Street Smarts: Realizing the Value of Value-Added …value-added products and services is the latest...

NewsIndustry Update ..................................8The EVO-lution of MSI ......................20Success Is Spelled "ETA SLNF"

By Julie O'Ryan-Dempsey ..............22Scamming Spammers and the

Scamming Spams They Spam ........79Hypercom Sells Golden

Eagle Leasing ................................86

ViewsIntuit Buys Way Into POS Business

By Patti Murphy ............................16

FeaturesWhite Paper

What the Securities Industr y Can Teach Us About Electronic PaymentsBy Eric Thomson ..........................27

Book Review"How to Survive and Thrive in the Merchant Services Industry" ..........82

EducationStreet Smarts:

Eye on ETABy Ed Freedman ..........................60

How About Them Reserves?By Adam Atlas ..............................68

To Image or Not to Image … That Is the QuestionBy Lin Fellerman ............................72

Interchange Untangled – Part 2 ..........78

New ProductsTriple Teaming for Powerful

Mobile Payment Solution ................91A Flexible Billing Option

for Merchants ..............................91

Company ProfilesPaySystems Corp. ..............................35Pi Systems International......................41

InspirationA Marketing Plan Will Lead

Them to Your Doorstep ..................95Consider the Next Steps ....................95

DepartmentsForum ..............................................6Datebook........................................96Resource Guide ..............................98Index to Advertisers ......................102

October 27, 2003Issue 03:10:02

Publishing Excellence Since 1983

I f you're a Merchant LevelSalesperson looking for waysto counter merchant attrition,you might need something

new in your bag of tricks. If you'rethinking bankcards, rates and basispoints, think again. The sale of

value-added products and servicesis the latest buzz in the industry andis proving to be an eff e c t i v ea p p roach for acquiring and re t a i n-ing merchants.

See Value Added on Page 55

Realizing the Value ofValue-Added Solutions

It only takes one large uncollected check tocontradict the theory that imaging has no placein today's menu of hardware alternatives.

See Story on Page 72

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» Neal Anderson-NGA Enterprises » John Arato-MagTe k» Adam Atlas-Attorney at Law» Penny L. Baker-National Bankcard Systems » Clinton Baller-PayNet Merchant Services » John Beebe-Global eTelecom » Stacy Bell-Advanced Payment Tech » Audrey Blackmon-POS Portal » Shannon Byrne-Paradata Systems» Robert Carr-Heartland Payment Systems » Steve Christianson-TransPay Processing » Rob Connelly-VeriFone » Wayne Damron-Lynk Systems » Steve Eazell-Secure Payment Systems » Mike English-Ingenico » W. Ross Federgreen-CSRSI » Ed Freedman-Total Merchant Services » Patrick Gaines-LML Payment Systems » Marc G a r d n e r- N o r t h American Bancard » Alan Gitles-Landmark Merchant Solutions» Russ Goebel-Retriever » Larry Henry-L. Henry Enterprises » Ginger Hollowell-Electronic Money » Jared Isaacman-United Bank Card » Robert Joyce-Alliance Payment Systems » Allen Kopelman-Nationwide Payment Systems » Lee Ladd-LADCO Leasing » Vaden Landers-iPayment» Gary La Tulippe-Schmooze » Mitch Lau-Money Tree Services » Lisa Lersner-Golden Eagle Leasing» Dan Lewis-ABANCO International » Douglas Mack-Card Payment Systems » James Marchese-IRN Payment Systems » Paul Martaus-Martaus & Assoc. » David McMackin-AmericaOne Payment Systems » Doug McNary-First Data Merchant Services » Patti Murphy-The Takoma Group » Steve Norell-US Merchant Services » Anthony Ogden-Bankcard Law.com » Christopher O'Hara-Profitscentric » Paul Oswald-NOVA Information Systems» Bill Pittman-RichSolutions » David Press-Integrity Bankcard Consultants» Brian Rogers-PurchasingPower » Stuart Rosenbaum-U.S. Merchant Systems » Charles Salyer- G l o b a l Tech Leasing » Dave Siembieda-CrossCheck » Matthew Swinnerton-Merchant Services Direct » Dan D. Wolfe-Barons Financial Group

Editor in Chief:Paul H. Green [email protected]

General Manager: Julie O'Ryan-Dempsey [email protected]

Contributing Editors: Adam Atlas..........................................atlas@adamatlas.comPatti Murphy [email protected]

Senior Staff Writers:Juliette Campeau [email protected] Converse [email protected]

Contributing Writers: John H. Beebe................................john@globaletelecom.comSteve Eazell [email protected] Fellerman [email protected] Freedman [email protected] Graff............................Michelle_graff@verifone.comJared Isaacman............................jared@unitedbankcard.comDavid H. Press [email protected] Scharnell [email protected] Thomson [email protected]

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A ff i l i a t i o n s :

Visa 's R ED Ac tua l Dates

I believe the information contained in the article starting on page27, "Coming in October: Visa's RED Will Change ChargebacksForever" [The Green Sheet, September 22, 2003, issue 03:09:02]is not up to date as of the time of publishing. According to Visa, thereduction in chargeback cycles is anticipated to become effectiveApril 2004. Also, the introduction of Visa RED online in the U.S. isbehind schedule and some rules and requirements of the use of REDonline products are not mandated until October 2004. Thus, acquir-ers will still have 21 days to get supporting documentation to theissuer. In addition, beginning 10/03, Visa will reduce and/or elim-inate the special treatment of T&E (travel and entertainment) charge-back rights. This will have significant impact on this industry. On apositive note, effective 10/03 Visa has reduced the requirement tohold transaction "paper" from 18 months to 12 months, thus reliev-ing the merchant of this burden. This should significantly reduce thevolume of compliance cases for request for copy.

Andrew C. BenjaminChief Operating Officer

Merlin Solutions LLC

Andrew:

The information contained in the article starting on page 27,"Coming in October: Visa's RED Will Change Charg e b a c k sForever," contains a typo (we wanted to see if anyone is readingthese articles).

According to Visa, the reduction in chargeback cycles is anticipatedto become effective April 2004. Also, the introduction of Visa REDonline in the U.S. is a bit behind schedule and some rules andrequirements of the use of RED online products will not be mandat-ed until October 2004.

In addition, beginning October 2003 Visa will reduce and or elimi-nate the special treatment of T&E (travel and entertainment) charge-back rights.Although these changes do not take place for a year, it is imperativethat chargebacks are handled properly now so that when these

changes are mandated, there will be a smooth transition.

David H. Press, Principal and PresidentIntegrity Bankcard Consultants, Inc.

Contributing Writer to The Green Sheet

And V isa Re sponded…

Re: "Coming in October: Visa's RED Will Change ChargebacksForever."

The article states that we are eliminating the second chargeback andsecond first time chargeback in October 2003 (both should be April2004).

The article also refers to the requirement for all dispute documenta-tion to be online and all arbitration and compliance case filings onVisa Resolve Online effective October 2003.

The correct dates are as follows:

In April 2004, all U.S. Members with $10 billion or more in Visasales must send their documentation online and use Visa Resolveonline for pre-Arbitration and pre-compliance.

In October 2004, all U.S. Members are required to send all disputedocumentation online and file all pre-arbitration, arbitration, pre-compliance, and compliance cases through Visa Resolve Online.

Jay HopkinsCreative Response Concepts (for Visa USA)

C'mon, you're goingto waste your

money on that?

Oh, that will look GREATwhen you're home alone

this Saturday night!Gimme a break, you can't

a f ford this!

The predecessor to the Smart Card, the "Smug" Card never caught on for some reason.

