transaction trends

2010

1990

20201010

EmpoweringPayments

for Two Decades

TRANSACTIONtrends

The O� cial Publication of the Electronic Transactions Association | April 2010

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TransacTion trends | April 2010 3

The Official Publication of the Electronic Transactions Association Vol. 15 | No. 4

TransacTiontrends

cover story

14 the Fed takes AimBy Bryan Ochalla

From the newly effective CARD Act and possible“red flag” rules to the potential fallout from the interchange-focused Credit Card Fair Fee Act, 2010 will be a busy year for payments professionals.

FeAtUres

20 rx for Payment ProcessingBy Julie Ritzer Ross

Looking for a vertical with little competition? Dramatic changes in the health-care landscape reveal immediate opportunities for ISOs to deliver specialized offerings required by providers.

24 Welcome to Main streetBy Bryan Ochalla

The ETA Technology Product Showcase demonstrates innovative and workable products ISOs can resell into the marketplace now.

28 special series: startup storiesHalfway Mark By Julie Ritzer Ross

Hear from our three new ISOs as they achieve some initial goals and adjust others.

31 etA Anniversary special: empowering Payments for two Decades A look back at the payments evolution and the people who shaped it.

DePArtMents

5 President’s MessageInsights from ETA’s elected leader

6 Industry newsTrends, strategies, and news in the payments business

10 Iso cornerMaking the case for p-cards

44 risk in reviewThe hazards of cloud computing

54 Ad Index

56 Industry InsiderCynergy Data’s back in business

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Electronic Transactions Association1101 16th Street NW, Suite 402Washington, DC 20036202/828-2635www.electran.org

ETA Chief Executive Officer Carla Balakgie

ETA Director, Communications & PR Thomas Goldsmith

Transaction TrendsPublishing office: Stratton Publishing & Marketing Inc.5285 Shawnee Road, Suite 510Alexandria, VA 22312703/914-9200

PublisherDebra Stratton

Features EditorAngela Hickman Brady

Managing EditorJosephine Rossi

Art DirectorJanelle Welch

Contributing WritersRichard H. Gamble, Bryan Ochalla, Julie Ritzer Ross, Michael Petitti, Robert Cortopassi

Advertising SalesSharon Miro or Fox Associates (800/440-0232; [email protected])

Fox Associates Offices Chicago 312.644.3888 New York 212.725.2106Atlanta 800.699.5475 Detroit 248.626.0511Los Angeles 213.228.1250 Phoenix 480.538.5021

Ad Production/Billing Carrie Wood

Editorial Policy: The Electronic Transactions Association, founded in 1990, is a not-for-profit organiza-tion representing entities who provide transaction services between merchants and settlement banks and others involved in

the electronic transactions industry. Our purpose is to provide leadership in the industry through education, advocacy, and the exchange of information.

The magazine acts as a moderator without approving, disapproving, or guaranteeing the validity or accuracy of any data, claim, or opinion appearing under a byline or obtained or quoted from an acknowledged source. The opinions expressed do not necessarily reflect the official view of the Electronic Transactions Association. Also, appearance of advertisements and new product or service information does not constitute an endorsement of products or services featured by the Association. This publication is designed to provide accurate and authoritative information in regard to the subject matter covered. It is provided and disseminated with the understanding that the publisher is not engaged in rendering legal or other professional services. If legal advice and other expert assistance are required, the services of a competent professional should be sought.

Transaction Trends (ISSN 1939-1595) is the official publication, published monthly, of the Electronic Transactions Association, 1101 16th St. N.W., Suite 402, Washington, DC 20036; 800/695-5509 or 202/828-2635; 202/828-2639 fax. Postage paid at New Richmond, Wisconsin and additional mailing offices. POSTMASTER: Send address changes to the address noted above.

Copyright © 2010 The Electronic Transactions Association. All Rights Reserved, including World Rights and Electronic Rights. No part of this publication may be reproduced without permission from the publisher, nor may any part of this publication be reproduced, stored in a retrieval system, or copied by mechanical photocopying, recording, or other means, now or hereafter invented, without permission of the publisher. Nonmembers, government agencies, $150 per year; single copy, $20. Subscriptions are available for 12-month periods only, at the quoted rates.

The Network Effect

One of the most important accomplishments attained by the Electronic Transactions Association is something you won’t see in any official history or list of ETA milestones. Somewhere between ETA’s

incorporation in 1990 and this month’s celebration of ETA’s 20th anniversary, we became a robust community—a diverse group of companies and people who share a common interest in the payments business and a commitment to making it grow and prosper.

This month, at the Annual Meeting & Expo, we’ll celebrate that commu-nity by convening in Las Vegas. We will do business with one another, renew

acquaintances, confer with colleagues and meet new people in the business.

The term the network effect describes the ETA community perfectly. It refers to the phenomenon that as a network expands, and the amount of activity on the network grows, the value of the network increases exponentially.

Everyone in the industry—every large company, every small company, every sales representative—who

cares about our business and becomes active in the ETA, adds value. But the benefits to all members of the community increase by a far greater amount.

Being active in the ETA and participating in events like the Annual Meet-ing will expose you to hundreds of individuals who share a common experi-ence. But that’s only the start. Those who take part get unparalleled access to information. It informs them about fast-paced legal, regulatory, card company, and legislative developments. Participants share in all the resources ETA has to offer, from industry best practices to technological developments and educational programs. The community amplifies the voice of each member, whether by influencing government actions or improving relations with card companies.

Perhaps the most important attribute of this network effect is that the ben-efits are tangible. They often flow right to the bottom line, helping member companies—and their profitability—grow. There is a reason that the largest payments companies in the world are part of ETA. They participate in ETA activities and contribute to the growth of our community because doing so provides unparalleled value to them.

Without the community that has grown up around the association and the benefits that come from that, we wouldn’t be having this 20th anniver-sary celebration. So if you’re an active part of the community, congratula-tions. You’ve been part of an amazing story. If you are new to the industry or haven’t joined us yet, get involved, and be a part of the story for the next 20 years. The rewards far exceed the investment.

Warm regards, Holli TarganHolli Targan is president of ETA and a partner at Jaffe, Raitt, Heuer & Weiss, P.C.

President’s Message

inDusTrYnews

6 April 2010 | TransacTion trends

Big Number for Mobile Online ShoppingResearchers expect about $119 billion to be spent on goods and services purchased via mobile phones in 2015—about 8 percent of the total e-commerce market.

“Mobile online shopping is reaching critical mass,” says ABI Research Senior Analyst Mark Beccue. “In the United States, mobile online shopping rose from $396 million in 2008 to $1.2 billion in 2009. While definitions of ‘mass market adoption’ vary, a more than threefold increase in one year indicates significant consumer interest.”

However, that number is dwarfed by the size of the mobile online shopping market in Japan, which exceeded $10 billion in 2009 alone. ABI expects the European market to outpace the U.S. by the end of 2010 as well.

“The driver for mobile online shopping in the U.S. has been the recent sharp spike in smartphone adoption and the corresponding enthusiasm for mobile Internet. Also, many more retailers have been launching mobile com-merce Web sites,” says Beccue, noting that in many less-industrialized regions, mobile is virtually the only way to access the Internet.

The firm also reported during the fourth quarter of 2009 an increasing number of consumers visited brick-and-mortar stores to see a product in person, but they used their phones to comparison shop. In addition, trade in virtual goods, generally associated with online gaming, has seen a rapid uptake. Mobile payments are an easy option for online purchases of less than $20, particularly by gamers who are often younger and do not have credit cards.

These moments in ETA’s history are brought to you by Jaffe, Raitt, Heuer & Weiss, P.C.

› In 1994 and 1995, ETA introduced its first industry certification program and video, and in 2002 it partnered with Visa to offer free classes on e-commerce.

› The first ETA University course “Intro to Electronic Processing” was delivered at the 2003 Annual Meeting in Las Vegas. In 2008, “Sales Channel Development” was the first ETAU course deployed online.

20 YEARS ETA Anniversary Fast Facts

This month, the Electronic Transactions Association will unveil a new grassroots ad-vocacy program designed to encourage ETA members to make their views on in-dustry issues known to their elected state and federal representatives.

Named “The Voice of Pay-ments” program, the online effort will offer up information about the latest legislative and regulatory actions could af-fect electronic payments busi-nesses; encourage participants to take action and speak up

on issues that are critical to their businesses and the elec-tronic payments industry; and educate ETA members, govern-ment officials, the media and the public about issues that are important to the survival, advancement, and success of the payments system.

The new grass roots tools will be available through ETA’s Web site at www.electran.org and will be introduced to at-tendees at ETA’s Annual Meet-ing & Expo in Las Vegas.

According to ETA’s CEO, Carla Balakgie, the Voice of Payments

effort will involve the associa-tion’s members in every aspect of its advocacy efforts. “ETA will keep members and others in the industry informed about what’s going on in Washing-ton and state capitals,” she ex-plains. “But we also will rely on members to keep us abreast of what’s important to them and real-life impact of legislation and government regulation.”

The project also will be a re-source to legislators and their staffs, to help them understand how their actions will affect the payments industry.

ETA Launches Advocacy Campaign

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Consumers Crave Digital Coupons In 2009, digital coupons—which include save-to-loyalty-card and mobile promo-tions— dramatically outpaced the growth of their newspaper counterparts by more than 10 to one, according to new informa-tion from Coupons.com.

More than 45 million American con-sumers are using online coupons, up from 38 million in 2008, according to the company.

“For the first time in almost two de-cades the use of coupons increased in 2009, in part due to the growth of digital coupons as more consumers made them part of their shopping routine and more brands tapped them to engage with their consumers,” said Steven Boal, CEO of Cou-pons.com Inc. “We expect the adoption of digital coupons will continue to acceler-ate in 2010.”

Printed savings from the company’s Web site and network exceeded $858 mil-lion last year. This 170 percent increase over 2008 is far more than what the com-pany experienced the prior year. (2008 grew 133 percent compared with 2007.) The company attributes the growth to increased consumer adoption of online printable, save-to-loyalty-card, and mo-bile coupons, as well as increased use of digital coupons by brand marketers, in-cluding manufacturers and retailers.

