The Buck Stops Here:
Insights From Payment Processing Experts
BY PAT CAULEY
In last month’s special supplement, we discussed and the fulfillment of their order is payment pro-
the power of e-mail marketing to drive sales and cessing. And it’s that mysterious processing of sen-
consumer confidence. But once the consumer has sitive financial information that scares so many
filled his or her shopping cart online and is ready consumers away from e-commerce. In fact, a recent
for checkout, what happens next? That’s when the report from eMarketer research found that an aver-
payment-processing vendor steps in. This essential age of 76 percent of respondents don’t like giving
element of e-commerce is often undervalued and their credit card or personal information online.
oversimplified. Eleven percent of U.S. online buyers think they
When making online purchases, consumers would be liable for damages of over $500 if their
merely input their credit card information and card or data were stolen.
then wait for a package to arrive at their door. What
happens between those strokes on the keyboard IS THE INTERNET MORE SECURE?
Ironically, while speaking with
various leaders in the payment
processing industry, it became
crystal clear that the experts
firmly believe shopping online
is actually more safe and
secure than using a credit card
at a traditional retail location.
Throughout these discussions,
Electronic Retailer discovered
the intricacies of problems
that occur day-in and day-out
for processors, the vast major-
ity of which are resolved
before the customer or mer-
chant even finds out.
vendors are helping to
remove the negative stigma
associated with online shop-
ping by serving as the secure
conduit between customers
and their merchandise. A
2004 study from eMarketer
found that 72 percent of
Canadian retailers thought
that the risk of stolen credit
card information was the
leading threat to online trans-
released data showing that
sor that can treat all of your
Online Revenues Lost due to Online Payment Fraud needs, rather than trying to
according to E-Retailers in North America, 2000-2007 negotiate separate agree-
ments with multiple proces-
2000 $1.5 sors or banks.” Some
processors have demon-
2001 $1.7 strated strength and expert-
2002 $2.1 ise in domestic processing,
while others excel in inter-
2003 $1.9 national. One company is
2004 $2.6 an expert in computing dif-
ferent sales tax jurisdictions
for online purchases, where
2006 $3.0 another is the company you
turn to when chargebacks
for continuity or multi-pay
Source: CyberSource, "Online Fraud Report" conducted by Mindwave plans fall flat. Regardless of
Research, January 2008 your particular needs, the
091424 www.eMarketer.com projected growth of e-com-
merce retail sales indicates
revenues lost because of online payment fraud that payment processors will continue to become
jumped from $3 billion in 2006 to $3.6 billion in an increasingly integral part of your business plan.
2007. It’s because of the standards seen in PCI When’s the best time to go international? What
compliance, which was introduced by the card role would a payment processor play in monetiz-
companies and is enforced by the processors, that ing social networks? How will mobile commerce
these fears have begun to recede. JetPay CEO alter the payment industry? What exactly is PCI
Trent Voigt contends that PCI is going to be the compliance?
biggest driver of the payment industry in the The following pages contain Q&As with some
near future. Luckily for everyone, while identity of the biggest names in the payment industry.
fraud costs to U.S. consumers reached $45 billion These thought leaders discuss the current state of
in 2007, it’s expected to drop to $34 billion by the industry and also shed light on what innova-
2013, surely in no small part because of the ded- tions may be right around the corner.
ication of the processors.
LOOKING FORWARD US Retail E-Commerce Sales, 2007-2012 (billions and %
One of the most interesting change)
elements to this aspect of the
2007 $127.7 (19.8%)
industry is the diverse expert-
ise that each processor is 2008 $146.0 (14.3%)
required to maintain. Many
2009 $164.3 (12.5%)
processors, in fact, specialize
in particular niches. PacNet 2010 $182.5 (11.1%)
Services’ Renee Frappier says 2011 $200.6 (9.9%)
it best: “It’s difficult to high-
light one main consideration, 2012 $218.4 (8.9%)
because each company’s needs
Note: eMarketer benchmarks its retail e-commerce sales figures against
are quite different. Consider US Department of Commerce data, for which the last full year measured
all of your potential sales was 2007; excludes travel sales
Source: eMarketer, May 2008
channels and markets. Make
sure you’re choosing a proces-
Payment Processing 2008 | electronicRETAILER 1
CCH Product Manager ple will type out “lane” or “street,” others will
of Sales & Use Tax abbreviate, and others will leave it out all together.