North American Bancard is a registered ISO/MSP of HSBC Bank USA Inc, Buffalo, NY

N E W S

Seeking Members: Institute forPayment Professionals

Recognizing a need for qualified and educated salesp rofessionals who understand merchants' point-of-salere q u i rements, two payment industry veterans, P a u lM a r t a u s and Brett Mansdorf, have formed a new edu-cational forum called the Institute for PaymentP r o f e s s i o n a l s (IPP). IPP is an educational re s o u rce thatwill provide industry information through local semi-nars and the Internet. IPP is developing a Web site off e r-ing re s o u rces to help support sales efforts such as whitepapers, FAQ's and a Q&A with industry experts. IPPmembership will cost $25 a year; training sessions willbe priced at $35 for members and $100 for non-mem-bers. IPP is planning a road show of seminars at majorU.S. cities beginning in Dallas on November 15, 2003.Look for further information to come.

A N N O U N C E M E N T S

The Clearing House Turns 150

The Clearing House celebrated 150 years in the pay-ments business on October 3, 2003. Established in 1853to simplify the exchange of checks and improve the eff i-ciency of the payments system, it now manages andoperates the Clearing House Interbank PaymentsSystem (CHIPS), the National Check Exchange and theSVPCo businesses as well as the Electronic PaymentsNetwork (EPN) and Electronic Clearing Services (ECS).The Clearing House is owned by the U.S. commerc i a lbanking affiliates of ABN AMRO, Bank of America, The

Bank of New York, Bank One, Citigroup, DeutscheBank, Fleet National Bank, HSBC, JP M o rgan ChaseBank, Wachovia and Wells Farg o .

Certegy Part of Visa POS Check Program

Certegy Check Services, Inc., a subsidiary of CertegyInc., is participating in the Visa POS Check Service p ro-gram as both an acquiring processor and a third - p a r t ycheck authorization source for Visa. Certegy pro v i d e sw a r r a n t y, verification and collection services for re t a i lm e rchants. The Visa POS Check Service program ro u t e scheck transactions directly to the financial institutionw h e re the consumer's demand deposit account re s i d e sfor authorization and settlement. When Visa does nothave access to the financial institution, checks are ro u t-ed to a third-party authorizer, such as Certegy.

Two Announce Compliance with Visa CISP

Visa U.S.A recently recognized e P r o c e s s i n g N e t w o r ka n d SLIM CD, Inc. for being compliant with itsC a rdholder Information Security Program (CISP).e P rocessingNetwork is a full-service Internet paymentgateway that offers Internet, retail, MOTO, mobile PDAand cell phone, credit card and check processing and anoptional integrated shopping cart. SLIM CD offers POSs o f t w a re for retail, restaurant, hotel, auto rental, dire c tmarketing and e-commerce merchants that supportsboth credit and PIN debit transactions.

Visa Awards Fifth Third Bank for Quality

Vi s a re c o g n i z e d Fifth Third Bank Processing Solutionswith its 2003 Member Service Quality PerformanceAw a rds. The awards are for the lowest duplicate trans-action rate, highest copy request fulfillment rate andlowest chargeback-to-sales ratio among credit card

➤ ConocoPhillips is selling its Circle K Corp. to Alimentation Couche-Tard, Inc.Circle K has 1,663 retail stores in 16 states.

➤ A Bank One economist predicts 2003 holiday sales will increase more than 6% from last season(more than double the pace of last year) because of tax cuts, union bonuses and easy credit.

➤ Retailers across all categories reported better than expected sales in Sept. 2003 for the thirdstraight month. The Bank of Tokyo-Mitsubishi Ltd.'s same-store sales tally of 77 stores increased 5.9% forSept., the strongest gain since March 2002, which was 6.4%.

p rocessors. Fifth Third has won the lowest charg e b a c k -to-sales ratio award eight years in a ro w, and the high-est copy fulfillment rate award seven times. Fifth Thirdp rocesses 8.2 billion ATM and POS transactions eachyear for more than 190,000 retail locations and financiali n s t i t u t i o n s .

SVPCo To Sponsor Check Image Study

Small Value Payments Company, LLC, or SVPCo,announced it will co-sponsor a 16-week study to deter-mine whether less expensive black and white imagesused in check processing provide the right level ofu s a b i l i t y, or if grayscale, which provides a higher defi-nition image, will be more cost effective in the long ru nfor handling exceptions, detecting fraud, and pro v i d i n gcustomer service. Financial Services Te c h n o l o g yConsortium (FSTC) is conducting the re s e a rch. The U.S.Federal Reserve is also a sponsor of the study.

WesPay Awards Donato and Grommesh

The Western Payments Alliance recognized F r a n kD o n a t o, Senior Vice President of City National Bank inLos Angeles, and Mike Grommesh, Senior Vi c eP resident of The Golden 1 Credit Union in Sacramento,for their lifetime contributions to the payments industryat Payments Symposium 2003 held in San Francisco onSeptember 30. Both are members of WesPay's Board of

D i rectors. Donato received the George E. LowtherAw a rd for Outstanding Service to the PaymentsI n d u s t r y. Grommesh received the Richard JohnsonAw a rd for his work in re p resenting credit unions inWesPay's recent dues re s t ructuring and in planning andlaunching The Payments Symposium.

PA RT N E R S H I P S

Albertson's Picks TeleCheck

First Data Corp. will provide its TeleCheck Services,I n c. check verification and recovery services to allAlbertsons, Inc. store locations. Albertson's operatesa p p roximately 2,300 retail stores across the U.S., includ-ing Albertsons, Jewel-Osco, Acme, Sav-on Drugs, OscoD rug, Albertsons-Osco, Albertsons-Sav-on, Max Foodsand Super Saver.

Food Lion Renews with Global Axcess

Nationwide Money Services , subsidiary of G l o b a lAxcess Corp., extended its contract with U.S. supermar-ket chain Food Lion, LLC (subsidiary of DelhaizeAmerica), to continue providing ATM equipment, trans-action processing, maintenance, monitoring and cashmanagement services at all Food Lion and Kash n'Karrys t o res through April 30, 2011. Food Lion has 1,200 store sin 11 Southeastern and Mid-Atlantic states and 140 Kashn'Karry supermarkets throughout central Florida.Nationwide Money owns and operates 725 ATMs inFood Lion/Kash n'Karry locations, and plans to expandits ATM network to include more than 1,300 within thenext 36 months.

Cardinals Win with GO Software

Major League Baseball team, the St. Louis Cardinals,manages credit card processing of ticket sales with G OS o f t w a r e's payment processing solution, RiTA ( R a p i dTransaction Authority). The software helps the org a n i-zation manage online, telephone and walkup ticketsales year round, but was specifically implemented tomanage credit card transactions for its two busiest daysof the year: the day tickets for regular season games firstbecome available and the day playoff tickets firstbecome available. The Cardinals said it plans to expandthe use of RiTA into other systems, including merc h a n-dise, season magazine subscriptions and club member-ship sales.

MFA Oil Picks Lynk

Lynk Systems, Inc. will provide M FA Oil Companywith electronic payment processing for credit, debit,p repaid and EBT cards. MFA Oil will also use Ly n k ' sp roprietary FuelLynk fleet program with its Pre f e r re dand Petro - C a rd 24 cards. MFA Oil will use Lynk's solu-tions, including Petro Trans, in conjunction with

Page 1 0

2

VeriFone Inc.'s Tranz 380 point-of-sale (POS) terminalsand VeriFone's Ruby SuperSystem where appro p r i a t e .

MSI NJ, Global eTelecom Renew Deal

Global eTelecom, Inc. has renewed an agreement withMerchant Services, Inc. (MSI NJ) where it will continueto provide back-engine processing and support for MSINJ's Electronic Check Conversion pro g r a m .