Fast FactSix in 10 retailers have Pos systems that do not support customer-specific promotions (down from 72 percent in 2008).

Source: National Retail Federation

The market for mobile phone-based au-thentication products and services is set to grow significantly over the next five years, according to a new analyst report from London–based Goode Intelligence.

The firm predicts about 3 million peo-ple will have mobile phone-based authen-tication products and services in 2010, and that figure will grow to more than 20 million users by 2014.

“The mobile phone gives financial services companies incredible flexibility; the mobile phone can be used to provide strong two-factor authentication into all financial channels, including physical and virtual, and also provides an excellent method to verify financial transactions, including payments,” says Alan Goode, Google Intelligence founder and author of the report.

“The same technology that is being used to successfully authenticate finan-cial services customers using their mobile phones can also be adopted to provide an added level of verification to secure finan-cial transaction and payments. This type of technology is increasingly important

to financial services companies and their customers in the prevention of more so-phisticated attacks.”

Other findings from the report:• The growing adoption of smartphones, the iPhone, and Google’s Android device, for instance, by corporate and personal users will drive the market for soft-token one-time password (OTP) deployments.• Short-message service (SMS) OTP products and services will be the fastest growing area for mobile phone authentication in the next one to two years and will be aided by mobile carriers changing their SMS fees to reduce the cost of receiving SMS text messages.• The total number of mobile OTP us-ers (both SMS OTP and soft-token OTP), as a percentage of the total OTP market (both hardware token and software), will increase from 12 percent of the market in 2010 to 61 percent of the market in 2014.• By 2014, almost 114 million unique us-ers globally will generate nearly $760 mil-lion in revenue for technology vendors involved in products and services that enable the mobile phone to become an authentication device.

Mobile-Based Authentication to Grow 566%

inDusTrYnews

70

60

50

40

30

20

10

0

2006 2007 2008 2009 2010 2011 2012 2013 2014

100%

80%

60%

40%

20%

0%

2528

32

38

42

46

50

54

58

31%34%

38%

44%48%

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Actual (smoothed)

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ions

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.S. H

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Source: Javelin Strategy & Research

online P2P transfers 2006-2014

DETROIT • SOUTHFIELD • ANN ARBOR • NAPLES • JERUSALEM

Asset Saleto Yapstone, Inc.

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Stock Saleto PowerPay, LLC

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As with consumers, corporations have developed a strong liking for using Visa, MasterCard, and

American Express cards for more of their procurement, which means that larger transactions are showing up as card pur-chases. It’s a market that even aggressive feet-on-the-street ISOs have largely ignored.

Consider one law firm whose clients paid for services with corporate purchas-ing cards. The firm used a terminal for high six-figure transactions and paid more than 3.5 percent in interchange, reports Aaron Bills, chief operating officer of 3Delta Sys-tems Inc. in Chantilly, Virginia. The firm switched acquirers when alert salespeople showed officials how to get a 1.2 percent interchange rate. Now, they are saving 230 basis points on a lot of money by qualify-ing for interchange breaks for large trans-actions and for reporting Level 3 data (line item detail).

“They saved over $1,000 on their first transaction, which was for more than $50,000,” Bills reports.

No doubt p-card-driven business-to-business transactions are lucrative and a lot less saturated than the familiar world of consumer-to-business transactions. How-ever, going after this market can be a mixed bag for ISOs.

The RewardsThe commercial payments sector is largely untapped for card payments, according to consultant Ali Raza, executive vice presi-dent of Speer & Associates in Atlanta. “It’s a high-growth, high-potential market,” he says. “It’s still dominated by paper check payments. Both Visa and MasterCard are clearly seeing this as an area of opportunity.”

“B2B is good for ISOs looking to ex-pand,” Bills insists. “Salespeople drive across town to call on a new store or restaurant, passing industrial parks full of merchants that they are not calibrated to see.”

3Delta Systems, a provider on the mer-chant side of the p-card market, is getting calls from ISOs that “feel punished in to-

day’s consumer retail space, where busi-nesses are closing, sales are down, and consumers are cutting back, partly because issuers have clipped their credit limits,” Bills reports. “P-card volumes are not shar-ing in that decline.”

B2B also is more profitable because those merchants “work closely with you over the years and tend to stay with you if you work hard for them,” says Diane Mer-rigan, B2B specialist at Heartland Payment Systems in Princeton, New Jersey.

Charge Card Systems, an ISO in Boca Raton, Florida, recently entered the p-card supplier ranks and has boarded its first sup-plier. “We wanted to provide our agents with opportunities beyond knocking on doors of retail merchants that see so many salespeople they get numb. P-card suppli-ers represent vast potential,” says Adam Moss, vice president for sales. “Now sales-people can go to merchants that want to hear about solutions, not price, and wel-come a consultative approach. It gives them a chance to break out of the pack.”

A small retail store may do $10,000 or $20,000 of transactions in a month. A B2B merchant might do hundreds of thousands, Moss points out. “Our profits are based on

volume, and B2B merchants have volume.”The key to supporting such business,

Moss reports, is having the right partners. “We sign them up and turn them over to 3Delta, which has a lot of experience,” he explains. “They provide a gateway that con-nects merchants to First Data, our proces-sor, and First Data is set up to handle Level 3 data.”

Small-dollar p-card purchases started years ago and are showing modest growth, Bills reports. What’s new is a push to take purchases requiring purchase orders and approval of invoices before payment is au-thorized, sometimes by providing a card number to the supplier at the end of the approval process. This move to high-ticket card purchases has pushed the average p-card transaction size from around $650 to around $1,300, with approved invoice transactions often in the six figures, he notes.

The ObstaclesB2B card commerce is no secret, and there are reasons that most ISOs haven’t pursued it. Heartland has been active in the B2B space for 12 years, but that business line remains relatively small. That’s because “it

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B2B: Worth the Effort?As p-card programs expand, more suppliers accept card payments. It’s good business if you can get it.

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takes a lot of work and a different customer sales structure,” Merrigan says. “It’s not for everybody. It’s a long sales cycle. The pros-pects are harder to find. You’re dealing at a corporate level, and customer service can be intensive. This is not a quick-sale busi-ness, and that turns off some merchant level sales reps.”

Identifying prospects, however, may be the greatest impediment. The world’s larg-est procurement operation is the U.S. gov-ernment, and Uncle Sam requires most sup-pliers to accept p-card payments for large and small transactions, so government sup-pliers are an obvious target. That’s because there are so many of them, because volume can be high, and because these suppliers can be identified relatively easily. “You can go to a government Web site and see a list of suppliers. It’s public knowledge,” Mer-rigan points out.

Finding suppliers taking corporate p-card payments is harder because they are not listed on a public Web site, Merrigan explains. “The banks are keeping most of

that business for themselves,” she says. It’s probably not worth the effort to try to cultivate a relationship with p-card issuers like USBank, JPMorgan Chase, or Bank of America to sign up the suppliers of their p-card clients, she suggests.

But an ISO could survey the merchants in its portfolio to determine which of them lack corporate purchasing card programs and would be interested in considering them. Then the ISO could approach an issuer and offer to make introductions in return for getting a crack at the merchants’ suppliers.

The best approach, Moss suggests, may

be to focus on businesses such as law firms, accounting firms, printers, trucking compa-nies, janitorial services firms, and landscap-ing firms that primarily serve businesses, he reports. And don’t overlook trade associa-tions that represent such businesses. “We love trade associations,” he adds.

Delivering service is no cinch either. These merchants want solutions that inte-grate into their POS systems, and the larger ones have ERP systems in which a mer-chant processing solution would have to be embedded, says Greg Cohen, president of Moneris Solutions in Chicago.

“A salesperson would need to partner with a gateway or middleman to round out the service offering a B2B merchant would expect,” he adds. The best approach is not simply to supply Level 3 card processing but to offer a “full processing suite that en-compasses all types of payments,” he says.

Ideally, a sales organization would part-ner with a p-card issuer since this business is largely issuer driven; the issuer sells a procurement operation a p-card program and then goes after a list of suppliers to get them to accept the card, Cohen explains. “The payment gateways are doing an ex-cellent job, but they need sales channels.”

Data security can be another hurdle. In the p-card world, buyers often want to use the card-on-file model, which means that suppliers have to store sensitive card data, raising the stakes for PCI compliance, Bills points out. “The more you store, the big-ger your exposure and potential liability and the bigger your compliance burden under PCI,” he notes. The solution, he says, is tokenization and outsourcing storage of the sensitive real data to a provider with robust security rather than forcing mer-chants to build security fortresses around their stored data and go through a lot of PCI compliance.

B2B is a major niche that is “showing tremendous growth and is still under-served,” Cohen concludes. “As more cards are issued, buyers need more suppliers to accept card payments. If a salesperson has the fortitude and patience, the profit margins are higher and the merchants are stickier.” TT

Richard H. Gamble is a contributing writer to Transaction Trends. Reach him at [email protected].

ISO COrnerISO COrner

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By Bryan Ochalla

From the CARD Act to IRS reporting requirements,

federal legislation trickles down to payments space.

Are you ready?

[ COVER STORY ]

The FedTakes Aim

If 2008 was the year that Congress, for the first time, “took an action that injected the U.S. government into the payments process,” then 2010 is the year those ac-tions will affect companies in the payments space, according to ETA Director of Government and Industry Relations Mary Bennett.

Case in point: The American Housing and Rescue Foreclosure Prevention Act, which was signed into law in July 2008 and goes into effect at the end of this year, and the Credit Card Accountability, Responsibility, and Disclosure (CARD) Act, which was signed into law last May and went into effect in late February.

But that’s not all. Other on-the-horizon pieces of legislation and regulation—such as the on-again-off-again “red flag” rules associated with 2003’s Fair and Accurate Credit Transactions Act and whatever bill follows in the footsteps of the interchange-focused Credit Card Fair Fee Act of 2008 and 2009—are sure to affect the electronic payments space.

“It could be a very busy year” for payments professionals, says Marc D’Annunzio with the Siavage Law Group in Atlanta.