Bruce Krumlauf The zip code is another one of the key driving fac-
tors that’s used to associate address with tax juris-
dictions. Validating accurate zip codes where a
street crosses multiple zip codes, that’s all part of
the address scrubbing that occurs at the very front
Bruce Krumlauf is the product manager for CCH’s end of the work that we do.
sales and use tax compliance solutions. CCH pro-
vides leading tax and business law information and ER: The notion of Streamlined Sales Tax is at
software solutions. CCH products track, report, the forefront of ERA’s government affairs
explain and analyze tax and related law in over efforts. As a company entrenched in the col-
approximately 700 publications in print and elec- lection of taxes for various jurisdictions,
tronic form for tax, accounting, legal, human what’s your position on this hot-button issue?
resources, banking, securities, insurance, govern-
ment and health care professionals. In his role at Krumlauf: It’s an interesting initiative in that every-
CCH, Krumlauf is responsible for a suite of prod- body agrees with the long-term goal of simplifying
ucts comprised of software, database content and the rules of sales tax calculation and leveling the
hosted services. Prior to joining CCH in 2005, he playing field. But, the real question is: Is the move-
was vice president of product development for ment that’s afoot today really accomplishing that?
First Data Government Solutions, a leading There are really only about 1,000 to 1,500 companies
provider of government e-commerce payment that have volunteered to participate in this effort. To
solutions. For two decades, Krumlauf has been a continue to build membership with the states, the
highly visible proponent of using technology to Streamlined organization has had to make some dif-
streamline tax revenue collections and reporting. ficult concessions about taxation to keep some of the
While at National Data Corporation he spearhead- original members of the initiative on board and to
ed the development and implementation of the try to bring others in. Whether it’s truthfully going to
nation’s first mandated electronic tax payment accomplish its goal of simplifying taxation is the
program in the country. question. We see a lot of benefits in Streamlines’ long
haul, in simplifying the compliance of sales tax, but
Electronic Retailer: At what point in the pay- it’s still got a long way to go.
ment processing transaction does your busi-
ness step in? ER: What that most misunderstood notion
about what you do? What lessons are there
Bruce Krumlauf: Once a customer selects items to for retailers?
purchase, the seller needs to determine what and
how much sales tax needs to be collected on the Krumlauf: Retailers need to remember end-of-the
good or service. That’s the piece CCH and our month tax compliance reporting. What’s critical is
compliance solutions play. Based on the product that this isn’t a stand-alone process. It’s much more
being sold, the location of the buyer and the loca- integrated into their buying and selling of goods
tion of product shipment, that’s how we determine than say, the credit card authorization process. We
the tax that’s going to be collected. This all hap- have to map their product SKUs and our product
pens before a transaction can be finalized. So, one groups and items so that all of this can be accurate-
of the biggest challenges is getting good, quality ly calculated. That work of integrating into their
information in on the transactions. That’s what shopping cart and their ERP system is extremely
helps to minimize the likelihood of an audit or important. The calculation almost becomes an
incorrect taxation. invisible process once the integrations are in place.
We have products that both sit behind the retailer’s
ER: What type of quality information are you firewalls or that we offer in a hosted environment
looking for when determining accurate taxes? that do both the calculations and maintain the tax
liability information in our system. And towards
Krumlauf: There’s a systematic address scrubbing the end of the month, that information is fed over
process that has to go on. For instance, some peo- to the compliance reporting products.
