring we’re giving ISOs what they need and want,” Smith says.“And if there is one thing we’ve learned from this process, it’s that it’s impossible to properly service ISOs without first getting a clear picture of their structure, their requirements, and, most importantly, their objectives. A   visit— in their offices, with all their people, learning about their unique needs and goals—is the best way to really get to know any new ISO.” In the three months following that visit, ISOs are assigned to a dedicated LaunchPad team that includes an account executive, relationship manager, credit underwriter, and risk manager. Brand Central Station provides print and electronic materials, including PowerPoint presentations, sell sheets, direct mail materials, ads, and more, to help ISOs generate leads, cross-sell new prod-

SMART STRATEGIES n AVOID RESTING ON LAURELS. Just because a service or line of

business “panned out” at the beginning doesn’t mean future change is not warranted. n ASK, DON’T TELL. Customers—whether ISOs, merchants, or a

combination thereof—should have a say in programs and products. n BE FLEXIBLE. The more leeway ISO partners have in everything from setting prices to handling residuals, the better.

32 May 2011 | Transaction trends

ucts, and perform more effectively during sales calls. Also part of Brand Central Station is an education component with “training notebooks” for an ISO’s sales representatives, all forms and documents needed to board merchants on any Cynergy program, and responses to common questions about boarding and other procedures. Cynergy-branded promotional items for ISOs to distribute to existing and prospective merchant clients, along with banners for display at trade shows, may be ordered through the Brand Central Station website as well. Cynergy Data also recently broadened its underwriting guidelines and developed a new risk management system to enable it to process transactions for more “nontraditional” merchants, such as travel agencies.“This particular move is a result of feedback from our ISOs who told us they wanted the flexibility to serve the ‘non-traditional’ market,”Tesmer explains. Just as significantly, the company has added several new technologies to its portfolio since the start of the year, including the AIRCHARGE suite of mobile processing products.An AirBLUE Mini hand-held unit connects via a USB cable into retailers’ choice of mobile device, and the suite includes free PCI-compliant software that accommodates payment processing from any cell phone or PDA, including the iPhone, iPad,  Android, and iPod Touch. In conceiving the mobile offering, Cynergy Data partnered with another Comvest partner,AIRCHARGE, a leader in mobile credit card acceptance. To meet demand for a wider range of more traditional payment acceptance solutions, Cynergy Data has also introduced a low-cost proprietary solution marketed under the moniker AccuPOS. It is not a standalone terminal but rather a fully integrated POS system.“Full point-of-sale integration is a direction in which many merchants served by our ISOs and sub-agents want to go,” Smith says.“Introducing an integrated proprietary POS configuration increases merchant stickiness for them, and ISO stickiness for us.” At press time, Cynergy Data was gearing up to exercise the terms of a recently formed partnership with Greenwise Bankcard, an ISO/MSP headquartered in Coconut Creek, Florida. In addition to traditional credit card processing, Greenwise Bankcard facilitates charitable fundraising efforts at the POS within the structure of a revenue-sharing model. Under terms of the partnership, merchants served by Cynergy Data and its ISO partners will be able to collect donations for several dozen charities at the point of sale. Further enhancements of VIMAS, intended to increase ISOs’ sales productivity and efficiency, are scheduled for rollout later in the year. A program to support more effective closing of sales to merchants while bolstering revenues and loyalty is imminent, too. Going forward, Smith also plans to hold annual “Meeting of the Minds” events at which he will seek additional feedback from Cynergy Data’s “best, brightest, and most business-minded” ISOs.“We intend to ask them tough questions—like how we are failing them and what they want to see next,” he says.“We can’t build ourselves in a vacuum; doing so would defeat the entire purpose of reinvention.And reinvention is something we’ll continue.” TT Julie Ritzer Ross is a contributing writer to Transaction Trends. Reach her at


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Making the Grade in Education

ISOs find lucrative alternatives beyond traditional card acceptance services By Julie Ritzer Ross


t’s no secret that the cost of education is sky-high, but many ISOs and MSPs may not realize that the education vertical is becoming a source of revenues. On the college and university side, there’s still an opportunity to bring traditional credit and debit card acceptance technology to campus. “Some college bookstores and dining facilities,” especially smaller ones,“are looking to become more efficient by eliminating standalone terminals and instead integrating payment processing with the point of sale,” says John Farrell, payments director at Logica North America, a Houston-based technology integration and consulting firm that works with colleges and universities. However, with many college and universities already past this stage, new opportunities include “more evolved” alternative solutions, says Farrell.