CARD Act FalloutThe CARD Act, which restricts an issuer’s ability to charge late payment fees, raise in-terest rates, unilaterally change cardholder agreements, and adjust payment due dates,

KE Y NOTES8 Some say the CARD Act may

lead to higher fees and rates for consumers as well as fewer cards in circulation, while others suggest it may be less impactful.

8 New housing rules requiring acquirers and ISOs to obtain a merchant’s TIN add a new layer of reporting and thus operating expense.

8 The thrice delayed “red flag” rules—now with implementation set for June 1—may be delayed again.

8 While new interchange legislation isn’t likely in 2010, it certainly isn’t going away.


went into full effect February 22 (a few provisions were enacted Aug. 20, 2009) and could be the first piece of legislation to impact acquirers and ISOs in 2010.

Although the legislation was aimed at issuers, “its effects could trickle down through our businesses, from top to bot-tom,” says Bennett. The act removes risk-based pricing from an issuer’s arsenal, which Bennett says is likely to lead to “in-creased costs for consumers in the form of annual fees or higher rates.”

The CARD Act also could lead to a reduc-tion in the number of credit cards in circu-lation as a result of “issuers deciding some consumers are too risky to give cards to,” she adds. Those two things taken together “could well mean fewer cards in circula-tion, which would affect everyone in the chain of this business.”

Although the obvious effect of the CARD Act is that “it’s going to make it harder for cardholders to get credit and it’s going to make it harder for issuers to make revenue in the numbers they used to make,” its ef-fect on acquirers and, in turn, ISOs, is “a little less clear,” suggests D’Annunzio. “From a short-term perspective, we’re probably going to see a bit of a dip in the overall transaction dollars that would have gone on cards had there not been an economic downturn [as a result of the CARD Act], but at the same time I don’t think it is going to squarely affect acquirers and ISOs unless it results in a lot fewer people with cards and those people decide to put a lot less on those cards. But I don’t see anything to suggest that that’s happening.”

Todd Ablowitz, president of Denver-based Double Diamond Group, agrees, saying that “if issuers reduce availability of credit because issuing is less profitable, it would be a natural consequence that it might affect acquirers.” But in general, he believes the CARD Act “is going to change issuer dynamics, but it’s not going to re-verse the trend from cash to electronic pay-ments. So those who are not overleveraged


Until Congress added verbiage to the American Housing and Rescue Foreclosure Prevention Act requiring acquirers and ISOs to report to the IRS the card transactions of each of its mer-chants, it had never “injected it-self into the payments process,” says ETA’s Mary Bennett.

But Congress isn’t through injecting itself into the industry. Lawmakers and regulators “are paying a lot more attention to this industry than they did five or 10 years ago,” says Marc D’Annunzio with Siavage Law Group. “That attention and, as a

result, legislation and regula-tion aimed at this industry, is only going to increase in the years to come.”

Although Bennett says ETA has, historically, “played defense” when it comes to combat-ing legislation and regula-tion aimed at the payments industry, it recently went on the offense by releasing a policy position on data security and breach notification.

The policy position (see www.electran.org/docs/gr/2009DataSecurityPolicyPosition.pdf)

asserts that the association “strongly supports industry self-regulatory efforts for the protection of cardholder data.” However, it also asserts that “in the area of government regulation, ETA believes that a uniform national standard for data security and breach notification with respect to Personal Financial Information would best balance the rights of consumers to be notified of a breach when the secu-rity of their Personal Financial Information is truly at risk, while minimizing the compliance and legal risk to businesses.”

“In the case of data security, there has been so much local and state legislation, and it has created a patchwork set of rules across the country,” says Todd Ablowitz, president of Double Diamond Group.

In particular, the creation of a uniform, federal standard for data security and breach notification would be beneficial for those in the payments space “because it would give us a standard set of rules to live by,” he adds. “I think there are very few, if any, stakeholders that would be against that.”

20 YEARSA Brief History of Advocacy

[ COVER STORY ]

©2010 Moneris Solutions®

Congratulations ETAon Twenty Years of Leadership!

THANK YOUfor being a voice for the

Electronic Payment Industry.

C

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establish “red flag” rules requiring financial institutions and creditors to develop and implement written identity theft preven-tion programs.

The implementation of those rules has been delayed three times since they were finalized in 2007 because the FTC “recog-nizes the difficulty of getting all different kinds and sizes of companies to be in com-pliance with that reporting construct,” says Bennett.

As of press time, the rules are set to be implemented on June 1 of this year, though D’Annunzio admits he wouldn’t be sur-prised if that implementation was delayed once again.

Interchange Still Alive Another on-again-off-again legislative and regulatory issue that is likely to show its face in the payments space in 2010 in-volves interchange. Although bills dealing with interchange—in the form of the Cred-it Card Fair Fee Act—were introduced in Congress in 2008 and 2009, neither made it out of committee.

But Bennett doesn’t expect the issue to go away anytime soon. “As long as merchant groups devoted to reducing the amount of interchange they pay continue to lobby Congress and get bills introduced, the is-sue will be kept alive.” That said, she doesn’t think the issue is a priority for most mem-bers of Congress. “I don’t think it’s on the top 10 list of the House and Senate finan-cial services committees. I don’t see both houses passing it into law in 2010.”

D’Annunzio agrees, but adds that it’s not going away. “It’s starting to attract the attention of consumer groups as well as merchant groups. It seems like the conver-sation is beginning to shift and if consumer groups get involved and increase visibility on that side of coin, I think it could provide an additional push to get something passed.

“The legislation that was introduced in 2008 and 2009 had a fair amount of flaws, and there are a lot of things that would have to be done to make it more palatable to everybody, but I don’t think the topic is going to go away,” adds D’Annunzio. In fact, I wouldn’t be surprised if it popped up again this legislative session.” TT

Bryan Ochalla is a contributing writer to Transaction Trends. Reach him at [email protected].

IRS system, for example, as “Jones and Son Inc.,” while the merchant fills out the form with the ISO as “Jones & Son Inc.” and a mismatch occurs. “So the big message to ISOs is that they not only have to get the numerals of the TIN, but the name under which the TIN is registered.”

Ablowitz, on the other hand, says that while “it’s an irritant to have to [report your TIN to the IRS annually], I don’t think it moves the needle.”

“It basically imposes an additional oper-ating expense on acquirers to do the busi-ness that they’ve already been doing,” adds D’Annunzio.

“Red Flag” RulesOne of the big question marks coming into 2010 was whether the “red flag” rules as-sociated with the Fair and Accurate Credit Transactions Act would finally be imple-mented. When the act was passed into law in 2003, it directed the Federal Trade Com-mission and federal banking regulators to

and who can manage through growth that is flatter than it has been in the past will be fine because paper will continue to go to electronic.”

Merchant-Reporting ReduxNext in line: The American Housing and Rescue Foreclosure Prevention Act, which requires acquirers and ISOs to report to the IRS the card transactions of each of its merchants.

Bennett suggests the act will have a “big impact” on acquirers and ISOs because if, while boarding, signing, or processing a merchant, they don’t obtain that mer-chant’s correct, valid tax identification number (TIN), it can trigger a back-up withholding of 25 percent, something that “would be pretty brutal for any business. Every ISO, every salesperson going to sign a new merchant, has to get the correct TIN and has to get the correct name that the TIN is registered to,” she adds. She’s heard numerous stories of a TIN being in the

ETA Annual Meeting & ExpoMay 10 – 12, 2011 San Diego, CA

Save The Dates

Where the Payments Industry Connects!


By Julie Ritzer Ross

Rx

[ FEATURE]

Payment Processing

for


Changes in the health-care payment landscape, spurred by consumer preference, legislation, and

business conditions, signal ISO opportunities

While recessionary conditions and other factors are precipitat-ing change in myriad industries, health-care

ranks among those most affected. “‘Shift’ probably isn’t a strong enough word; if any-thing, it’s a seismic shift,” says Mary Dees Griffith, president and COO of Preferred Health Technology Inc. in Dallas.

To reduce the cost of health insurance coverage, many employers and individu-als are selecting consumer-directed health plans (CDHPs) or high-deductible health plans (HDHPs) that allow providers to be paid for their services only after patients have remitted the applicable deductibles. Some patients are electing to forgo insur-ance entirely.

“The end-result here is a worsening of the financial situation of most health-care providers, which by most estimates are now only being paid roughly half of what they are owed,” Dees Griffith asserts. She cites a study by research firm Celent, which estimates each provider location in the U.S. will be responsible for collecting $317,000 from patients in 2014. Assuming that the current patient self-pay bad debt levels of 40 percent to 50 percent remain stable in a market with rising deductibles and copays, the study says, this equates to $158,500 in bad debt per location.

Such changes in the overall health-care landscape clearly are not good for provid-ers, but they bode well for ISOs. While the market as a whole is rife with generic pay-ment processing solutions and services, few players have ventured heavily into the health-care arena or found applications de-velopment partners to configure the spe-cialized offerings required by providers. “If an uncrowded vertical segment is what ISOs seek, this is the one to consider—and now, rather than later,” Dees Griffith asserts.

Positive PrognosisInefficiencies in payment collection sys-tems currently used by physicians, clinics, and hospitals also contribute to a posi-tive health-care opportunities prognosis for ISOs, because they render solutions that address providers’ payment pain ever more appealing. Under the new “system,” health-care providers can’t determine what patients owe until after insurers’ network discounts have been reflected. Payments from patients come in slowly, with provid-ers typically waiting 60 to 90 days or lon-ger to receive payment, “if they arrive at all,” Dees Griffith asserts.

To further complicate matters, patients are often in the dark about their financial obligation. Individuals with insurance cover-age generally have to guess whether they’ve met their deductibility requirements.

“Under this very real scenario, physicians and hospitals typically collect only about 50 percent of the balance due from insured patients, and only 10 percent to 20 per-cent of the balance from self-pay patients,” notes John Grubmuller, vice president, government health and human services for Atlanta-based First Data Corp. “Across the health-care sector, this dismal response re-sults in almost $60 billion of bad provider debt each year.”