2 electronicRETAILER | Payment Processing 2008
Chase Paymentech ER: What role does international commerce
Solutions Senior Vice play in payment processing? Is it difficult to
President and Group work with the various currencies?
Executive of Client
Relations Michael Clark: The rise of the Internet gave every business
Clark the opportunity to go global. As our merchants
expanded globally, we’ve also expanded our inter-
Since 1985, Chase Paymentech has made it their national capabilities to support them. For most
business to lead the way in payment processing. mature U.S. companies, international processing is
They process payments for merchants in both a huge part of their growth strategies. We were
brick-and-mortar and cyber storefronts throughout actually the leader in expanding currency options
the U.S. and Canada, with more than $719 billion in for card-not-present merchants, first expanding
transactions annually. Michael Clark is responsible into Canada, then Europe and, now, globally.
for the direct response and strategic account rela- Working with the various currencies isn’t difficult.
tionship management teams. Their objective is to What can sometimes be challenging for our mer-
provide dedicated and focused relationship man- chants is navigating the complex regulatory envi-
agement services, keeping their merchants up to ronment of each country’s legal framework, as well
date with industry and regulatory issues and ensur- as the requirements of each local payment method.
ing optimal payment processing practices. We have a team dedicated to helping merchants
navigate through these issues.
Electronic Retailer: What’s the most misunder-
stood notion about the payment processing ER: If mobile commerce takes off the way that
industry? e-commerce has, what changes, if any, will
occur in regards to payment processing?
Michael Clark: Some merchants believe that pay-
ment processing is a commodity service. I believe that Clark: Again, the mechanics of processing the pay-
our relationships with merchants are partnerships, ment will remain the same. Merchants can contin-
with the goal of helping them optimize their payment ue to submit transactions the way they do today.
strategy. This could be in providing comprehensive Most of the changes will revolve around consumer
analysis tools, benchmarking, innovative tools to help payment behaviors. The average dollar amount of
reduce costs, offering alternative payments to increase transactions may be impacted, depending on how
sales or hundreds of other areas. Merchants should consumers choose to make mobile payments. It
consider the full range of services and solutions when could lead to a rise in micropayments if they down-
choosing a payment processor, and then choose the load low-cost items or use mobile for convenience
one that best meets their overall needs. purchases. Or, it could lead to new fraud threats
that didn’t exist before mobile was a viable channel.
ER: For those who may be unfamiliar, what is There’s been a lot of attention on mobile within the
PCI Compliance? What role does it play in the payments industry; but we have to first reach
future of the payment processing industry? device, carrier and bank independence, as well as
provider consolidation before a successful model
Clark: PCI provides a common framework for how emerges. Mobile payments may also represent an
payment data should be stored and protected. PCI opportunity for traditional online alternative pay-
itself is not a compliance program; the individual ments to enter the card-present arena. Largely
card brands continue to maintain their own com- though, mobile payments will be driven by con-
pliance programs. Protecting account data should sumers. As a demand for mobile payments increas-
be a priority for all merchants, as it protects their es, so will the mobile payment options. It is an
customers and enables them to continue to accept exciting time to be in the payments industry. We’ve
electronic payments. As fraudsters become more seen more payments innovation in the past five
sophisticated, it’s clear that data protection will years than in the previous 50. Mobile will lead to
continue to be a main priority of payment brands, even more innovation.
acquirers, merchants and consumers. I think that
the standards will grow and change as the fraud
4 electronicRETAILER | Payment Processing 2008
JetPay CEO scam than anything else. The most insecure place to
Trent Voigt use your credit card now is at a restaurant, where
you set it on the table and it walks away. When
you’re using it on an Internet retail site, everything
is encrypted, everybody’s under PCI Compliance.