NPC Wins QSR Hardee's

National Processing Company, LLC signed a multi-year credit card processing agreement with H a r d e e ' sFood Systems, Inc., a wholly owned subsidiary of CKERestaurants. NPC will provide Hardee's with authoriza-tion and settlement services for Visa and MasterCardtransactions accepted at all corporate-owned Hard e e ' slocations and participating franchise locations. Hard e e ' sowns and operates more than 2,100 company and fran-chise-owned quick-service restaurants in 31 states and11 foreign countries.

Payment Data and Network 1 Partner

Payment Data Systems, Inc. signed a multi-year agre e-ment with Network 1 Financial, a wholly owned oper-ating company of Verus Financial Management, to pro-

vide credit card authorization and settlement servicesand sponsorship into Visa's ISO and MasterCard's MSPp rograms. Payment Data will extend credit card mer-chant services to all of its customers. Ve rus will haveaccess to Payment Data's payment processing, whichincludes $600 million worth of credit card transactionv a l u e .

PRE Soltions Expanding Partnerships

PRE Solutions, Inc. partnered with Coinstar Inc. t odeliver its prepaid consumer products, including pre-paid wireless, long distance, Internet, and Web content,t h rough self-service Coinstar Centers and TO P - U Pkiosks. PRE Solutions has also teamed with B r i g h t s t a r,,a wireless distributor and value-added service pro v i d e r,to provide retailers with solutions for prepaid wire l e s sp roducts and services at the point of sale.

Paymentech Signs Ford and Yaga

Paymentech, L.P. will provide electronic payment pro-cessing services to nearly 5,000 Ford Motor Companydealerships in the U.S. Paymentech is now the pre f e r re dp rocessor for Ford's system-wide FORDSTAR Charg eand Check Services Program. Ford's full transition toPaymentech processing is targeted for completion in thefourth quarter of 2003. Paymentech is also off e r i n g

Ya g a's Digital Content Commerce Solution to its onlinem e rchant customers so they can more easily sell bothphysical and digital content at the same time, such asnews articles, music or software from their Web sites.Yaga and Paymentech have several mutual clients in themedia and entertainment space. One is Tribune MediaServices (TMS), the largest syndicate of news, comicsand puzzles on the We b .

A P P O I N T M E N T S

Vital Recruits VIP Payment Exec

Vital Processing Services appointed Kathy Crumley a sVice President of Vital Integration Partners (VIP)P rogram. Crumley will build and manage the new VIPp rogram. She has 15 years of payment and merc h a n tservices experience and most recently served as Vi c eP resident of the Global Alliance Channel for Hyperc o mC o r p .

Welcome Appoints CEO for Americas Region

Welcome Real-time appointed Connie Festa as CEO ofWelcome's Americas region, covering the U.S., Canadaand Latin America. Festa has been serving in the posi-tion since July 2003. She has 24 years' experience as a top

sales executive responsible for establishing NorthAmerican operations for a number of payment systemscompanies, including Keycorp (Australia), Bull'sEFT/POS division (France), International Verifact Inc.(Canada) and ICL (UK). Festa has also served on theE TA's Technology Committee for six years and on thePlanning Committee.

CardWare Int'l. Hires EVP Sales

Shelly Laird joined C a r d Ware International a sExecutive Vice President of Sales. Laird pre v i o u s l yworked at Fifth Third Retail Merchant Services whereshe was responsible for small market sales and salesmanagement. She has 14 years' experience in opera-tions, sales and client and sales management withF r i g i d a i re Financial Corp. and Bank of A m e r i c a .

Quiroz Joins Cynergy Data

M e rchant acquirer Cynergy Data h i red Peggy Quirozas a Technical Support Supervisor. Quiroz has morethan 10 years of experience in the bankcard industry.She started out as a Sales Coordinator for Lipman USA,Inc., and was promoted to Customer Service Rep toManager and then to Account Manager. She has a back-g round in platform training, workshop facilitation,budgeting and human re s o u rces.

Page 1 4

By Patti Murphy

Intuit Inc. is onto somethingthat could be cause for con-cern for folks in other businesslines, such as payments. The

Mountain Vi e w, Calif., firm – per-haps best known for its Quicken andQuickBooks accounting software –just plunked down $116 million incash for Innovative Merc h a n tSolutions (IMS), an up-and-comingm e rchant services firm that operatesf rom headquarters in Calabasas,Calif.

Joe Kaplan, IMS founder and CEO,is pretty astute when it comes to them e rchant community, having builtand sold Superior Bankcard Serviceduring the 1990s and then eventual-ly starting IMS in 1999.

The deal with Intuit has Kaplan andassociates leveraging their com-bined acumen to help Intuit boost itsp resence in the small-business mar-ket for financial services. Kaplanand his staff of 110 have been askedto remain on board .

I can almost see the prompts pop-ping up on my QuickBooks scre e n s :"Enhance sales with credit card anddebit card acceptance. Let Intuit helpyou set up a merchant card account.Click here for details."

Intuit has dabbled in card paymentsbut lacked the capability to supportPIN-based debit and swipe termi-nals, a spokesperson explained.While limited, the merchant accountservices available thro u g hQuickBooks, Intuit's small-businessaccounting software, have attracted40,000 customers and created a $9million business for Intuit over thelast three years, according to a com-pany statement. But, the company'sspokesperson noted, "There's a huge

need beyond this limited off e r i n gfor QuickBooks users and othersmall-business owners."

IMS processed an estimated 1.7 bil-lion Visa and MasterCard transac-tions in 2002, according to GSQ's2002 Billion Dollar A c q u i re r sReport. It ranked 30th among bil-lion-dollar acquirers. That's arespectable showing for a four- y e a r-old company.

Kaplan and a group of co-investorsalso own Innovative Bank, anOakland, Calif.-based bank that spe-cializes in small-business lending (itholds "Pre f e r red Lender" status withthe Small Business A d m i n i s t r a t i o nand ranks as the third - l a rgest SBAlender in the U.S.). While the bankand the processing company havesimilar names, they operate as sepa-rate corporate entities.

The bank isn't part of the Intuit deal,but it might play a role in Intuit'sm e rchant services strategy; howev-e r, Kaplan expects the business willsoon outgrow Innovative Bank andwill probably be shared by two orm o re acquiring banks. (Remember,the size of an acquiring bank's bookof business is constricted by re g u l a-tory re q u i rements on capital. A p r i-vately held bank with two branchesand an Internet presence, Innovativehas about $70 million in assets,a c c o rding to Kaplan.)

Intuit doesn't rule out owning abank, but the legal odds are againstit these days. What it's most intere s t-ed in is expanding its re l a t i o n s h i p swith small businesses, and companyexecutives see merchant services asan area rich with untapped poten-tial.

"Small business is a huge business

for us. Our goal is to solve as manypain points as possible for the small-business person," the Intuitspokesperson said. "We ' re alwayslooking at opportunities."

Competing with the Big GuysThose who know Kaplan and IMSsay there''s real potential for Intuit,t h rough IMS, to become a formida-ble competitor in the merchant serv-ices arena. "If they follow the planlaid out by Joe Kaplan, they willhave every chance for success," pre-dicted Paul Martaus of Martaus &Associates, Mountain Home, A r k .

But Intuit is a big company (it claimsnearly 7,000 employees), and theb u reaucracies common to big com-panies can be stifling for entre p re-neurs like Kaplan, Martausobserved. If Kaplan doesn't re m a i nwith Intuit, the odds for success godown. "I don't think they can makeit work without him," Martaus said.

Kaplan, though, had nothing butpraise for Intuit's corporate culture ." T h e re are so many synergies, andour corporate cultures are aligned,"he said. "We ' re like two peas in ap o d . "

Intuit isn't the first software house todabble in financial services. Severalyears ago, Microsoft teamed up withFirst Data Corp. and Citicorp in ane l e c t ronic bill-pay venture but hassince sold its interests in the venture(as have Citi and First Data) to ano u t s o u rcing company that special-izes in bank operations.