Prepaid for Students Heightened interest in prepaid card programs is one notable alternative. Students can use a single FDIC-insured card or contactless tag to pay for all on-campus purchases—including tuition, housing, food, and books—as well as for items they buy from participating local merchants. OneCard, offered by the Heartland Campus Solutions arm of Heartland Payment Systems in Princeton, New Jersey, is one example. Colleges and universities can configure the card to integrate with Heartland’s Acceluraid electronic financial aid disbursement solution, which is also available as a standalone system.  Acceluraid enables financial aid disbursement checks to be replaced with student debit cards that satisfy Title IV, Regulation E, and PCI requirements. When integrated with the campus card system, OneCard uses a single account per student, rather than one for OneCard and a second for the receipt and use of financial aid monies. Colleges and universities can also choose to process OneCard transactions via Heartland’s Give Something Back (GSB) 34 May 2011 | Transaction trends

Network, in which the processor returns a varying percentage of the purchase price of each transaction made at a participating retailer and, in certain cases, a matching donation from that merchant itself. While a Heartland spokesperson was unable to quantify the number of colleges and universities with OneCard and Acceluraid in place, she points to a couple of smaller institutions, including College of the Holy Cross in Worcester, Massachusetts, which has 2,900 students, and Hillsborough Community College in Tampa, Florida.

Online Payment Options Also gaining ground on campus are solutions that facilitate online payment of charges and fees. New Haven, Connecticutbased Higher One, a provider of electronic banking services to higher learning institutions, offers the CASHNet suite of products now implemented at more than 600 campuses nationwide, according to Founder/ COO Miles Lasater.The CASHNet ePayment component of the solution allows institutions to accept Web-based payments via credit card,ACH, and/or PIN-less debit and offers students the option to set up recurring payments and designate a checking or savings account for electronic refunds of excess financial aid and other overpayments. CASHNet eMarket allows campus departments to set up and process payments to online stores (e.g., bookstores). Moreover, the “growing popularity of mobile payment technology,” coupled with “a desire to take debit and credit payments without the burden of interchange,” is spurring colleges and universities to “take a second look” at other alternative solutions, says Ben Milne, CEO and founder of Des Moines, Iowa-based Dwolla. The company is currently seeking ISO/MSP partners, touting what Milne calls a low-cost, peerto-peer mobile payments platform. “Dwolla Spots enables users to pull up a map on an Apple Inc. iPhone, click on a participating store’s icon, and make a payment for a purchase using the phone,” he

explains. “No cash, check, or card swipe is needed, eliminating the cost of hardware, card readers, and payment processing networks.The cost to the consumer is 25 cents per transaction—which we feel is very attractive if someone is charging a $10,000 tuition bill and doesn’t want to incur a huge convenience fee—and the benefit to schools is no interchange.”

Lower-Ed Solutions Opportunities in the education vertical aren’t limited to the college and university subsector; the K-to-12 market holds promise as well. Public and private schools alike want the flexibility to collect a variety of fees, including those for meals (prepaid), transportation, extracurricular activities registration, yearbooks, auctions, PTA-sponsored fundraising activities, booster clubs, special events, and “spirit wear,” sources note.“Private schools are also demonstrating an interest in offering parents the option of paying tuition with a credit or debit card,” according to Ted Hardson, president and CEO of Woodstock, Georgia-based ISO/ MSP Vantage Card Services. While it serves other merchant categories, Vantage Card Services has been building the education side of its business in part with special “perks” for K-to-12 institutions. For example, monthly fees are waived during summer months, when most schools are closed. Schools receive assistance with value-adds like the MasterCard Convenience Fee program, which allows participating pre-certified education and government entities to collect a convenience fee for MasterCard transactions conducted in person or via the Internet, telephone, mail, or kiosk, but not with cash, check, ACH, or PIN-based debit. Both elementary and secondary schools qualify for the program (as do junior colleges, colleges, universities, and professional schools). Fees covered include tuition and tuition-related fees, as well as school-maintained room and board. While a portion of public and private K-to-12 schools still limit credit and debit