ER: For those who may be unfamiliar, what is
Trent Voigt, chairman and CEO of JetPay, LLC, PCI Compliance? What role does it play in the
directs the company in the latest technology for the future of the payment processing industry?
payments industry. JetPay has a comprehensive
customer-driven and technology-focused vision, Voigt: PCI Compliance is by far going to be the
matched with an end-to-end understanding of the biggest driver of the payment industry in the near
strategic business needs of its customers. JetPay’s future. If you have a merchant that actually stores
solutions provide businesses with flexible integra- credit card information and it gets compromised,
tion, ease of use, and the ability to adapt to virtual- it costs millions and millions of dollars for the
ly any website and application. issuers to replace that. It’s ferociously expensive.
As a technology advisor, Voigt assists with tech- With that in mind, I think PCI is only going to get
nical planning and product design, implementa- stronger and stronger. Even the small “doughnut
tion, integration and project management. shop merchants” have to fill out a questionnaire,
Additionally, he develops and maintains relation- stating they’re not storing information. I would
ships with industry leaders. Prior to JetPay, Voigt even say in two or three years, they’ll have to have
was CEO and president of Triumphant an audit of some type.
Enterprises, Inc., an innovative third-party
processor since 1990. ER: If mobile commerce takes off the way that
e-commerce has, what changes, if any, will
Electronic Retailer: What’s the most misunder- occur in regards to payment processing?
stood notion about the payment processing
industry? Voigt: If it’s truly mobile commerce, I don’t think
there will be a lot of changes because the transac-
Trent Voigt: I think there are two. The first would tion shows up to us very similar to a purchase on
be that you must have a gateway to process in the the web. So, it doesn’t really change our processing
electronic arena. The gateway came about when methods. Now, when we get to a real mobile com-
the Internet first started and the old processors merce environment where the phone is the paying
from the ’70s and ’80s had no ability to take trans- tool, like if I’m in a retailer and I just tap my phone
actions. So, the gateway was their interface. But, on the cash register and move on; that does pose
the good processors don’t need a gateway; they can some unique concerns for the processor. We would
talk directly to them. JetPay has an XML interface have to work on getting the “Card Present” media
that comes directly to them. So, there’s no reason into the phone. JetPay ran that pilot for MasterCard
to put another point of failure and an additional about a year ago to allow the phones to be a paying
cost in between your retail connection to the device, and it works very well. It’s now just a matter
processor. The second would be that the retailer of getting the public to accept that as a payment
should always work with their processor directly. device. The only real concern on m-commerce on
The third-party salespeople serve a great purpose, payment is if the phone actually has a loaded cred-
but if an electronic retailer has any size at all, they it card to it, that’s not a problem. If it’s m-com-
should work directly with their processor to estab- merce where it tries to bill the phone bill, that’s a
lish their merchant account. whole different story because then the risk moves
around to the phone company. For big purchases,
ER: What would you say to a consumer who’s you’ll have phone companies assuming credit, and
wary about making online purchases for fear they don’t like that at all.
of compromising his or her security?
Voigt: Actually, today I think the online purchases
are highly more secure. This is more of a media
6 electronicRETAILER | Payment Processing 2008
Litle & Co. Chief dumpster diving and friendly fraud. It’s a waiter or
Marketing Officer waitress writing down not only your card number,
Chris Long but also the security code on the back.
There are other things you can do to protect your
privacy and enhance security. For example, you can
sign up for an alternative payment plan, like PayPal
or Bill Me Later, which provide an extra layer of
Litle & Co. is a full-service payment processor serv- security between your data and the Internet.
ing direct response merchants, direct marketers, elec-
tronic retailers and other card-not-present retailers. ER: For those who may be unfamiliar, what is
Chris Long joined Litle & Co. as one of its founders PCI Compliance? What role does it play in the
in 2001. As chief marketing officer, Long is responsi- future of the payment processing industry?