At the same time, payments administra-tion accounts for a staggering 15 percent or more of U.S. health-care costs, according to “Overhauling the U.S. Payment System,” a report by McKinsey & Co. analysts Nick A. LeCuyer and Shubham Singhal. Bill, pay-ments, and processing expenditures, cou-pled with bad debt and other transactions, total more than $300 billion annually. Such expenses are so high in part because 60 percent of these transactions are executed using manual methods, and an estimated 80 percent of payments remitted to providers in 2008 were paper-based.

“The cost to process a manual claim and issue a paper check is almost $9” apiece, Grubmuller asserts. “By comparison, the cost of generating a payment using an au-tomated process averages about 80 cents per claim. These costs can be significantly reduced through the use of proven pay-ment technologies and processes.”

Cure for Business IllsHowever, industry players wishing to capitalize on opportunities in health-care payment processing face significant chal-lenges. Notably, although it is not uncom-mon for ISOs to ink deals with merchants immediately after the first sales call, suc-cessful boarding of health-care providers can take weeks or even months, depending on the size of the practice. ISOs and the solutions/services they propose must first win the approval of an office manager or administrator before being vetted by the practitioner or practitioners in question. Administrative personnel generally func-

KE Y NOTES

8 The cost to process a manual claim and issue a paper check is almost $9, while the cost of generating a payment using an automated process averages about 80 cents per claim.

8 Health-care providers are beginning to understand the need to implement “retail-style” collection methods, as the bulk of responsibility for health-care expenditures shifts to consumers.

8 Health-care processing has multiple components, and while payment processing isn’t the part getting the most press, it offers a proven solution to address the 15 to 20 percent of health-care expenditures dedicated to administrative processes.


tion as gatekeepers for their employers, so getting their attention and support often requires an intimate knowledge of how most health-care practices operate on a day-to-day basis, sources assert.

In promoting solutions and services tar-geted toward this segment, ISOs also need to consider that providers are now under-standing the need to implement “retail-style” collection methods, as the bulk of responsibility for health-care expenditures shifts from their shoulders to consumers.

“Admittedly, the presence of third-party payers in the mix prevents a complete transition to a true retail payment environ-ment in health care, wherein the entire bill is handled upfront through one payment vehicle or another,” Dees Griffith says. “Nev-ertheless, with more money coming out of patients’ pockets, there will definitely be a shift to ‘retailish’ health-care payment tech-nologies that support transparency, speed, and collection/payment assurance.” Com-ponents of these systems, some of which are already available in the marketplace as part of revenue cycle management (RCM) applications, include:• Tools for determining service eligibility

and estimating patient costs in real time, much as point-of-sale systems tally up the whole of consumers’ purchases. Ad-ditionally, just as merchants’ POS systems interface with other applications, such as accounting and inventory, these tools are integrated with patient scheduling and/or registration modules. They also take into account patients’ remaining deductibles and out-of-pocket payment maximums.

• Real-time claims adjudication capability. • “Account on file” functionality that au-

tomates the processing of payments for which patients, rather than insurers, are responsible. Transactions may be ex-ecuted via a credit or debit card, bank ac-count, or tax-advantaged account (flexible spending account) selected by a given patient.

• Provisions for patient financing, includ-ing credit scoring and/or automated installment plans (i.e., configuration, calculation, and billing/debiting of the appropriate account on file).

• Electronic bill presentment and payment via e-invoices, patient portals, or online bill pay.

• Automated customer relationship man-

agement (CRM) and messaging capa-bility across patient collection process steps. Examples include sending patients information pertaining to pre-visit cost es-timates, regular and installment payments due, and payment receipt verification.

• Automated payment reconciliation and posting via electronic payments coupled with billing information.

Booster ShotSome experts believe health-care reform under the American Reinvestment and Re-covery Act of 2009 will lead to additional enhancements in health-care payment sys-tems. The act allocates approximately $20 billion in funding for health-care informa-tion technology. While the most significant portion of these monies has been allotted for the launch of an electronic health rec- ords system, a portion of the funds can be used to develop a higher level of electronic eligibility assessment and claims transac-tions functionality, Grubmuller purports.

Real-time verification of eligibility and claims adjudication are currently compli-cated by the fact that there currently is no all-inclusive automated procedure for eli-gibility determination, claims adjudication, and payment processing, the executive explains. For the most part, providers and insurers alike use proprietary disjointed processes, many of them manual. Even with

[ FEATURE]

existing automated solutions, it is not al-ways possible to obtain an accurate assess-ment of eligibility and patient fees owed.

“The vision for a reformed health-care payment processing system,” Grubmuller says, incorporates the implementation of “a consolidated ‘hub’ for transactions, like verification of eligibility and adjudication of claims.” Accessed in providers’ offices via personal cards or tokens presented by patients upon check-in at each visit, the “hub” would be used by all providers and all payers in a collective system, i.e., within a state or even at the national level. Such a “hub” does not exist today, but creating one has become a key health reform initiative already undertaken by a number of states, among them Vermont.

Additional fallout may come from the federal level. In September of 2009, the Senate Finance Committee unveiled a com-prehensive health-care reform framework containing several proposals for improv-ing quality of care, reducing costs, and fi-nancing expanded coverage. Among such proposals is the establishment of a $10 bil-lion innovation center at the Centers for Medicare and Medicaid Services (CMS). The center would have the authority to test new provider payment models and expand successful programs into the Medicare side. A second proposal centers on the develop-ment of a voluntary pilot program wherein hospitals, physicians, and post-acute-care providers could achieve savings through collaboration and coordination on the Medicare payments front.

“Health-care processing has multiple components, and while payment process-ing isn’t the part that’s getting the most press, it offers a proven solution to address the 15 percent to 20 percent of health-care expenditures now dedicated to adminis-trative processes,” Grubmuller says. “Key stakeholders believe positive results in pay-ment processing reform can be achieved by 2012. With consideration for putting together the technology, the streamlined processes, the legislation, and the funding, significant health-care payment processing reform can be a reality within just a few years.” TT

Julie Ritzer Ross is a contributing writer to Transaction Trends. Reach her at [email protected].

“With more money coming out of patients’ pockets, there will definitely be a shift to ‘retailish’ health-care payment technologies that support transpar-ency, speed, and collection/payment assurance.”

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A s important as it is to gaze into the proverbial crystal ball from time to time and ponder all of the bleeding-edge tech-nologies that may or may not be coming down the payments pipeline, it’s just as

important—if not more so—to take stock of the industry’s current technological offerings.

After all, as nice as it is to dream about the former, mer-chants—and, thus, the ISOs that serve them—are looking for real, tangible examples of the latter to meet their needs today.

That’s exactly what attendees of ETA’s Technology Prod-uct Showcase will experience, according to Sarah Owens, vice chairperson of the ETA Technology Committee and vice president of business development at Atlanta-based First Data. After all, ISOs “want to see innovative technolo-gies that they can use to drive sales and increase profits,” she says.

By Bryan Ochalla

ETA’s Technology Product Showcase shines a

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The Technology Product Showcase takes things a step further by demonstrating to attendees how those technologies can be used in actual merchant environments, adds Tom Tesmer, chairperson of the ETA Technology Committee and chief technol-ogy officer at Pipeline Data Inc. in Atlanta. “Our goal is to show potential customers—with the typical potential customer being an ISO that’s looking to buy a cutting-edge product it can resell into the marketplace—that these products and services are real and workable,” he explains, “as opposed to being so strategically futuristic that they’re still only a gleam in someone’s eye.”

Building Main StreetThus, ETA has recreated Main Street, USA, right on the Annual Meeting exhibition floor. Walk along the street and you’ll see an average person’s home, a restaurant, a beauty salon, and a boutique retail location.

Two or three vendors will showcase their wares in each environment. For example, the area that will be set up to look like an average person’s home will show someone ordering a product over the phone—show-casing Planet Payment’s Shop BuyVoice so-lution—as well as someone delivering that product and accepting payment for it—showcasing PAYware Mobile, VeriFone’s iPhone payment application.

The area set up to look like a restaurant will showcase, along with First Data’s Pay-ment Essentials solution, Hypercom’s Op-timum M4240 portable payment terminal by demonstrating how a waiter can bring a payment terminal to the customer to pay his or her bill, including a tip, with a credit card. “By bringing the terminal to the cus-tomer, the card never leaves the cardhold-er’s possession, which will greatly reduce skimming fraud in restaurants,” says Stuart Taylor, vice president of global marketing at Hypercom. “Additionally, the customer-con-trolled payment process can speed up the payment process, which greatly increases table-turns for busy restaurants. With pay-ment portability, restaurants can expect higher revenues during rush hours and bet-ter guest experiences from quicker service and greatly improved cardholder security.”

American Bancard’s TouchSuite system, which allows checkout from multiple mer-

chants, will be one of the products, along with the Ingenico IPA 280 Payment PDA, showcased in Main Street, USA’s beauty sa-lon. “In the salon industry, half of the salons are ‘renter shops,’ which means that each stylist is his or her own company and gen-erally maintains his or her own merchant account to accept credit cards,” explains Sam Zietz, president/CEO of Boca Raton, Florida-based American Bancard.

If a client goes to a salon and has mul-tiple services—has her hair cut by stylist A, has her nails done by stylist B, and buys some product on the way out—tradition-ally this would require multiple payment transactions, he adds, as each stylist would have to charge independently for his or her service (resulting in three separate card swipes and receipts, in this instance).

“With the patent-pending process we have developed, each charge is listed on the checkout screen, one receipt for all services and products is printed out, the client’s cred-it card is swiped one time, and the system automatically settles each service/product to the appropriate merchant account simul-taneously. One credit card receipt is printed out for signature,” Zietz says.

The boutique retail portion of the Tech-nology Product Showcase will also shine a

[ FEATURE]

light on SoundPOS’s Virtual Electronic Cash Register (vECR) and USA ePay’s PaySaber (SBR-1000), a full POS software and hard-ware solution for iPhone/iPod Touch.

Cashless Moves CloserThe products and services showcased on Main Street, USA, also showcase the ever-broadening spectrum of environments where plastic is accepted, according to Tesmer. “We’re rapidly, as a society, moving toward a cashless society,” he says. Although the capability for such a society already is in place, “it is a matter of endorsing it, embracing it, and pushing it downward, which is what we in the payments space are doing.”