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ISO Corner VERTICAL MARKETS acceptance methods to swiping cards through traditional terminals, some are beginning to embrace Internet-based payment technology. RevTrak, an ISO/MSP headquartered in Bloomington, Minnesota, began processing credit card payments for school districts, local governments, and other nonprofit organizations in 1998. In 2002, management decided to extend this capability to the Internet, in tandem with the belief that once customers grew accustomed to online shopping, they would also be more inclined to save steps by handling their children’s school fees online, notes David Thorson, president.That year marked the debut of RevTrak Web Store, a solution whereby school districts can collect electronic payments from parents online on their own Web portals.The ISO/ MSP now processes payments for more than 800 Web Store users. Thorson attributes some of RevTrak’s success in the K-to-12 arena to the fact that its solutions interface with other software used by primary and secondary schools. For instance, the ISO/MSP recently developed an interface for the MEALTRACKER Dietary Software application. In addition to managing the planning of school meals and the administration of

school foodservice programs, the software gives parents the ability to check their student’s foodservice balance and make foodservice payments online. Payments are then imported to MEALTRACKER and posted to the student’s account. RevTrak’s solution also interfaces with several school financial and registration management software packages.The ISO/ MSP recently inked a deal with a large school district because its offering would work seamlessly with that district’s existing financial software.The client had previously allied itself with a competitor for online transaction processing, but ended the relationship because that organization’s software didn’t properly integrate with its accounting package. My Payment Network, an electronic payment solutions and service provider in Pittsburgh, uses a similar strategy for marketing its e-commerce software to K-to-12 schools. For several years, it has been forging partnerships with value-added resellers (VARs) and other organizations that promote administrative solutions to clients in the education market. Its partners include 11 companies specializing in content management, accounting/administration, extended learning, and procurement.

To more effectively chart elementary and secondary education waters,Vantage, RevTrak, and My Payment Network alike present a clear value proposition for migrating to at least one mode of electronic payment acceptance. A “K-to-12 Payment Survey” sponsored by My Payment Network, the Association of School Business Officials International, and the National Business Officers Association found that schools spend an average of 345 hours per month—the equivalent of 2.25 full-time employees—managing payments. Based on a salary of $35,000 per year, per employee, this costs school districts about $87,000 annually, says Ann Dunaway, My Payment Network co-founder and vice president of marketing.And 36 percent of survey respondents pay NSF fees of $10 or more per check, or as much as $7,270, and 15 percent, pay $20 or more per check, or as much as $10,095, she adds. “When necessary, pull out the numbers card,” Farrell says. “At least it will induce (administrators) to truly listen—and for ISOs to hopefully” make the grade. TT Julie Ritzer Ross is a contributing writer to Transaction Trends. Reach her at

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ETA 2010-2011 BOARD OF DIRECTORS OFFICERS PRESIDENT Rick Pylant Chairman & President COCARD Marketing Group LLC

Mike Passilla President & CEO Elavon

Gary Goodrich CEO ProPay Inc. Robert McCullen CEO Trustwave

PRESIDENT-ELECT Eddie Myers President & COO Payment Processing Inc.

Jeffrey Sloan President Global Payments Inc.

Diana Mehochko President TSYS Merchant Solutions

TREASURER Roy Banks CEO ACCELERATED Payment Technologies Inc. SECRETARY Tom A. Wimsett Chairman & CEO J&T Ventures

Jeff Rosenblatt President EVO Merchant Services

ADVISORY COUNCIL Tom Bell CEO Bank of America Merchant Services

DIRECTORS Todd Ablowitz President Double Diamond Group

Jan Estep President & CEO NACHA

Debra Rossi Executive Vice President Merchant Payment Solutions Wells Fargo Bank Kurt Strawhecker Managing Director The Strawhecker Group

IMMEDIATE PAST-PRESIDENT Holli Targan Partner Jaffe, Raitt, Heuer & Weiss P.C.