E l e c t ronic billing and paymentalways have been a difficult sell, pri-marily because the service re q u i re sthe buy-in of consumers and billers,constituencies that are serviced bytwo distinct areas of banking (re t a i l

Page 1 6

Insider's Report on Payments

Intuit Buys Way Into POS Business

and wholesale) that are loathe toworking in tandem.

M e rchant services, on the otherhand, is strictly a business service,one that is critically important to alltypes of businesses — from the big-gies all the way down-market to the"mom and pops."

What bodes well for Intuit is thatbanks, for the most part, havei g n o red "mom and pop" businesses,especially the legions of home-basedbusinesses. These are the types ofbusinesses that drive Intuit's re v-enues.

"The acquisition of IMS enablesIntuit to strengthen our offering fora critical 'beyond-accounting' serv-ice," Steve Bennett, Intuit Pre s i d e n tand CEO, said in the company'sstatement announcing the deal.

Intuit reports that its fiscal year 2003

revenues exceeded $1.6 billion. Toput this into perspective: First DataCorp. reported $7.6 billion in re v-enues in 2002; $2.8 billion came int h rough merchant services. NPC,which isn't quite as diversified asFirst Data and focuses more acutelyon merchant services, saw a littlem o re than $118 million in re v e n u e sin 2002.

Kaplan is excited about the deal andbelieves that under the Intuit corpo-rate banner – with the funding andaccess to new technologies and busi-ness processes that come with it –his operation can mine new pro f i ts o u rces in merchant services. Heclaims, for example, that nearly 85%of all small businesses that useaccounting software useQuickBooks. And many of thesebusinesses are not accepting cardpayments.

"ISOs and agents need leads to sur-

vive," Kaplan said. As part of Intuit,he added, "We can back our agentsand reps with leads that will allowthem to offer full-service financialp ro d u c t s . "

If the Intuit deal isn't already turn-ing heads in banking and payments,I think it should be. Intuit has set itssights on becoming a major pro v i d e rof financial services in a market seg-ment that long has been ignored bytraditional providers (read: banks),sole proprietorships and other smallbusinesses. It may not own a bank,but it doesn't really need one tog row and prosper in this market. Am e rchant services company shouldsuit its needs for entree to the pay-ments system just fine.

Patti Murphy is Contributing Editor of TheG reen Sheet and President of Ta k o m aG roup. She can be reached [email protected]

Page 1 8

The EVO-lution of MSI

What's in a name? Shakespeare may have hadit figured all wrong, at least according toM e rchant Services, Inc. (MSI) of Plainview,N . Y. Ask this company if a payment pro-

cessing services provider by any other name would smellas sweet, and they'll say 'no.' As part of a major re - b r a n d-ing campaign, MSI has new name: EVO.

"EVO" will now better reflect not only the company'scommitment to continuing its current level of quality andservice, but will also incorporate concepts like new MLSp rograms, inaugurate the next stage of its strategic visionand establish a unique and recognizable name within thei n d u s t r y. The name change is official as of October 25,2 0 0 3 .

It' what's behind the name that's important here .Sometimes you can't have evolution without re v o l u t i o n ,and the new name was developed as a vehicle to commu-nicate those two important components of the company'sd i re c t i o n .

EVO's ownership, management, staff, location and over-

all focus on quality customer service have not changed.When contacting EVO, the main toll-free phone number,800-CARDSWIPE (800-227-3794), also re m a i n sunchanged; however, the company's Web address haschanged to www. G o ToEVO.com to coincide with the newn a m e .

A c c o rding to Ray Sidhom, President and CEO of MSI andnow EVO, the re-branding campaign was driven primari-ly by the company's desire to establish an identity fro mwhich to implement new sales programs and gro w t hplans. Sidhom has been at the helm guiding the expan-sion since 1995.

"Since 1995 we've developed revolutionary programs forour partners that have helped to elevate MSI's position inthe industry," said Sidhom "We ' re now ready to grow ourbusiness to the next level, and EVO signifies our re v o l u-tionary approach for this evolutionary stage of our devel-o p m e n t . "

In today's competitive environment, where the phrase" m e rchant services" is used fre q u e n t l y, EVO will bring ahighly recognizable brand name to the company. The re -branding also includes a distinctive logo.

Founded in 1989, MSI has grown dramatically over thelast several years. From its inception, EVO serves morethan 75,000 merchants who generate over $7 billion inp rocessing volume annually.

EVO's primary focus will remain on providing MLS,independent sales agents and agent-bank clients the serv-ices and re s o u rces they need to grow quickly and pro f-i t a b l y. Spring boarding from MSI's strong organic gro w t h— including five acquisitions in four years — financials t rength and flexibility, EVO is positioned to drive itsown strategic direction, as well as its clients' successes.

EVO has already invested $5 million in a pro p r i e t a r yf ront-end system. The new switch will roll out in early2004 and is designed to build on the company's existings i n g l e - s o u rce solution for its clients' electronic paymentre q u i re m e n t s .

EVO has the scale to provide an enhanced suite of pro d-ucts and services for its clients and merchants of all sizesa c ross the U.S.; the company processes credit, debit andgift cards, EBT and provides check conversion and checkguarantee services.

EVO will continue MSI's role as an industry leader and asthe first true ISO to enter the Canadian bankcard marketby giving its clients tremendous opportunity where thetraditional ISO sales channel has not been used.

Page 2 0

By Julie O'Ryan-DempseyGeneral Manager, The Green Sheet, Inc.

Conventional Wisdom said, "No one wouldattend," but an event marked by two firstsp roved Conventional Wisdom wrong thist i m e .

Amid the recent flurry of trade shows and meetings,E TA's fall gathering was held September 16-18, 2003 inBoca Raton, Fla. This was the first trade event off i c i a l l yo rganized by the association's new leadership, under thed i rection of Carla Balakgie. It was also the first annualStrategic Leadership and Networking Forum (SLNF), aslight variation on previous meetings.

Despite it being hurricane season, five hundred peoplef rom all over the country attended the SLNF to meet,g reet and establish connections. The event was signifi-cantly diff e rent from the regional acquirers' meetings,and it fulfilled a very diff e rent need within the industry.The presentations and panel discussions were geare d

t o w a rd management and policy making for industryissues such as creating and setting standards. Although itwas not a meeting for re c ruiting sales re p resentatives, anevent like this does serve a very important purpose, justas regional acquirers' associations or associations thatre p resent the feet on the street serve an important pur-pose.

I had the opportunity to speak with many of the industryexecutives in attendance. The overall consensus was thatthis was the meeting of the "golden handshake." In theopulent setting of the 75-year-old Boca Raton Resort &Club, many deals were signed that had been months andyears in the making. The SLNF was really the CEO's sum-mit of the payment processing industry. In fact, the"power source" at this conference was so intense thatHurricane Isabel was kept at bay off the coast of Florida.OK, that's stretching it a bit, but the weather was gor-geous and the beaches and golf course beckoned.

The meeting began with a cocktail reception, and KC andthe Sunshine Band provided the entertainment (KCp roved that some old rockers should re t i re). At the re c e p-tion, the networking was fast and furious with severalh u n d red already in attendance.

Frank Abagnale presented an outstanding keynotea d d ress. This man's life story was the inspiration for themovie "Catch Me if You Can," and he's been a popularspeaker at many trade shows since the movie came out.Abagnale is a captivating storyteller. He relates both hispersonal adventures and provides "trade secrets" in ar a p i d - f i re forty-five minutes — without notes! Hea d d ressed payment security, check fraud and identitytheft.