ble for the company’s go-to-market strategy, brand
promotion, competitive positioning and business Long: PCI (or ‘PCI DSS,’ which stands for “Payment
development. Prior to joining Litle & Co., he was vice Card Industry Data Security Standard”) is the set of
president of marketing at OrderTrust, Inc., a firm rules put in place by the Card Associations (Visa,
that specialized in distributed order management MasterCard, Amex and Discover) to ensure the
and large-scale transaction processing networks. security of credit card data. The role of PCI
Before OrderTrust, Long was director of electronic Compliance in the future of the credit card industry
commerce at Staples, Inc., where he developed is critically important; if consumers cannot count
Staples’ first e-commerce site. on data security, then they will stop using credit
cards, and the entire system will shut down. All of
Electronic Retailer: What’s the most misunder- our futures depend on security. We payment
stood notion about the payment processing processors are the enforcement arm of the
industry? Associations, with respect to PCI. It’s our job to
make sure that merchants are compliant.
Chris Long: The most important and probably least
understood thing that we do is we accept merchant ER: When selecting a payment-processing
risk. When fraud occurs, or if a merchant was to go vendor, what’s the main element a potential
out of business, the customer gets their money back client should consider?
from us. So, you not only pay us to handle the
mechanics of your data transaction and follow VISA Long: It’s important that merchants have a payment
and MasterCard’s rules, but you also [depend on us] processor that truly gets to know their business.
to stand in for merchant risk. It’s almost like the When talking about alternative payments, as a mer-
merchant is being forced to buy life insurance. chant should, do you offer Bill Me Later? PayPal?
Google Checkout? It’s too expensive to offer all of
ER: What would you say to a consumer who’s them, so you need a payment processor to help guide
wary about making online purchases for fear you through that choice. For example, with Bill Me
of compromising his or her security? Later when a customer signs up for it, they put them
through a credit check behind the scenes. If they pass
Long: Online purchases are probably the most the credit check, then they’re granted the service.
secure aspect of the electronic payments industry. Now, that’s great if you’re selling to middle-aged,
With PCI Compliance, we know people are taking upper middle class consumers. But, if your consumer
really good care of data. If you look at the recent is not that tier, or if you’re selling to teenagers who
break-ins into data, they’re all related to traditional don’t even have a credit history yet, then why would
brick-and-mortars that are taking sloppy care of you bother to roll out a service that’s not going to
their data behind the scenes. The PCI rules were work for your customers? The flip side is if you want
put into place because people thought e-commerce to sell to teenagers, PayPal would be the perfect solu-
was insecure, but the major break-ins have not tion because they accept cash and checking accounts.
happened in e-commerce, ironically enough. This is the kind of advice that merchants should get
According to Javelin Strategy and Research, if you from their payment processor. If done correctly, your
look at identity theft and fraud data, the largest payment strategy is intimately tied into the rest of
source of fraudulent credit card transactions is your business.
8 electronicRETAILER | Payment Processing 2008
PacNet Services Ltd. companies. We will settle for a client in the native cur-
Director of Marketing rency or in U.S. dollars according to the merchant’s
Renee Frappier wish, which can save them up to 2 percent on their
processing. This is a big deal because they don’t have
to take the spread on the currency exchange.
ER: What are some of the other specializa-
PacNet Services was founded in 1994 by an inter- tions you’ve found and appeased in your
national team of banking experts. The company international commerce dealings?
received instant recognition as one of the world’s
leading processors of foreign currency checks for Frappier: Aside from processing credit card transac-
the direct response industry. For the past 14 years, tions in multiple currencies and countries, we also
PacNet Services has maintained an average growth offer other regionally appealing payment types like
rate of 20 percent or higher. Today, PacNet direct debit or bank transfer acceptance. Credit card is
Services is recognized for much more than pro- far and away the most popular payment type for the
cessing foreign currency checks. Companies from Internet in North America, but credit card isn’t as
a wide variety of industries rely solely on PacNet popular in other countries. For example, direct debit
Services to handle all of their international pay- is very popular in Germany, the Netherlands and
ment needs. Through offices in Canada and Austria. If you want to localize and achieve great suc-
Ireland, PacNet Services enjoys working with cess in those markets, it would help to offer payment
clients in North America, Europe, South America, options that are locally relevant. We don’t expect every
Asia, Africa and Australia. Renee Frappier is consumer to behave the same. We provide payment
PacNet’s director of marketing. options that are basically tailor-made for a specific
region. We try to make this very easy for the merchant.