EX-OFFICIO Carla Balakgie CEO Electronic Transactions Association

Sameer Govil Head of Acceptance Solutions Global Aceptance Visa Inc. Steve Carnevale Senior Vice President/Group Head Commerce Development MasterCard Worldwide Ron Shultz Vice President American Express

Donald Boeding President—Merchant Services Fifth Third Processing Solutions

Robert Baldwin President & CFO Heartland Payment Systems Inc.

Gerry Wagner Vice President Discover Financial Services

Chuck Harris President NetSpend

Gregory Cohen President Moneris Solutions Kim Fitzsimmons Senior Vice President—First Data Services First Data Corporation

LEGAL COUNSEL Dave Goch Attorney at Law Webster, Chamberlain & Bean

Chris Hylen General Manager & Vice President Intuit

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Cash Infusions…and More AmeriMerchant delivers working capital solutions that position businesses for success By Kim Fernandez


meriMerchant was born of something of a calamity. Then age 29, David Goldin—a young entrepreneur who’d already started a company, built it up to 50 employees, and sold it to a large publicly traded firm—lost all of the stock from his first venture in the crash of Internet-based companies. He needed to turn his luck around quickly, so he started researching businesses that could thrive outside of the Web. At the same time, he saw a clear need for working capital that could be obtained by small businesses without going to banks. With some thought and work, AmeriMerchant was born in 2002. Since then, AmeriMerchant has provided capital solutions to a wide variety of businesses. The company has been successful for two reasons: Its solutions are flexible and a bit outside-of-the-box, so it works when traditional financing might not, says Goldin, who is president and CEO. A merchant cash advance program—offered both in the U.S. and —David Goldin Canada—accounts for the bulk of the company’s business.AmeriMerchant has deployed hundreds of millions of dollars since its inception, says Goldin, who now employs 80 people in two offices in New York City and San Francisco. “We have a variety of programs that use credit card receipts as a form of repayment,” Goldin says.“We expect that to expand, especially in the current environment. Traditional lending has been difficult for awhile. This lets companies get access to working capital.”

“We’ve never seen a company stay in business that’s lowered its price. And people have to understand that there’s risk involved.”

Flexible Solutions Companies that process at least $5,000 per month in card transactions for at least 60 days, and that process cards at least 12 days out of each month are eligible for the program. Higher credit merchants with credit scores of at least 640 and that have been in business at least two years are eligible for the company’s Platinum Cash Advance Program, which offers up to $1 million in working capital against future sales.Approvals are fast, and such programs are increasing in popularity as traditional bank loans intro40 May 2011 | Transaction trends

duce more restrictions, says Goldin. “We’re in business to help our merchants, not hurt them,” says Goldin. “Our renewal rate is over 70 percent, and our clients are very happy.” In fact, solid partnerships have been instrumental in AmeriMerchant’s success. The company is attractive to ISOs looking for new products to offer their customers. Among those products is the company’s Alternative Funding Program, which provides working capital to businesses with low card transaction volume. Its Money & Marketing program offers capital, but part of that can be used to develop a marketing program or business campaign.“Our clients have access to our in-house marketing staff,” Goldin says.“We’ll put our sales team up against anyone in the industry.They’re very well trained.” AmeriMerchant’s Stock Up Inventory program allows customers to buy inventory with 100 percent AmeriMerchant funding, which can make companies eligible for bulk discounts or discounts for paying cash up front. AmeriMerchant also offers a turnkey marketing program that supplies merchants everything from postcards and menus to custom letters and marketing pieces.All are designed to help increase foot traffic to customers, and are offered with no upfront payment. Everything from design to list aggregation/mailing is done by AmeriMerchant staff. The marketing packages work hand-in-hand with the capital offerings of the company to help build business for its clients, explains Goldin.

Working Model “It’s really cyclical,” he says of the capital business.“We’ve never seen a company stay in business that’s lowered its price. People have to understand that there’s risk involved.” Merchant cash advances have revolutionized lending for businesses, he says, and for good reason. “With traditional loans, the merchants have to make payments regardless of their cash flow that day,” he explains.“The whole beauty of the merchant cash advance is that it works with the merchant’s cash flow.We’ve been doing this for a long time. We know the model and we know the risk, and we’re able to deliver on a very low default rate.” TT Kim Fernandez is a contributing writer to Transaction Trends. Reach her at

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Transaction Trends May 2011  

The official publication of the Electronic Transactions Association