That will be plainly evident to Technol-ogy Product Showcase attendees, as the products and services set to be demon-strated at the event prove that “payment by plastic offers an ever-broadening conve-nience for consumers,” Tesmer says. “And as that convenience continues to evolve, the requirement for carrying cash will become rarer and rarer.” TT

Bryan Ochalla is a contributing writer to Transaction Trends. Reach him at [email protected].

The Evolution of POS TechnologiesPoint-of-sale technologies have come a long way since the days when merchants com-pared customers’ credit card numbers with information in printed bulletins to determine whether they should accept or reject card transactions.The evolution of these technologies seems to have increased in speed exponentially in the last 10 years. A decade ago, explains Tom Tesmer, chairperson of the ETA Technology Committee and chief technology officer at Pipeline Data Inc. in Atlanta, “it was uncommon for people to get paid via a prepaid card. Today, it is not uncommon at all.”

Another example can be seen in the transportation industry. In particular, “it used to be you had to carry cash if you wanted to take a cab since they refused plastic,” he adds, “but five, six, seven years ago they began to accept it. Today, it’s a requirement; you can’t find a cab in New York City that doesn’t take plastic these days.”

Unsurprisingly, Tesmer expects the evolution of POS technologies to continue in the coming years. During the ETA Annual Meeting in 2008, he says, he led a presentation on bleeding-edge, cutting-edge technologies. “One of my slides featured a guy who had inserted in his wrists tiny identification tags that were about the size of half of a straight pin,” he says. “I don’t know if or when that kind of technology—or biometric identifica-tion technology, for instance—is going to become commonplace in the payments space, but it’s clear that things will continue to change going forward.”

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Startup Stories: A special series following three newly launched ISOs (6th installment)»

When Transaction Trends began following three ISOs six months ago, one of the first questions we asked this select group of entrepreneurs was what goals they had set for their companies. Today, some of their objectives have indeed been achieved, but

others have been refined as new lessons are learned and different challenges enter the mix.

“With our reseller program and large merchants, our revenue goals are now more aggressive,” says Richard Davis, founder and executive vice president of Express Transact. “The focus is no lon-ger solely on number of set-ups, but on a combination of quantity and quality.”

Express Transact has attained several of the objectives set at its inception, most notably to convert more than 10,000 merchants to its proprietary e-commerce platform by its first anniversary in late 2009 and to maintain the momentum going forward. The ISO has also fulfilled its mission to begin serving multiple merchant aggre-gators as a merchant services partner. It has significantly grown its reseller program through a network of such aggregators, most of which cater to enterprise-level merchants, Davis reports. Resellers and merchants alike receive comprehensive one-on-one education from the ISO, with all fees laid out on the table at the outset of the relationship. “As a result, we’re getting larger, more quality mer-chants in terms of processing volumes,” Davis notes.

However, a few initial goals required some rewriting. For example, while Davis’ original plan had dictated signing up all e-commerce clients for a full merchant account solution, he no longer intends to pursue such a path. “We realized it doesn’t make sense for ev-eryone. It’s easy to take advantage of, and make money from, small (‘micro’) merchants that are labeled as ‘e-commerce’ by selling them

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a solution they don’t really need. But this benefits nobody.”

The ISO now relies on startup and monthly fees to garner profits from work-ing with clients whose size doesn’t warrant a complete merchant account solution. The company takes a careful approach to set-ting these fees in case a merchant becomes unable to afford even basic payment pro-cessing services. “The account goes into collections, nobody makes money, the merchant cancels, and with the number of

signups we’re doing, that kind of model just results in a high attrition rate,” Davis asserts. “We’ve learned that it’s better to charge affordable prices and find other ways to maximize revenue.”

Targets With a TwistLeap Payments has also hit several of its targets in recent months, but with a twist, according to CEO Will Detterman. Exceed-ing revenue goals tops the list. The ISO’s original business plan dictated signing a high volume of merchants in relatively short order. But managers quickly realized that boarding a steady stream of merchants was far less important than keeping total revenues on an upward climb. “Our target merchants had higher transaction volumes than we had projected, so while we missed our account goal, we were able to exceed our revenue goal,” Detterman notes.

Meanwhile, although Leap Payments’ business plan had specified a six-month interval between its inception and “being completely up and running,” the ISO was writing business only three months after opening its doors. Detterman attributes this feat not only to his finely honed network of industry contacts, but to the efforts of a team of behind-the-scenes employees.

He deems the considerable number of referrals Leap Payments has received from existing customers an even bigger coup. “We have yet to pay a single penny to acquire these referrals, and that tells us

that we’re achieving what we set out to accomplish.”

On the flip side, Leap Payments has yet to meet its objective of optimizing Web search engine placement to ensure pros-pects looking for ISOs can easily find the company in the mix. “We’ve had to be very strategic in pursuing niche markets to get any placements,” Detterman says. “The big ISOs out there have bid up keywords to more than $15 per click, which is just too much for smaller companies to justify. We have to maneuver faster and focus really tightly to compete. This exercise is very educational and requires laser focus on a target audience, but we think that there’s a place for all of us.”

The past few months have also taught Detterman the importance of striving hard to protect his turf from less scrupu-lous competitors. Not long ago, one of Leap Payments’ merchant clients informed Detterman that it had been solicited by another ISO that claimed to represent its existing processor. At the merchant’s invita-tion, Leap Payments’ sales representative at-tended its meeting with the company that was attempting to solicit its business. “The competitor’s sales rep was clearly seasoned in this industry and recited a well-practiced pitch,” notes Detterman. “But what was tru-ly shocking was that not once, but twice, this company lied to the merchant about where they worked. During the initial call, they led the merchant to believe that my company was calling, and during the in-person pitch, the sales rep claimed to work directly for one of the largest processors, when in fact he represented a small ISO.”

Detterman urges fellow ISOs to regis-ter with the card associations so they can cease hiding behind other companies’ names and instead set goals for building their own organizations. “Bottom line: Stop

Startup Stories: A special series following three newly launched ISOs (6th installment)»lying just to set a sales appointment, and start meeting your own objectives,” he ad-vises. The former “gives us all a bad name.”

Upping the CountFor its part, PayMint Partners continues to strive toward its goal of developing part-nerships in verticals not served by many ISOs, like building management firms. At one point, principals believed they had forged a deal to work with an overseas company “that had the infrastructure/ soft-ware design in place” to build the technol-ogy needed to attain this objective, says Steven Feldshuh, vice president, business development. “However, the physical dis-tance and cost proved to be too much.” Feldshuh and his partner, George Saran-topoulos, have since identified another potential software design partner with a demonstrated interest in PayMint Partners’ project and are currently hammering out terms of an agreement with that firm.

The ISO has also formulated a new objec-tive—increasing its volume of merchant ap-plications. The company recently launched a program Feldshuh and Sarantopoulos be-lieve will double the merchant application count over the next three to four months. The program calls for offering agents an upfront application bonus of $200 per ac-count. Agents can apply the funds toward terminal purchases, lead generation, and/or telemarketing campaigns.

“We are dealing with a tough environ-ment and smaller margins,” Feldshuh ad-mits. “With that said, it appears that January was our best month to date. I think the program was part of that. We have to keep refining our goals.” TT

Julie Ritzer Ross is a contributing writer to Transaction Trends. Reach her at [email protected].

Got a question for our startups?Send it to [email protected].

Let us profile your company!

If you launched a new ISO in the last 12 months and would like to be considered for the second Startup Stories series, contact [email protected].

20 YEARS

Networking

ADVOCACY

LEADERSHIPEDUCATION


2010

1990

JOE KAPLAN: SAFEID AND KAPTIVATION“There have been so many memories throughout my mem-bership with the ETA—each with their own unique imprint on my life. In general, however, watching the maturation of the payments industry by myself and through the eyes of my competitors, who are also my friends, coupled with my 11-year tenure as a board member and officer, has been absolutely wonderful. To watch a group of individuals bond together for a common goal to create a well respected, well educated, and financially viable opportunity from its Wild West beginnings has been incredible as well.”

ETA Flashback

Since the first ISO meeting at O’Hare Airport and its founding in 1990, ETA has evolved into an international professional association providing leadership through education, advocacy, and the exchange of information.

Growth and Progress

There is rarely a sharp line that marks the point where an association such as ETA reaches maturity. But as ETA celebrates its 20th anniversary, it is clear that some-where in its brief history, ETA and its

members have made that transition. The acquiring industry, with ETA at the fore, has grown into a solid community that still—after 20 years—thrives on entrepreneurship and innovation, yet has gained respect throughout the greater financial services industry and beyond.

And it all came about thanks to a group of pay-ments professionals who got together in Chicago in 1988 and agreed to invest $1,500 apiece to launch an organization to represent their interests.

“In the early days, there were just a handful of us meeting in hotels,” recalls Paul Garcia, chairman and CEO of Atlanta-based Global Payments Inc. “Even then, I noticed a bit of a dichotomy in that some of the board members came by private plane, though most by commercial, and a there were a couple who indicated that they would have taken a Greyhound if it was available. Fast forward, every-body who attended has done very well and built businesses of considerable value. I believe camara-derie and the support that the ETA provided had a lot to do with that success.”

Indeed, the organization that started with a $10,500 investment has done much to advance

the careers of payments professionals, as well as navigate and influence a constantly changing busi-ness landscape.

“ETA has provided an unparalleled opportunity to stay close to our customers in both business and informal settings,” adds Garcia. “We all know that it is our customers who write the checks, and it all begins and ends with them.”

Seven years ago, in 2003, it achieved another milestone during what some say was the most

By Angela Hickman Brady

ETA leaders reflect on the organization’s impact and point to an exciting future

Two DecadesEmpowering Payments for

20 YEARS


Continued on page 36

RICK BRENNES: THE BRENNES-JONES GROUP“My best memory of the ETA is my time on the ETA Board of Directors. It was very satisfying to work with a great group of dedicated professionals and assist in the direc-tion and development of the ETA. In fact, all of my best memories of ETA came as a result of being involved in the organization as a volunteer, and I encourage others to become involved, as well.”