Electronic Retailer: When selecting a pay- They don’t need to go and negotiate these payment
ment-processing vendor, what’s the main ele- options with the various foreign banks; we’ve already
ment a potential client should consider? done that. We put together the relevant payment
options for them on the back end, and then provide it
Frappier: It’s difficult to highlight one main consid- for their user interface or website on the front end.
eration because each company’s needs are quite dif-
ferent. Consider all of your potential sales channels ER: Aside from the possible 2-percent savings in
and markets, and make sure you’re choosing a processing, where is real value opportunity for
processor that can treat all of your needs, rather than a U.S. marketer to focus on international?
trying to negotiate separate agreements with multi-
ple processors or banks. You want to streamline the Frappier: When the U.S. market is bad, it’s actual-
entire process because otherwise, you’ll need to deal ly the best time to go international. The U.S. dollar
with multiple gateways and reporting formats. is in decline, and with it are U.S. profit margins. If
you’re marketing internationally anyway, then it
ER: What role does international commerce really pays to localize and set prices in the local cur-
play in payment processing? Is it difficult to rency. If you use some sort of a relational currency
work with the various currencies? converter on your site and your foreign prices are
all pegged to the U.S. dollar, they’ll change accord-
Frappier: It’s very easy for us to handle the currencies ing to the exchange rate every day. If this is the case,
because we specialize in processing transactions for you’re losing an opportunity to protect your profit
companies that have a presence in more than one margins. By localizing and setting a price in say
country. We have clients that do domestic business Euros, as the spread between Euros and the U.S.
only, but we’re particularly strong at serving those dollar becomes greater, so does your profit margin.
clients that need to transact in more than one curren- So, setting prices in a local currency is really a fan-
cy at a time. We have a worldwide network of banking tastic opportunity for American companies to pro-
facilities that allows us to offer credit card merchant tect their bottom line in a declining market.
accounts in the currencies of over 30 countries. We
can settle in those currencies, which is different than a
lot of the other international payment processing
10 electronicRETAILER | Payment Processing 2008
SKO Brenner America this is the consumer. What usually trips up the process
SVP of Consumer is a soft decline, that being where the cards have
Division Bob Graham expired, they’ve reached their limit, or they’ve closed
out the card and it’s no longer viable. A hard decline
is where the consumer actively and knowingly stops
the transaction, versus the process breaking down.
It was in 1993 that Bob Graham saw the first easy ER: How do your dealings with hard declines
payment offers being used by DRTV marketers. He differ from soft declines?
realized then that there was going to be a portion of
those accounts that would default because of Graham: Hard declines most often occur when the
account expiration, card limits or accounts closed product does not meet customer expectations, or
out before all the installments were paid. Graham is they can’t identify why the charge occurred on their
currently the senior vice president, consumer divi- credit card or checking account statement. In the
sion, for SKO Brenner America. SKO Brenner world of credit cards, if the customer disputes a
America is a national billing, customer retention transaction, the card companies will favor the cus-
and collection outsource solution provider that tomer. We are the advocates of the merchant. When
assists organizations that sell directly to consumers we first notify a customer, it’s usually done through
when the automatic credit card, e-debit or continu- a call center and we identify ourselves as a first-party,
ity shipment is interrupted due to non-payment. customer service function on behalf of the client.