Abagnale strongly encouraged everyone to visit the We bsite www. p r i v a c y g u a rd.com., a re s o u rce to help youmonitor your credit reports in order to protect yourselfagainst identity theft. I'm not sure which was more inspir-ing: his story or his talent as a speaker. Every attendeereceived a signed souvenir copy of Abagnale's book.

First Data Corp. sponsored the event's Internet CyberCafé, which featured several stations in a specific area ofthe room set up specifically for networking and pro v i d i n gw i reless Internet access (each of the tables was individu-ally sponsored as well). Breakfast, lunch and caff e i n eb reaks were held in the Café, an area conducive to con-versation and an imaginative component for a tradeshow—it made checking in with the home office muche a s i e r.

The presentations were all focused on management issuesand included some very interesting and high-powere djoint presentations and panels:

• Representatives from Visa and MasterCard addre s s e d

Page 2 2

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the debit-card settlement• Adam Godfre y, Ben Spero and Tom Wimsett discussedprivate equity investments in the industry• Representatives from American Express, Vi s a ,Discover and MasterCard participated in a panel dis-cussion re g a rding data security and lack of an industrys t a n d a rd

As ETA's new Executive Dire c t o r, this was CarlaBalakgie's first official meeting. She was pleased with theattendance, the overall event and especially with the pos-itive response ETA received. "We were delighted that theevent — which was based directly on member feedback— so obviously hit the mark in terms of responding totheir needs. The outcome is that we can re f i n e rather thanre d e s i g n this meeting for next year," Balakgie said.

When Balakgie took over the job as Executive Director inJuly 2003, she said that one of her goals was to continuep roviding serious forums for networking, and she seemsto be headed in the right dire c t i o n .

Mary Dees, ETA's current President, was also very posi-tive about the event. "I am pleased that we were able todeliver a redesigned program that provided the intimacy,relevance and personal connection that members told usthey wanted," Dees said.

"I think the success of this meeting could be attributed toa number of things but a few stand out. There was an inti-macy in the event fostered by attendees being able tomeet in the Cyber Café during concentrated time periods.Rather than walking around trying to see exhibits, theyw e re able to spend quality time having in-depth discus-sions with specific companies and individuals.

“The proximity of the Cyber Café and the general ses-sions allowed ETA attendees ease of seeing and meetingother attendees, without running into people attendingother conferences as well. The 'meatiness' and re l e v a n c eof the sessions fostered thought provoking and intensediscussions. This event appeared to provide an atmos-p h e re that fostered more in-depth business contact anddialogue among key industry players," Dees said.

The ETA s t a ff encouraged attendees to provide feedbackon the event, and it's important to let them know whatyou thought about it. If you attended and did not com-plete the on-site evaluation, please visit the ETA Web site( w w w. e l e c t r a n . o rg), and pass your comments on thatw a y. While we heard that having a meeting without thefull-blown expo was beneficial, many of the attendeeswould have pre f e r red the scaled-back vendor area similarto what they're doing at the regional acquirers' meetings.

Page 2 4

With the near-term passage of the Check 21Act, the MLS/ISO community will be pre-sented with an unprecedented opportunityto sell, install and maintain check image-

c a p t u re solutions for more than 40 billion items—fourtimes the current number of credit card transactions inthis country. These 40 billion transactions will consist of amix of consumer, corporate and government checks,which all have diff e rent re q u i rements associated withtheir conversion—from paper to image exchange and set-t l e m e n t .

M e rchant Level Salespeople who understand the magni-tude of this opportunity will expand their vision fro mpoint-of-sale (POS) transactions and start laying the foun-dation to turn their clients'' payroll checks and vendorand government payments digital. The one industry thathas probably given more thought to this transition thanany other is the securities industry.

After all, brokers perform their services as agents movingl a rge sums of "other people's money" between investorsand investments. In doing so, relative to the dollars trans-f e r red, they operate on very thin margins and are forc e dto manage a wide array of payment risks.

The issues and re q u i rements the securities industry hasdefined for streamlining funds transfer, which isdescribed in this Securities Industry Association (SIA)white paper, are informative and relevant.

Executive Summary The document starts with an introduction in the form of a

Letter from the Chairperson, Ernest Pittarelli. In the firstsentence, it becomes obvious that Pittarelli is addre s s i n ga select group because he describes the drivers behinde l e c t ronic payments for the securities industry asS T P / T + 1 .

For those of you not familiar with this jargon, STP s t a n d sfor Straight Through Processing, and T+1 is shorthand foran SEC ruling requiring the securities industry to movet o w a rd completing stock exchange purchases one busi-ness day after the trade is executed. T+1 is pretty straight-f o r w a rd; STP deserves some further explanation.

Page 2 7

R e s e a rch Report: Securities Industry Association (SIA)Payments Processing White Paper Update Authors: SIA STP Payments Processing Sub-CommitteeDate: August 2002Size: 59 pagesRelevance Rating: Medium-HighWeb Address: www. s i a . c o m / s t p / p d f /

Payments_White_Paper_v3.6_082902.PDF

What the Securities Industry Can TeachUs About Electronic Payments

Imagine a POS transaction where the consumer pocketsthe change and walks out of the store with the scannedm e rchandise. When STP comes to your re t a i l e r, as thecashier scans the merchandise during checkout, not onlydoes the cash register run a total purchase amount, butthe store inventory is reduced for each item sold, and theb a r-coded items are aggregated into an electronic pur-chase order and transmitted to various suppliers for bid.

The retailer's computer uses a set of rules to compare thesupplier bids, and generates a purchase order and trans-mits it to the winner. When the pallets arrive at the load-ing dock, scanners are used to confirm that the contentmatches the approved purchase ord e r, inventory isupdated, and an electronic payment is authorized forrelease according to the terms off e red by that supplier.

For the securities industry, STP is the execution of a stocktransaction without another human being involved pastthe broker's entry into the order system. With Internetsecurity trades, the broker is taken out of the transactions t ream and the trade is taken "straight through" the ord e r,confirmation and settlement stages electro n i c a l l y.

With drivers like STP/T+1, the security industry set forth10 building blocks, one of which was to "reduce thereliance upon checks and increase the use of alternativemeans of payment." This white paper was publishedm o re than a year ago, before the Check 21 Act was a seri-ous piece of legislation. But even at that stage, the SIAknew that checks weren't going away and that the A C Halternative had serious limitations associated with it.S p e c i f i c a l l y, this is what Pittarelli re f e r red to in his coverletter as "the NACHA Right of Return Rule."

This is the NACHA regulation that allows a consumer 60days from the date of authorizing an ACH debit to achecking account to dispute the item and ask the bank toreverse the transaction. This is a major problem for a bro-kerage house, especially if the stock market slides and theinvestor takes a serious loss when a bank statementshows the authorization for those 100 shares of K-Mart.

The white paper preceding this version of the PaymentsSubcommittee report investigated the various advantagesand disadvantages of existing forms of retail payment,including ATM debits. The realization surfaced that thepaper check was not going away anytime soon andwould remain the predominate method of payment forthe securities industry into the foreseeable future. Theindustry concluded that it needed to focus on appro a c h e sto improving the security and automation of paper checkt r a n s a c t i o n s .

The subcommittee identified the following advantagesand disadvantages associated with paper check transac-t i o n s :

Advantages: widely used, familiar, relatively low bank-ing fees, convenient for investors and re l i a b l e .

Disadvantages: fraud exposure, uncertainty of fundsavailability timing, mail delays, inherent manualp rocess that increases risk and costs, along with theextension of credit during the settlement process underT+1 conditions.