ETA Flashback


HOLLI TARGAN: JAFFE, RAITT, HEUER & WEISS“I remember the year, around 2000, when I walked in to the Annual Meeting trade show floor and realized, due to its sheer size and the buzz of activity, how large the ETA had become. I was amazed at the impact the organization was having on the industry.” Another memorable moment was “the President’s Dinner at which I was honored to receive the ETA Mem-ber of the Year award. The recognition by the organi-zation of my contributions was humbling and so very much appreciated.”

ETA Flashback

1990s’90

’91

’92

’93

’94

’95

’96

The Bankcard Services Association (BSA), ETA’s precursor, holds its official charter meeting in Denver, and later hosts its first Annual Meeting in San Diego with 36 attendees.

BSA membership reaches 28.

BSA hosts both Annual Meeting and Mid-Year Meeting for the first time.

First trade show held at Mid-Year Meeting: 14 exhibitors

Visa joins BSA’s advisory council.

First-generation certification initiative launches.

ETA produces first generation of virtual training.

Annual Meeting held in New York City: 291 attendees

MasterCard joins the board advisory council.

As BSA membership surpasses 50, the organization changes name to Electronic Transactions Association.

American Express joins ETA’s advisory council.

’97

’98

’99

ETA annual meeting is established as a stand alone event, no longer in conjunction with the ABA.

Transaction Trends launches, and ETA’s first Web site goes live.

Annual Meeting held in New Orleans: 665 attendees, 49 exhibitors

Mid-Year Meeting held in Baltimore: 790 attendees, 38 exhibitors

Membership surpasses 150.

261 ISOs are registered with Visa.

Visa tests chip-loaded cards.

ISOs begin selling Web-based merchant services.

Merchant Acquiring Committee (MAC) forms.

Microsoft Corp. and First Data Corp. introduce online bill payment.

pre ’90s

ETA Through the Years.... Major Milestones

1950 First Diners Club cards used in New York City restaurants.

1951 Franklin National Bank offers first bank credit card.

1966 MasterCard starts as an association of banks.

1970 Magnetic strip standards are established.

1971 First Data begins processing bankcard transactions.

Visa starts as an association of banks.

1982 First ISO launches: Amcor, founded by Paul Green.

1989 Several ISOs meet at O’Hare Airport to collaborate on improving industry business practices.

These Milestones brought to you by:

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ETA Through the Years.... Major Milestones


20 YEARS

2000s’00

’01 Membership surpasses 300.

Annual Meeting held in San Diego: 1,772 attendees, 80 exhibitors

Transaction Trends goes monthly.

’02 Mid-Year Meeting held in Seattle: 1,583 attendees and 100 exhibitors

’03 National headquarters opens in Washington, DC.

First Strategic Leadership Networking Forum (SLNF) replaces Mid-Year Meeting and welcomes 512 attendees. SLNF panel session serves as a catalyst for development of PCI Data Security Council.

ETAU delivers first course at Annual Meeting.

’04

’06

’07

Annual Meeting held in Las Vegas: record-setting 3,382 attendees, 185 exhibitors

ETA Compliance Day is launched.

First edition of ETA Currents is launched.

SLNF held in Palm Beach, FL: 375 attendees

ETA publishes first encyclopedia of industry terminology.

’05 Annual Meeting held in Las Vegas: 2,789 attendees, 178 exhibitors

ETA establishes a Washington-based advocacy function.

’09 The Stategic Leadership Forum (formerly SLNF) held in New York City: 331 attendees

NACHA joins the board advisory council.

ETA releases first proprietary research product: Economic Indicators Report.

’10

E-Sign legislation is approved.

Chinese government establishes China UnionPay (CUP) bankcard association.

Electronic payments exceed paper checks in number of transactions.

Signature and PIN debit cards account for 57% of card transactions.

’08 SLNF held in Chicago: 307 attendees

ETAU deploys first online course.

ETA launches a Webinar product line on key compliance issues and emerging opportunities.

PayPal has 68 million active accounts.

Visa and MasterCard have approximately 350 interchange categories.

Electronic payments account for more than half of all payments by dollar volume and more than two thirds of all noncash payments.

ETA hosts Mid-Year Meeting and 10th Anniversary celebration in Chicago: 1,512 attendees, 75 exhibitors.

Discover Financial Services joins the advisory council.



Opposite page: (Top) Entrance to the 2001 Expo floor. (Bottom) The ETA booth at the 1994 Annual Meeting.

This page TOP: (Left) Cover of the July/August 2000 10th anniversary issue of Transaction Trends. (Right) Attendees hit the links at the 1996 Mid-Year Meeting.

This page BOTTOM: (Left) Attendees shoot craps at an early ETA meeting. (Right) A scenic view from the 1994 BSA Annual Meeting in Tucson, AZ.

W.net is founded.

Membership surpasses 500 companies from 14 countries.

ETA celebrates its 20th anniversary.


significant board meeting in ETA’s his-tory. The organization hired its own internal staff, including its first CEO, Carla Balakgie, replaced its accounting firm and attorney, relocated its offices to Washington, D.C., and totally rewrote its bylaws. “You could see the lightbulb pop on in all of our heads that in order to propel ETA forward, it was vital to hire dedicated staff in Washington, D.C.,” recalls Holli Targan, partner with Jaffe, Raitt, Heuer & Weiss in Southfield, Michi-gan, and ETA’s current president. “This was a turning point for the organization.”

20 YEARS

Retail Cloud–Inventrak: Industry Newsmaker

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MARY GERDTS: POST INTEGRATIONS INC.Gerdts recalls the 2001 Annual Meeting when ETA added the position of president-elect. “There was extreme turmoil on the ETA board at that time, and there was great opposition to my desire to rise to president and lead ETA. The day of the Annual Meeting, I was standing on stage with Jim Plappert (who was being voted in as president) and I had to be voted in as president-elect (so we had two votes that year) and all of a sudden, it was announced that I was successfully voted in. I looked out in the audience and saw my good friend Linda Perry, who gave me a ‘thumbs up’ and a big smile because we both thought there was no way the op-position was going to let me get voted in to succeed to president. The good news: The vote was successful and the rest is history!” Gerdts also has a funny ETA memory when she was assigned to one of the event’s high-profile speakers. “We were talking one-on-one when the room started to fill up for the speaker’s session. He excused himself and a few minutes later, out of one of the speak-ers in the meeting room, I heard a ‘whoosh’ sound. Everyone started looking around, try-ing to figure out what the strange noise was, when I suddenly realized the speaker, who had excused himself to use the restroom, had left his lavaliere microphone on during the process!”

ETA Flashback

Continued from page 33


Those moves set ETA on the journey it continues today, as it promotes the highest level of individual professional-ism, integrity, and skill in the transaction processing industry.

“Participation in the ETA has given me an appreciation for the growth in the payments industry attributable to ISOs and how those accomplishments benefit all players in the payments in-dustry—acquirers, issuers, payment companies, equipment vendors, VARs, and, of course, merchants,” comments Gerritt Kerkstra, MasterCard’s group head of acquiring & operations, U.S. commerce development, in Purchase, New York.

Those efforts are obvious to ETA members who, with their peers, are creating the future of the electronic payments field. “ETA has always giv-en me the opportunity to share my

20 YEARS

DONNA EMBRY: PAYMENTS ALLIANCE INTERNATIONAL

One of Embry’s most memorable ETA moments occurred in the organization’s first couple of years of existence, then as the BSA. “It was one of BSA’s first meetings and it was held at the Waldorf Astoria in New York. It basically was in a large meeting room off the lobby. We had three tabletop vendors set up in the actual lobby. The meeting had about 150 attendees. I was one of the featured speakers (we only had three or so) and I was to talk about product opportunities, mainly focusing on the big emerging PIN debit products. I had put together a slide presentation, but I got in the room and they did not have a slide projector. All they had was an overhead for ‘foils.’ I quickly scrambled to convert my slides, which when shown, all turned out to be pink. I was embarrassed, but the presentation went off OK. I remember thinking that the BSA, as crudely put together as it was, was a valuable organization that would have merit and value ongoing. I was proud and excited to be part of it.”

ETA Flashback

A N O T H E R D A Y, A N O T H E R 9 , 0 0 0

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Find out more at www.TASQ.com or call 1-866-410-5689. Visit us at ETA in Las Vegas in booth #319.


knowledge and vision of this industry through speaking opportunities,” says Donna Embry, senior vice president of strategic and product development for Louisville, Kentucky-based Payment Al-liance International. “It has opened the doors to meet many new associates and make new business relationships and lasting friendships. I would like to say that as my universe and career have grown, many of the successes that I have achieved have been as a result of being involved with ETA.”

Joe Kaplan, president and CEO of of SafeID and Kaptivation in Calabasas, California, agrees. “ETA membership has provided me with guidance to succeed, and along the way I have created lasting friendships that I cherish daily. I look back on my involvement and my inter-actions with everyone associated with ETA and couldn’t be thankful enough.”

Career BuilderETA has successfully impacted mem-bers’ careers by offering a broad slate of learning and networking opportu-nities, including the Annual Meeting, the Strategic Leadership Forum, robust committees of active members, mem-ber periodicals Transaction Trends and ETA Currents, and ETA University webi-nars and other continuing education opportunities.

Jaffe, Raitt, Heuer & Weiss P.C. : Industry Newsmaker

Process Pink: Industry Newsmaker

The electronic payments business is complex and rapidly changing, placing a premium on access to the expertise needed to solve problems and take maximum advantage of opportunities.

Let our knowledge work for you. We have decades of experience in card processing, ACH, and stored value, and we constantly track regulatory and card association developments.

Jaffe advises companies ranging from large processors to sales representatives on legal issues, strategic alliances, and corporate direction, bringing industry-specific knowledge to bear on:

n Mergers and Acquisitionsn Litigationn Corporate Mattersn Compliancen Contract Drafting and Negotiation

Contact Holli Targan 248.727.1460 [email protected]

There is something deep within us that seeks to make a differ-ence in this world; to leave a footprint; to know that some-one’s life has been made better because of what we do.

We are certain that a higher power planted this desire into the hearts of all of us at Process Pink Payments. Together, we collaborate on all levels to achieve this common mis-sion—to have every merchant in America participate in Process Pink. As an ISO or agent of Process Pink, your full confidence in our Process Pink Program is of critical importance to us. Please join us!