Its resources will often convert these defaulted But, sometimes we find that the consumer’s position
accounts into satisfied, paid-in-full customers. has merit. Based on that response, we then notify our
client that they’re within their rights. However, for
Electronic Retailer: At what point in the pay- the majority of hard declines, the customer has tried
ment processing operation does your compa- to do everything to prevent from paying their obli-
ny step in? gation. When an account is still not paid and the
fault lies on the customer, we approach them as a
Bob Graham: We’re not dealing with the actual third-party collection agency voice—SKO Brenner
vehicle to get the consumer’s wishes converted into America. But, the vast majority of our declines are
a credit or debit on their account. We’re working soft. For most of my dealings within direct response,
with the merchant or other suppliers who are han- the customer is unaware of the situation, so they’re
dling the merchant account for the marketer. We not intentionally trying to dodge a bullet.
provide service when the automated re-submit
process has broken down. What makes us different ER: Some see payment processing as the
is that our resolution comes not from the infra- invisible lifeline of the industry. How do you
structure that’s been built electronically handling add to or compete with that?
these things, but rather, we go directly back to the
consumer, get new billing information from them, Graham: Everyone has one mission, which is to sell
and then submit that information through a nor- product and get paid for it. Ninety-five percent of
mal payment processing channel. So, it’s a three- the transactions that are initiated go through with
way win. It’s a win for the marketer because they no issue. But even in a 5-percent default rate those
get paid for the product they sold. It’s a win for the dollars become significant when you have a hit. In
payment processor because we create new transac- addition to that, sometimes these campaigns are
tions to run through their pipeline. And, it’s a win just marginally effective, and the difference
for us because we end up with a new client. between being a successful marketer is having this
extra cash come in. We can take anywhere from 30
ER: What are some of the circumstances that to 50 percent of the accounts we receive and con-
lead to default accounts? vert them from non-pay to pay.
Graham: Our mission is to be the fix when a pay-
ment breakdown happens. We provide the boots on
the ground to get back to the consumer to resolve
the situation. Ultimately, the only one who can fix
12 electronicRETAILER | Payment Processing 2008
Transfirst ePayment measures as a consumer to protect yourself. Buying
Services President on the Internet is more pervasive than it’s ever
Michael Phelan been, and it will continue to grow. You still need to
be pragmatic about your identity, so operate safely
and securely using common sense.
ER: For those who may be unfamiliar, what is
Michael Phelan joined TransFirst’s ePayment divi- PCI Compliance? What role does it play in the
sion as vice president of sales in 2005. A little more future of the payment processing industry?
than a year later in October 2006, he was named
president of the division. An 18-year veteran of the Phelan: It is at the very top of our priorities in
financial services industry, Phelan is responsible training employees and educating our merchants.
for developing business growth strategies, new We work to ensure that our merchants know what
product solutions and maintaining operational the credit card security requirements. We help
oversight for all areas of TransFirst’s ePayment them through that process. PCI compliance is the
business. TransFirst ePayment Services (“ePay”) is industry’s way to create standards, practices and
a provider of payment processing and information procedures that businesses follow in protecting
services for card-not-present merchants. ePay was cardholder data.
founded in 1990 as Data Processors International,
Inc. (DPI) and primarily provided credit card pro- ER: When selecting a payment-processing
cessing services targeting small- to mid-sized mail vendor, what’s the main element a potential
and phone order merchants. Since that time, it has client should consider?
continued its specialized CNP focus and grown its
industry presence by providing a variety of pay- Phelan: Especially in this space, merchants need to
ment processing services to the CNP market; work with a processor that understands the
including the e-commerce environment. In March nuances of the card-not-present industry.
2002, DPI was acquired by TransFirst, and re- Merchants should work with a processor that is a
branded its name to TransFirst ePayment Services, aware of the sensitivities of the card-not-present
Inc., in December 2003. supply chain. Whether that’s a media company, ful-
fillment company, consultant, or call center…Your
Electronic Retailer: What’s the most misunder- merchant processor needs to understand that sup-
stood notion about the payment processing ply chain and work that to your benefit, and to the
industry? benefit of the end consumer.