This white paper also detailed concerns associated withACH as an alternative to checks. They included the fol-l o w i n g :

• NACHA's 60 Day Right of Return rule, which was origi-nally intended to protect consumers over unauthorizedtransactions. This rule represents a major exposureincrease for the securities industry relative to the finalityof settlement afforded checks under the UCC body oflaw.

• Credit and debit cards also provide cardholders with sim-ilar protections and rights of reversal.

• Appeals by the securities industry to the NACHA rule-making committee for exceptions to the 60 Day Right ofReturn rule were not successful.

• ACH, ATM and wire transfers represent very small por-tions of the current security transactions; changing con-sumer behavior to adopt these methods of payment,

Page 2 9

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even if they were able to overcome the settlement riskissues, were felt to be unrealistic in the near term.

The white paper detailed the ideal payment characteris-tics for retail security transactions relative to the needs ofboth sides of the funds transfer transaction:

High Value to the Broker/Dealer:• Finality of payment• Funds availability by settlement date• Notification of payment on transaction date• Guarantee of payment on transaction date

High Value to the Client:• Ubiquity• Ease and convenience of executing payment• Low cost• Secure and reliable• Ability to handle large dollar amounts for security trans-

actions

M o re recent SIA d o c u m e n t s1 contain further details onthe mix of payments and the Check 21 Act. The signifi-cance of this legislation is greatest to the SecuritiesIndustry for its ability to satisfy STP/T+1 re q u i rements ina manner that is transparent to the investor community. Itnow seems clear that finality of funds transfer in a shortsettlement window will provide the investment ROIneeded to deploy check image capture technology at all ofthe endpoints where checks first enter a bro k e r / d e a l e r ' soperation. It looks like the starting gun has gone off in therace to build out the infrastru c t u re for converting paperchecks into digital images.

Excerpts from this White Paper• The survey results indicate there has been a smalldecline in checks in favor of electronic payments such asACH and wired funds. All of these results are encour-aging, but there is still a long way to go. The U.S. needsto catch up with many of its European and Asian coun-t e r p a r t s .• As of 1997, check usage in the United Kingdomamounted to 31% of non-cash payments usage; therespective figure for Japan was a mere 7%. Contrastthese figures with the U.S. with a 70% check usage at thesame time. While a number of factors accounted forthese diff e rences in the level of check usage, we tendedto underestimate the size of the hurdles confronting ashift away from checks.• The most significant disadvantage of using the AT Mnetworks is that the client's financial institution on tradedate may not guarantee finality of the ATM Pull Debittransactions, while the other ATM transaction types arec o n s i d e red final. Barriers to implementation of AT M

transactions include:> Obtaining buy-in from ATM network vendors andfinancial institutions. A significant majority of finan-cial institutions and networks may choose not to par-ticipate or may choose to participate at diff e re n ttimes; hence critical mass may not be achieved.T h e re may not be enough network providers elect-ing to participate to cover the U.S.> The ATM Network Initiatives working group isstill conducting re s e a rch to understand the rules andregulations that apply to the three SIA t r a n s a c t i o ntypes. Additional network rules may need to bedeveloped. All ATM network vendors may not agre eon recommended rule changes.> Potential costs to implement this product have notbeen estimated. High potential costs may pro h i b i tadoption of this initiative.

Best Practices for Risk Management of Retail Payments:U l t i m a t e l y, each broker/dealer must determine whichpayment method(s) is appropriate based on the level ofrisk that is acceptable to them. Each payment method isassociated with a unique set of risks, and these risksshould help determine how that payment method shouldbe developed and managed. Those risk categoriesi n c l u d e :

• Risk of Fraud: the risk that a wrongful or criminal decep-

Page 3 1

1. See the Web site listing at the end of this article for the SIA Payments Sub-Committee slidepresentation, Spring 2003.

tion will lead to financial loss for the parties involved• Operational Risk: the risk that deficiencies in system and

internal controls will result in financial loss• Settlement Risk: a general term used to describe the risk

that settlement will not take place as expected• Liquidity Risk: the uncertainty that a counter party cannot

settle its obligations in full by the due date• Credit Risk: the risk that the counter party will be unable

to settle its obligation in full at any time• Legal Risk: the risk of loss because a contract cannot be

enforced

Web Sites for More Information on theSecurities Industry Perspectiveon Electronic Payments

www.sia.com/stp/pdf/paymentsystems.pdfT+1 Payments Committee White Paper, Version 2.0, May 1,2000, Securities Industry Association. Projected implications forbroker / dealer migration from Trade Date Plus Three (T+3) set-tlement cycle to T+1 and the required changes in technology(batch vs. real time) as well as client behavior and perspective.

www.sia.com/stpspring03/pdf/Payments.SubPart1.pdfSTP Payments Sub-Committee Presentation, Spring 2003. This

slide deck contains an update on the industry understanding ofpayment mix and new electronic options to checks. The mix ofinbound (75% checks) payments and outbound (85% checks)payments further re-enforced the fact that a solution to checkswould have to be transparent to the investor, if it was going tocome in time for STP/T+1. Closing slides describe the CheckTruncation (Check 21 Act) as the best payment alternative avail-able to the industry.

www.financialcounsel.com/News/Economics/SIA/SIA-1002.pdf

Research Reports, Vol. III No. 9, October, 25, 2002, "The Futureof Straight Through Processing," Judith Chase, VP and DirectorSecurities Research, page 26.

www.evalucheck.comA creative mix of technologies that offer immediate advantagesover traditional check payments while also containing the fea-tures needed to migrate into Check 21 image settlement oncethis legislation goes into effect. It's also an Internet paymentoption worth exploring for B2B and C2B transaction categories.

Eric Thomson is Executive Vice President of Profit Source Advisors.He can be reached at [email protected] .

Page 3 2

5

The American Dream isassembled from the suc-cess stories of people whohave built successful

businesses, even empires, fro mscratch. The American Dream holdsthe promise that independence,wealth and happiness are possiblefor anyone willing to work hard .Opportunities for success exista round every corner. They evenexist for our neighbors just acro s sthe border to the north.

ACanadian-based payment pro c e s s-ing company is enjoying phenome-nal growth by providing some inno-vative approaches to handling mer-chant accounts in North A m e r i c aand around the globe. A c o m b i n a-tion of factors has contributed to thesuccess PaySystems Corp. is experi-encing, reflected in the company'smotto, "A world of payment solu-t i o n s . "

Founded in 1998 by Philip Fayer,PaySystems was started to fill a gapin the market he experienced firsthand. While involved in anotherv e n t u re, Fayer said he needed tofind a credit card pro c e s s o r. Whenno one would give him an account,he figured there must be plenty ofother merchants and businesses outt h e re in the same boat without ap a d d l e .

He set out to give merchants likehim a way to process their transac-tions. Fayer said he wrote the soft-w a re for a back-office solution work-ing out of his bedroom in Montre a l .His American Dream was just takingshape.

The payment landscape looks a lotd i ff e rent in Canada. A t h i rd - p a r t yISO sales channel is just beginningto be used there; a handful of banksc o n t rol the market and process mer-chant accounts. But as Fayer said,"the world is borderless now."

Fayer started PaySystems andquickly learned all aspects of ru n-ning a business; the companyfocused initially on Internet-basedaccounts. As time went on, re i n v e s t-ing all the profits back into the com-pany fueled the growing venture .

In 2001, Fayer said, the decision wasmade to make the company a full-service provider of merc h a n taccount services. Now, in 2003, hesaid PaySystems is debt-free and has207 employees; its projected re v-enues for the year are $100 million.

Fayer credits this incredible gro w t hto several key factors: knowing howto provide services that merc h a n t swant, the company's pro p r i e t a r yt e c h n o l o g y, taking all aspects of pro-cessing transactions in-house, andc reative agent programs; mainly,though, he credits the growth to thequality of the people who workt h e re .