Please visit www.processpink.com or call 708/261-6595 for more information.

20 YEARS

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Solving Legal Issues

Process Pink with Anthony Holder

GERRITT KERKSTRA: MASTERCARDKerkstra’s most memorable ETA moment is a sober one. It was “learning upon landing at Dallas-Fort Worth airport on the morning of Sept. 11, 2001, that the World Trade Center had been attacked, and subsequently meet-ing with other ETA board members to cancel the Mid-Year Show, which was scheduled to open the next day. It was the only possible decision despite the impact to the ETA’s finances.”

ETA Flashback


NPC: Industry Newsmaker

Industry Champions

National Processing Company has a rich heritage dating back to the mid 1960s. That is 45 years of experience and stability! We are the largest provider of merchant processing services in the U.S. dedicated exclusively to merchant processing and acquiring services.

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NPC takes pride in the fact that we are a key business partner with some of the most successful ISOs in the indus-try. Consider this a personal invitation for you to join our family of successful partners!

Trustwave: Industry Newsmaker

TrustKeeper 3.0 for PCI Compliance

The simplicity of TrustKeeper 3.0 is ideal for Level 4 merchants; it’s an easy, straightforward tool. The innovative technology and user experience makes TrustKeeper 3.0 ideal for both Acquirers and ISOs looking to roll-out and manage large-scale compliance programs. The TrustKeeper 3.0 experience is simple and efficient, making PCI certification an attainable goal for all merchants, regardless of their size or level of technical knowledge.

For more information on Trustwave’s expertise with ISO and Acquirer Level 4 PCI programs, visit www.trustwave.com/level4PCI.

20 YEARS

“ETA has been such an enormous im-pact on my career,” says Mary Gerdts, CEO and president of POST Integra-tions in Phoenix. “We should all be very proud of what we have accomplished over the years to better ETA. I have made so many lifelong friendships as a result of my involvement on the ETA board and have learned so much from my colleagues. I know in my heart, my career would have been less rewarding if it was not for my involvement with ETA.”

Clearly, those relationships have been a key benefit of ETA involvement for many ETA members, particularly those who have served on the board of di-rectors and committees. “I have built a relationship base with a broad sector of the payments industry,” comments Mary Dees Griffith, president and COO of Preferred Health Technology Inc. in Dallas. “This helped me not only in my business development efforts for orga-nizations that I worked for, but helped me in establishing and maintaining the consulting practice I had for seven years.”

And she’s not the only one. The re-lationships Charles Creamer built en-abled him to take the entrepreneurial plunge 10 years ago. “I’ve met incred-ibly wonderful people who molded the industry yet still had time to help me start my own ISO,” says Creamer, found-er of Lansing, Michigan-based Midwest Transaction Group.

Talk to anyone in the industry and they’ll tell you that ETA networking events are where business gets done. “ETA has enabled me to meet, face to face, twice a year, the movers and shak-ers of the industry,” says Targan. “Those interactions gave me the inside scoop, facilitated the conversations that led to deals getting done, and introduced me to amazingly talented people, both mentors and protégés.”

Global ForceWhile ETA has come a long way in 20 years, there’s still plenty of work to be done. “Our organization has reached a significant size and scope, but I can

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POS Portal congratulates the ETA on

20 years of leadership in the electronic transaction processing industry.

Thank you for providing a collaborative forum for innovation.

see us having more impact in legislative circles. In fact, without the ETA taking on this active role, the acquiring com-munity would not be represented,” says Garcia.

Gerdts also would like to see the ETA’s advocacy role expand. “My single greatest vision for the future of ETA is for ETA to become a recognized global force with regard to world economics,” she suggests. “We are an integral part of the economy, yet we are not recognized at the level we should be or given the global voice or power that we deserve. I am confident with the continued great leadership of ETA, this is a goal that is no doubt obtainable.”

Becoming a global force is certainly a goal worth pursuing, say others. “As the acquiring industry has moved beyond ‘bankcard’ and the reach has grown to an international market, I see the ETA expanding its reach and perhaps hav-ing meetings beyond the United States,” notes Embry. “What ETA has done

TOM TESMER: PIPELINE DATA

Tesmer, now CTO at Pipeline Data, recalls pulling together the materials for his (then) company’s booth at ETA Annual Meeting in Hawaii. “I knew I could rely on Federal Express to give me guaranteed overnight delivery so I packed everything up, dropped it at FedEx, and caught a plane to Honolulu, only to find out that, of course, the overnight guarantee only applied in the contiguous 48 states. I had to spend a day at the meeting with nothing to display. We had a great laugh over it, but as always at an ETA meeting, I still made friends and did a lot of business there.”

ETA Flashback


20 YEARS

TSG congratulates and thanks the ETA for its 20 years of being both the voice and the biggest supporter of the Acquiring Industry.

—Your Loyal Supporters, Kurt Strawhecker, Jamie Savant, and the entire TSG Team

At ETA’s Live Learning Center

Don’t forget! ETA Annual Meeting & Expo educational content can be purchased for online viewing.

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20 YEARS

domestically to educate, legislate, and open doors has a place worldwide. There are many emerging markets in desperate need of education and organization.”

ETA’s role in education will be a critical component as the organization moves forward, as well. “I believe the ETA will continue to grow substantially and expand in its value to the payments industry, not only in its advocacy role but in its ability to provide essential ed-ucation, networking, and the essential event that showcases the latest technol-ogy and developments in the payments industry,” says Dees Griffith.

“One thing will always remain con-stant: People love to buy things and to do that, they need us,” concludes Kaplan. “As long as the ETA continues to morph and accept change, it will continue to be the premier organization to be part of.” TT

Angela Hickman Brady is features editor of Transaction Trends. Reach her at [email protected].

JEFF ROSENBLATT: EVO MERCHANT SERVICES

“The ETA has not only helped my career personally, but our company as well. The net-working and business opportunities that have been available to us has been extremely valuable. Additionally, the ETA has done a great job keeping me informed on so much of the interesting news and exciting developments constantly affecting our industry all the time.” Rosenblatt also recalls when Newt Gingrich spoke at the 2002 Annual Meeting. “I remember not only how much of a dynamic speaker he was, but also how friendly he was when I was given a chance to meet him and shake his hand after his speech was com-pleted. That day was certainly a huge thrill for me and one that I have never forgotten.”

ETA Flashback


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Cloud computing has grown in popularity largely because it is an inexpensive way to increase IT re-

sources. But potential security and compli-ance problems can cost users, particularly the payments industry, far more than they expected.

As spending on IT cloud services is expected to hit $42 billion by 2012, ISOs, merchants, payment processors, and gateways should have at least a working knowledge of the technology and the data security and compliance issues associated with offering services in the cloud.

The BasicsCloud computing is the use of hosted, Internet-accessible servers for a variety of computing needs. It can be dynami-cally scalable and is usually a virtual-ized resource primarily used in four categories: • Software as a Service (SaaS) is a mod-

el of software deployment where an application is licensed for use as ser-vice on demand.

• Platform as a Service (PaaS) describes a company using another company to host all of its applications.

• Infrastructure as a Service (IaaS) is a computer infrastructure delivered in a virtual environment.

• Virtualization Technology transforms on-premise data centers into their own clouds.

Google, Microsoft, Amazon, Citrix, and Salesforce.com are just a few com-panies offering some or all of these cloud computing services.

Cloud computing is cheap: By renting computer usage from a third-party pro-vider, companies avoid capital expendi-ture. These typically “pay for what you use” services are ideal for organizations that may have one or two busy months (i.e., holiday season) and need a larger platform just for that time of the year.

Compliance ConsiderationsThe cost savings a company achieves with cloud computing could poten-tially be offset by additional security measures that might be necessary. Ex-perts continue to debate whether these are able to meet regulatory compliance requirements.

No hard rules or standards currently exist, although the Cloud Security Al-liance (CSA), a non-profit organization promoting best practices for providing security assurance with cloud comput-ing, has issued an ongoing “Security Guidance for Critical Areas of Focus in Cloud Computing.” Some of CSA’s best practice recommendations for compli-ance with payment card transactions include:• classifying data and systems to under-

stand compliance requirements • understanding data locations, in par-

ticular the copies of data that are made and how they are controlled

• maintaining a right to audit on de-mand as your regulatory mandates and business needs may change rapidly

• performing external risk assess-ments, including a Privacy Impact Assessment. While these recommendations may

be valid, the PCI Security Standards Council has not issued formal guide-lines for cloud computing as it pertains to payment card applications or data. However, the council recently com-missioned two special interest groups to research these issues and provide guidance to the technology working group. One group is dealing specifi-cally with the compliance and security ramifications of hosting multiple server environments, with potentially varying security requirements, on a single phys-ical server. Another is reviewing poten-tial uses of technology solutions (such

Working in the CloudsWhile cheap and easy to use, cloud computing is risky businessBy Michael Petitti and Robert Cortopassi

ISO COrnerrISK In reVIeW


as tokenization, strong encryption, and virtualization best practices) to limit and more clearly define which systems are in or out of scope for the purposes of PCI Data Security Standards assessments.

All About ImplementationSeveral companies offer resizable and configurable com-puting capacity that can be paid for by the hour or in multi-year terms, making it an attractive option to many businesses. Unfortunately, cloud computing systems are not inherently PCI DSS compliant, and using them to store, process, or transmit sensitive credit card payment informa-tion can lead to compliance and other costly risks.

In a recent article at Data Center Knowledge, Amazon provided insight into the issue of compliance and cloud computing, reaffirming that PCI DSS compliance is depen-dent on how the merchant implements various solutions. Reaching out to customers to address compliance con-cerns, Amazon spokesperson Kay Kinton stated:

“Under the PCI Data Security Standard, merchants, re-gardless of their size, are independently responsible for complying with PCI when they collect, process, or store credit card information. When using a shared hosting ser-vice, like AWS, where the merchant controls what credit card information touches the service, the merchant is re-sponsible for using the services in a manner that permits them to be PCI compliant, such as the proper use of en-cryption and key management. Therefore, it is possible for a merchant to use Amazon EC2 and Amazon S3 and meet PCI compliance standards depending on their specific implementation.”