Michael Phelan: People don’t grasp that payment ER: Advertisers have struggled to monetize
processing is a form of short term, unsecured cred- social networking sites. Hypothetically, if sites
it. For inexperienced merchants, they tend to think such as Facebook began hosting more com-
this is a quick, easy process, when it’s actually a merce features, would it be difficult to imple-
complicated, involved process. It takes into account ment payment methods into their platforms?
technical, regulatory and security issues way
beyond the credit card. The payment processor is Phelan: This is what we specialize in at
fully liable for that relationship. TransFirst ePayment services: Integrating our
payment-processing platform into websites and
ER: What would you say to a consumer who’s companies. That’s exactly what we’re about. Our
wary about making online purchases for fear current processing platform, designed specifi-
of compromising his or her security? cally for card-not-present, delivers transactions
for large batch merchants, online and real-time
Phelan: I think it’s wise for a consumer to be wary. processing, and also for smaller merchants using
Especially if you didn’t initiate the transaction. Be an Internet-based virtual terminal application.
sure you’re doing business with a company you Also, our sub-accounting processing, response
know and trust. Check for Internet security seals on code monitoring system and direct query
the e-commerce sites you visit. Never give out your authentication would all work well in monetiz-
social security number. Take normal precautionary ing social networks.
14 electronicRETAILER | Payment Processing 2008
A Closer Look at the U.S. Online Shopper
It’s always valuable to better understand your customer. The demographics of the online shopper demonstrate higher
incomes and education levels. Also, nearly 30 percent of U.S. online shoppers always use the same payment method.
Reasons that U.S. Online Buyers Would Purchase from a Website vs. Another Offering of
the Same Product and Price, January 2008 (% of respondents)
Accepts payment method they want to use
Keeps financial information secure
Discount on next purchase
Offers PayPal or similar service
Double rewards points with store credit card
None of the above
More than half of online buyers choose a website because it keeps financial information
secure or offers their preferred payment method.
Point During Online Shopping When Payment Method is Considered, January 2008
(% of respondents)
Before beginning to research products
While researching products
When making the decision over which product and where to buy
While on the home page, because of an advertisement for that payment method
When I clicked checkout and entered the shopping cart
When I was prompted for payment information during the checkout process
Always use the same payment method and do not think about it
Other or do not know
The majority of U.S. online buyers always use the same payment method and put little or no
thought into the decision when making purchases.
16 electronicRETAILER | Payment Processing 2008
What Differentiates the Online Buyer?
Internet users with less than a high school degree are far less likely to shop online. Additionally, according to the Pew
Internet & American Life Project,“Online Shopping,” half of suburban Internet users make online purchases.
Demographic Profile of U.S. Online Buyers vs. Internet Users Who Have Not Purchased
Online, August-September 2007 (% of respondents)
Buyers Users who
(n=1,111) have not
Male 49% 49%
Female 51% 51%
18-29 25% 24%
30-49 46% 37%
50-64 23% 28%
65+ 6% 12%
R ac e o r e th nic i t y
White (non-Hispanic) 74% 66%
Black (non-Hispanic) 10% 11%
Hispanic (English-speaking) 10% 18%
Ed u c a t i o n
Less than high school graduate 6% 11%
High school graduate 29% 25%
Some college 25% 42%
College degree or more 39% 21%
H o u s e h o ld i nc o m e
<$25,000 13% 19%
$25,000-$40,000 12% 15%
$40,000-$60,000 17% 18%
$60,000-$100,000 22% 16%
$100,000+ 19% 7%
Don’t know or refused response 17% 25%
G e o g r ap hi c lo c at io n
Urban 25% 27%
Suburban 50% 47%
Rural 14% 15%
H o u s e h o l d b r o a db a n d 7 7% 53 %
Sources: Pew Internet & American Life Project
Thirty-nine percent of Internet users with a college degree or more consider them-
selves online buyers.
Payment Processing 2008 | electronicRETAILER 17