It's hard not to get swept up inFayer's enthusiasm not only forwhat he and his management teamhave accomplished, and for wheretheir plans for PaySystems will takethem. They're hiring up to 300 newactive sales reps within the next 12months through their new U.S.agent program, which was intro-duced in early October to accommo-

PaySystems Corp.

MLS Contacts:Patrick Huynh, Director of Agent ISO ProgramsRod Leblanc, VP of Business Development

Company address:1500 University StreetSuite 920Montreal, QuebecH3A 3S7, CanadaPhone: 866-699-9022Web site: www.paysystems.com

MLS Benefits:• Looking for reputable, dedicated agents to help

with aggressive expansion program in progress• Signing bonuses of up to $300; residuals paid

weekly• Customer service/help desk information available

in many languages and dialects to accommo-date multi-cultural and international agentsand merchants

• Proprietary, in-house integrated solutions coverall types of transaction processing

Good Days for PaySystems Corp.

date expansion.

Ta rgeted markets include everything from Internet toPOS transactions, he said. "We ' re not focusing on nation-al accounts, but rather on mid and small markets likeretail, hospitality and medical."

Agents who work with PaySystems can expect some re a lbenefits. Because they continue to write their own pro p r i-etary solutions, there is only one entity handling allaspects of the transactions, Fayer said. Real-time re p o r t-ing and the application approval process they have inplace are just the beginning. PaySystems' aggre s s i v ea p p roach makes them the only company paying agentson a weekly basis, he said. They're also offering signingbonuses of up to $300.

PaySystems offers diff e rent rate strategies depending onthe size of the merchant operation. "We ' re end to end interms of merchant relationships. We write our own back-end software and have partnered with as many compa-nies as possible for the front-end, so we can offer pay-as-you go programs with higher set-up fees, all the way tohigh-volume merc h a n t s . "

While managing rapid growth can be daunting and can

a ffect the quality of services provided, PaySystems hasthe right infrastru c t u re in place to enable expansion;Fayer said the company's revenue is growing 35% to 40%a month.

A management team with a combined industry experi-ence of decades between them, high-caliber staff andagents and a 52,000 square foot, state-of-the-art facilityhousing the company's headquarters in a sophisticatedcity creates a culture conducive to expansion.

"It's tough managing rapid growth, but we've created theright environment to give us room to gro w," said Fayer.

Todd Whiton, PaySystems' Senior Vi c e - P resident of U.S.Sales and Business Development, said the company is dif-f e rent from others he's worked for in both tangible andintangible ways.

" We ' re willing to try anything, and we're good at execut-ing ideas others are afraid to try. We have a great leader-ship team and the mental and financial bandwidth to beinnovative. We have effective programs in place to pro-vide merchants the service they deserve." said Whiton.

Whiton, who is based in Syosset, NY, said morale in thecorporate headquarters is very positive. "They really lovewhat they do. Montreal is the second largest college townin North America, following Boston, and it's really a tru emelting pot with every ethnic group re p resented. As aresult, we have a great, diverse pool of talent to drawf rom. The company culture nurtures innovation—there ' sa willingness to put additional re s o u rces toward an idea,and if it doesn't work, employees don't feel thre a t e n e d .People are given responsibility and they take pride in andownership of what they do."

The PaySystems team is making a concerted effort to takeadvantage of the ethnic diversity at their doorstep inM o n t real, a culturally rich, beautiful, world-class city.

Fayer said one big advantage that PaySystems off e r sagents and their merchants is multi-lingual support andcustomer service, available in a range of languages anddialects. Their staff includes a multi-cultural mix to sup-port this effort, he said, as well as international gro w t h .While 80% of their business comes from U.S. point-of-saletransactions, Fayer said the other 20% comes from inter-national card - n o t - p resent business in 40 countries includ-ing the United Kingdom, France, Belgium and A u s t r a l i a .They have plans to establish a subsidiary in Germany.

Part of Whiton's job involves developing collaborationswith banks and other companies to increase distributionfor both PaySystems and those partners.

" We ' re making great strides in adding additional services.

Page 3 6

Our partners are eager to add merc h a n tservices to their suites of offerings. It'sa great tool in attracting and re t a i n-ing accounts for recurring pay-ments and recurring re v e n u e .

" T h rough our reseller part-nerships, we're building thegood reputation of the com-pany by introducing lead-ing edge, proprietary pro d-ucts for them to offer theirm e rchants and to cre a t erevenue opportunities fort h e m . "

Fayer's once-small operation,started when he saw a need inthe marketplace, is today an inter-national company providing a com-plete array of payment options for mer-chants all over the world and on theInternet.

Flexible platforms for multi-currency processing of cre d-it, debit and gift cards, ACH processing for e-checks and

fraud management solutions are availablefor most POS environments and are

compliant with most terminals; thecompany even offers a secure gate-

w a y.

PaySystems' aggressive expan-sion plans include an empha-sis on finding like-minded,quality agents to re p re s e n tthem. They're looking foragents who are multi-lingualwith connections to ethniccommunities and, maybe

most importantly, for thoselooking to establish long-term

business relationships to gro walong with the company.

All agents working with PaySystemsa re assigned a specific manager. The com-

pany provides live Internet agent training viaWebEx, or they can take advantage of face-to-face

training in Montreal, definitely one more perk to workingwith PaySystems Corp. Who could turn down that trip?As Fayer said, "Agents love to visit us!"

Page 3 8

"We're willing to tryanything, and we're good at

executing ideas others are afraid totry. We have a great leadership team

and the mental and financial bandwidth to be innovative. We have effective

programs in place to provide merchants the service they deserve."

– Todd WhitonSenior Vice-President, U.S. Sales and Business Development, PaySystems

Ma s t e r C a rd and Vi s a ' scompliance deadlinesfor upgrading olderATMs with the new

triple data encryption standard(3DES) will be here sooner than youthink—and many banks and ownersof these devices are looking ahead tomake this change.

Most ATM manufacturers will wanttheir customers to purchase brandnew machines, but a company bythe name of Pi SystemsInternational, L.P. has a less costlys o l u t i o n .

The deadlines, initiated by the cre d-it card associations, vary accord i n gto the age of the ATM and networkon which it is running. PULSE andS TAR want all ATMs to be 3DEScompliant by the end of 2005,M a s t e r C a rd has set an April 2005deadline, and Visa's official deadlineis still to be announced.

What these deadlines mean is thatall ATMs that accept cards with aM a s t e r C a rd or Visa logo must beusing 3DES to send and receive data.

3DES is a data-encryption standardalgorithm that encrypts input datat h ree times (versus only one time) soit raises the level of fraud pro t e c t i o nfor PIN-based transactions initiatedat AT M s .

R i c h a rd A n d rews founded PiSystems, L.L.C., parent company ofPi Systems International, 13 yearsago. The company maintains and

services ATMs for banks and cre d i tunions. It also services equipmentsuch as computers, printers,modems, faxes, routers, desktopsand laptops for IT departments ingovernment agencies.

Because of the mandates from Vi s aand MasterCard and the ATM net-works, Pi Systems saw there was aneed to fill in the marketplace for ap roduct that could quickly and inex-pensively upgrade an ATM tobecome 3DES compliant, so it joinedf o rces with a neighboring company,G reenlink Technologies, Inc. todevelop a low cost solution.

In 2002, A n d rews created Pi SystemsInternational to further develop andmarket its idea, which it calls the3DES FIX, but also to provide tech-nology solutions for present andf u t u re industry needs.

Pi Systems International has beeng rowing quickly, and RichardA n d rews, Chairman of the Boardand the owner of both Pi Systemsand Pi Systems International, re c o g-nized the need for an executivemanagement team.