But some cloud providers are claiming to be certified as PCI DSS compliant or are offering PCI solutions. The authenticity of these claims is not certain, and merchants should consult a Qualified Security Assessor when evaluat-ing a vendor’s proposed solution.

Because cloud service can originate from anywhere in the world, it is difficult to know exactly where the data resides, or even if the provider is meeting the physical se-curity requirements of the PCI DSS. Further complicating matters, most cloud providers do not allow onsite audit-ing of their facilities. While PCI DSS compliance doesn’t automatically make a company safe from security threats, it does help businesses ensure appropriate security mea-sures are in place to prevent or deter security compro-mises and data theft as much as possible.

In many ways, cloud computing is an evolving IT ex-periment and still has some growing to do before the complexities surrounding payment data security are fully resolved. Therefore, merchants should wade cautiously into its waters. TT

Michael Petitti is chief marketing officer for Trustwave, and Robert Cortopassi is vice president of product development, CAM Commerce Solutions. Both are members of ETA’s Risk and Fraud Committee.


ETA 2009-2010 BOARD OF DIRECTORSOFFICERS

PRESIDENT Holli Targan

PartnerJaffe, Raitt, Heuer & Weiss, P.C.

PRESIDENT-ELECTRick Pylant

President & ChairmanCOCARD Marketing Group LLC

TREASUREREddie Myers

President & COOPayment Processing, Inc.

SECRETARY Roy Banks

CEOCAM Commerce Solutions

IMMEDIATE PAST PRESIDENTNick Baxter

Senior Vice PresidentFirst National Bank of Omaha

DIRECTORSTodd Ablowitz

PresidentDouble Diamond Group

Greg CohenPresident

Moneris Solutions

Kim FitzsimmonsSenior Vice President–First Data

ServicesFirst Data Corporation

Heidi GoffPresident & Managing Director,

The AmericasHypercom, Inc.

Stuart HarveyCEO

Elavon

Robert McCullenCEO

Trustwave

Bob Philbin Industry Consultant

Debra RossiExecutive Vice President

Merchant Payment SolutionsWells Fargo Bank

Dave SiembiedaPresident & CEOCrossCheck, Inc.

Tom WimsettPresident & CEO

National Processing Company

ADvISORy COunCIlRobert BaldwinPresident & CFO

Heartland Payment Systems, Inc.

Joe CohaneCEO

Veracity Payment Solutions

Dean LeavittChairman & CEO

Unicorn Partners, LLC

Ed MyersU.S. President

Global Payments

Deana RichPresident

Rich Consulting

Jeff RosenblattPresident

EVO Merchant Services

Kurt StrawheckerExecutive Partner

The Strawhecker Group

Buzz StrykerPresident & CEOPOS Portal, Inc.

Ex-OFFICIOCarla Balakgie

CEOElectronic Transactions

Association

Jan EstepPresident & CEO

NACHA

Sameer GovilHead of Acceptance Solutions

Global AcceptanceVisa

Matt JohansonVice President

Acquirer RelationsDiscover Network

Gerritt Kerkstra Senior Vice President

Acquirer RelationsMasterCard International

Bryan O’MalleyVice President

American Express

lEGAl COunSElDave Goch

Attorney at LawWebster, Chamberlain & Bean

ETA’s InAugurAl InvEsTmEnT CommunITy Forum

A pre-conference event at the 2010 ETA Annual meeting & ExpoMandalay Bay, Las Vegas • April 13, 2010 • 10 a.m. - 4 p.m.

celebrat ing 20 years 1990-2010

Whether you are a

stakeholder in the

payments supply

chain or an investor

looking to learn more

about the players and

potential, this event

offers you unparalleled

access, education

and information

on opportunities in

the ever-expanding

electronic transactions

business.

Who will you meet Executives from established and emerging payments companies

Institutional financial firms

Private investors including venture capital and private equity

Other payments industry service providers

What to Expect

Sessions: High level panels and discussion will provide an understanding of

the payments system, the potentials and the pitfalls.

Company Presentations: Emerging payments companies will discuss the

solutions that will define the payments industry in the next decade.

Networking Opportunities: Representatives from the many facets of the

payments value chain will be available for introductions and conversations.

Meet and greet processors, ISOs, acquirers, emerging technology companies

and other key stakeholders in the industry.

How To register

Go to www.electran.org and register for the Investment Community Forum,

or register for the full conference.*

*Full conference registration includes access to the 2010 ETA exhibit hall, an international exhibition of major payments companies showcasing their products, technologies, and services.

NEW


Company Page Phone Web

Apriva 54 480-421-1200 www.apriva.comAuthorize.Net C2 866-437-0491 www.authorize.netChase Paymentech Solutions 29 888-849-8980 www.chasepaymentech.comCrossCheck, Inc. 38 800-654-2365 www.cross-check.comCynergy Data C3 800-933-0064 x5147 www.cynergydata.netDiscover Network 23 224-405-0900 www.discovernetwork.comElavon 7 678-731-5000 www.elavon.comeProcessingNetwork 12 713-880-0326 [email protected] Merchant Screening 47 877-329-0524 www.onecheckreport.comFifth Third Processing Solutions 25 513-534-7678 www.ftpsllc.comFirst American Payment Systems 51 866-GO4-FAPS www.go4faps.comFirst Data Corporation/FDIS 27 800-735-3362 www.firstdata.comFirst Data Corporation/FDIS bellyband 800-735-3362 www.firstdata.comFirst Data Corporation/TASQ 39 800-735-3362 www.firstdata.comHypercom Corporation 37 480-642-5000 [email protected] Cybertrans 16 615-661-8020 www.cybertrans.comRetail Cloud-Inventrak 2, 36 925-288-4300 www.inventrakpos.comJaffe, Raitt, Heuer & Weiss 9, 40 248-351-3000 www.jaffelaw.comMerchant Warehouse 41 800-749-2173 www.merchantwarehouse.comMoneris Solutions 16 866-423-8475 www.monerisusa.comMoney Movers/Process Pink 11, 40 708-316-4332 [email protected] Processing Company 4, 42 877-453-5933 www.npc.netNMI - Network Merchants Services 43 800-617-4850 www.nmi.comNow Prepay 38 416-255-8897 [email protected] Services Ltd. 52 604-689-0399 www.pacnetservices.comPax US 49 678-684-0903 www.pax.usPayment Processing, Inc. 46 510-857-7146 www.paypros.comPlanet Payment 50 516-670-3200 www.planetpayment.comPOS Portal 44 1-866-940-4767 www.posportal.comThe Strawhecker Group 45 402-452-3663 [email protected] Merchant Services, Inc C4 888-84-TOTAL x9727 www.totalmerchantservices.comTransFirst 13 866-969-3350 www.transfirstsales.comTrustwave 1, 42 312-873-7291 mpetitti@trustwave,comUSA ePay 36, 55 866-872-3729 www.usaepay.com

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It was smooth sailing for the first 14 or so years of Cynergy Data’s existence, according to Marcelo Paladini, who started the company with John Mar-

tillo in 1995. Since then, the New York City-based firm has grown from a two-person operation to one with more than 130 employees.

Late last year, however, Cynergy Data (under the leadership of Paladini, who bought out Martillo in 2007) filed for Chapter 11 bankruptcy. At the same time, company leaders also sold its assets to The Com-vest Group, a private equity firm based in West Palm Beach, Florida.

“We had been growing very fast, and we had posi-tioned the company for a much different forecast than what proved to be,” who Paladini who now serves as the company’s vice chairman and executive vice presi-dent of business development.

RebuildingThe bankruptcy process and the sale to The Comvest

Group allowed the company to “cleanse” and “take care of the fi-nancial challenges” it was facing, says Paladini. “They are helping us rebuild not only our name but our strategy—and the long-term goals that we set for the company in the first place.”

The Comvest Group’s involve-ment is improving Cynergy Data in other ways, too. “They own other companies in this space,” Paladini says, “so we took a close look at these companies and came up with a plan to integrate the best aspects of each of them into our own.”

As a result, Cynergy Data has expanded not only its product offerings, but its processing platform as well. “We now have multiple front ends and back ends. And multiple gateways, too,” Paladini explains. “In other words, this process has enabled us to be even more competitive in the marketplace than we were before.”

Originally, the ISO-servicing company made a name for itself by processing a wide range of payments—

InduStry InsIder

Back in BusinessCynergy Data finds its way back into the industry after filing for Chapter 11 in 2009By Bryan Ochalla

from checks to credit, debit, gift, and phone cards. Today, it continues to offer those services while also helping customers with payroll management and alter-native business funding.

“We’re able to process transactions from any kind of merchant and any kind of POS system,” Paladini points out.

Customer Focus“Along with customer service, we’ve always focused on providing our customers products and tools to help them be more efficient and more successful at what they do—because we know that if they succeed, we will succeed, too.”

That customer-centric attitude was in full force even while Cynergy Data was fighting its way through the bankruptcy process late last year. While Paladini and his crew worked to get the company back on its feet financially, they also worked to maintain all of the company’s relationships.

“I always believed that our partners and providers shouldn’t have to suffer the consequences [of our fi-nancial problems],” Paladini explains. “So we did our best to ensure there were no major delays in payments and no interruptions in the processing of daily transac-tions. Basically, we tried to make sure everything kept working as close to normal as possible.”

That, possibly more than anything else, has helped the company bounce back from backruptcy in a mat-ter of months.

“I think it gave the resellers that work with us a sense of trust and confidence,” Paladini says. Regard-less, they continued to do business with the company as usual after the process was completed.

Today, Cynergy Data is, once again, in growing mode, according to Paladini, and is ready to regain all that it lost through the bankruptcy process.

“As painful as the process was, it really positioned us well for growth and success in the future,” he adds. “We’re capitalizing on what we learned from it, and we’ve built a much better company as a result.” TT

Bryan Ochalla is a contributing writer for Transaction Trends. Reach him a [email protected].

“This process has enabled us to be even more competitive in the marketplace than we were before.”

-—Marcelo Paladini

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