He approached Robert Normyle andJerry Graves, two entre p re n e u r swith extensive experience in tech-nology start-up companies.

Graves was appointed CEO of PiSystems International, and Normylewas appointed Pre s i d e n t .

The 3DES ("Triple-dez") FIX is a

Page 4 1

Pi SystemsInternational

MLS Contact:Name: Robert Normyle, PresidentPhone: 800-831-5723 ext. 530Fax: 817-858-9321e-mail: [email protected]

Company address:2170 Regal ParkwayEuless, Texas 76404Phone: 817-858-9300Fax: 817-858-9321Web site: www.3-des.com

MLS Benefits:• Offers new value-added solution to MLSs to help

banks meet 3DES mandates• Can open doors to potential customers• Can open doors to potential ATM service agree-

ments

A Quick and Cost-EffectiveSolution for Upgrades to 3DES

3DES-compliant PIN pad with a companion "router" thatf o r w a rds the encrypted messages to the modem,Normyle said. There is no need to upgrade the AT M ' sinternal processors to Pentium 233, new monitors or news o f t w a re from the manufacture r.

" T h e re's some confusion in the marketplace about whatneeds to be done to an ATM to make it 3DES compliant,"he said.

Pi Systems International's 3DES FIX combines a SPEDE P P with a device that routes the 3DES-encrypted mes-sages from the PIN pad to the pro c e s s o r. This "router" isbridged between the PIN pad and the modem, there f o re

not affecting the pre-existing set up of the ATM. PiSystems' solution targets older ATMs but also satisfies theneeds of newer ATMs, he said.

M a s t e r C a rd physically reviewed the PIN handling andp rocessing methods employed by the 3DES FIX pro d u c t ,and approved it in March 2003 for meeting MasterCard ' sPIN security re q u i rements and 3DES mandates.

Pi Systems says the 3DES FIX can be installed within oneto two hours and costs $3,200. Aqualified ATM technicianof the bank's choosing can do the installation, which costsabout $350.

Page 4 2

DES (Data Encryption Standard)

DES was originally developed at IBM. DES has been extensively studied since its publication and is the most well-known and widely used

cryptosystem in the world. DES is an algorithm implementing Secret-Key Cryptography. DES has been cryptographically enhanced by using three

encryption rounds, yielding 3DES. – Wilde's WWW Online Glossar y

No further hard w a re or software upgrade is necessary. The product also comeswith a one-year warranty.

The 3DES FIX is designed for Diebold 1060, 1062, 1064i, 1072, 1073,1074, including the "i" series, MDS and all STP-based units, NCR

50xx series and 56xx series and the Fujitsu 4000 series and 6000series ATMs. Pi Systems International also plans to expand the

solution to fit the Diebold "ix" series early next year.

"As far as we know, we're the only company that is off e r i n gthis type of solution at this price point," said Normyle.

Normyle said he does not know of any direct competitorsof Pi Systems International, although they do competei n d i rectly with ATM manufacturers, which have diff e re n tmethodologies for providing 3DES.

O b v i o u s l y, ATM manufacturers would want their customersto replace older machines with brand new ones, he said. But

many smaller banks can't aff o rd to do this.

One issue that has come up with the introduction of the product iswith ATM manufacturers. Some manufacturers have said they may

not honor their maintenance agreements if a product such as the 3DESFIX is added to the ATM, but this presents a unique opportunity for PiSystems' distributors and ISO partners, Normyle said.

Page 4 6

"The product is workingvery, very well. We've got abouta dozen units installed so far. The

reason that there's so much interest in this product is because all it is is a PIN

pad replacement. It's so easy and inexpensiveto add, so it allows customers to spend their

money in other places and still meet the mandate for 3DES."

– Jim Loper, Owner,Telecom Consultants of America (TCA)

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" T h e re are a lot of service org a n i z a-tions and maintenance companiesthat maintain and service AT M s ,and they could have an opportunityh e re," he said.

" We see it as a tremendous opportu-nity for them to distribute our pro d-uct and possibly win a maintenanceopportunity should ATM manufac-t u rers decide their warranty is nulland void because of the addition ofa piece of equipment that is nott h e i r s . "

Pi Systems International has beenworking closely with the CO-OPNetwork, a co-operatively ownednetwork of more than 1,200 cre d i tunions in the U.S.

They offer surc h a rg e - f ree AT Maccess to credit union members. CO-O P Network and eFunds pro v i d e dinput in the development of PiSystems' 3DES FIX pro d u c t .

"One of the most beneficial aspectsof Pi Systems' 3DES FIX is its abilityto replace the non-encrypting PINpads in older ATM machines," GenePolito, President EFT Services, CO-O P Network said in a statement.

"Their EPP (encryption PIN pad)extends the security and lifespan ofour member credit unions' AT Mfleets without requiring purchase ofadditional hard w a re or software."

Pi Systems International is truly aninternational company with market-ing partners and distributors acro s sthe U.S. and in Mexico, thePhilippines, Indonesia, EasternE u rope, France, Germany, the UKand others.

"The product is working very, verywell. We've got about a dozen unitsinstalled so far," said Jim Loper,owner of Telecom Consultants ofAmerica (TCA), which is an exclu-

sive distributor for Pi Systems.

"The reason that there's so muchi n t e rest in this product is because allit is is a PIN pad replacement. It's soeasy and inexpensive to add, so itallows customers to spend theirmoney in other places and still meetthe mandate for 3DES."

The product has been well re c e i v e dto date and the company is expect-ing overwhelming response in themarketplace. In addition to addingan executive management team, PiSystems International has moved toa larger building and is incre a s i n gits capacity.

When a company is offering aunique product with very little com-petition, and the demand is thereand the distribution is being put inplace, you have a winning solution,Normyle said .

Page 5 0

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Many ISOs already knowthese types of solutions willhelp set their agents apartf rom the competition; it'sjust a matter of gettingM e rchant Level Salespeopleto embrace them.

Christine Cro c k e r, Pre s i d e n tof Los Angeles-based 2CP rocessor USA, Inc. (2CPUSA), an ISO/MSP that hasbuilt a successful businessby selling value-added pro d-

ucts integrated with merchant credit card pro c e s s i n g ,recently shared with The Green Sheet her experience ofselling these solutions.

"When all you sell are bankcards, then you're just ab a n k c a rd person. Yo u ' re selling based on price," Cro c k e rsaid. "When you're selling a one stop shop—an entirebundle of services—then you're really selling value."

" B a n k c a rds have become a commodity, so agents willhave to come up with better solutions," she said.

By offering value-added products, you can open doors fornew merchant acquisitions, improve merchant re t e n t i o nand provide yourself and your merchants with opportu-nities for building continuous revenue stre a m s .

Typically when you sell a value-added solution, you takean existing product or service off e red through a particu-lar vendor, or even through your sales organization, thenadd your own "value" to the product or service and re s e l lit to a merc h a n t .

Some value-added products include gift and loyalty pro-grams, also know as stored value cards; check servicessuch as electronic check conversion, check guarantee andcheck authorization through an ACH; point of sale termi-nals can be value-added products, especially when theysupport applications for these types of services; pre p a i dc a rds such as for wireless, long distance, and Internetaccess; and payroll card s .

C rocker has more than 16 years of sales experience andhas built her business around selling merchant credit cardp rocessing integrated with value-added products. Beforegetting involved in the payment processing industry, shesold copy machines. She said her biggest bre a k t h rough insales came when she switched from selling individualcopiers to selling full-office solutions.

C rocker now applies this "full solution" principal to mer-chant services.

2 C P has a network of 900 agents—many of whom ares t ruggling to move from selling only credit card pro c e s s-ing to selling value-added solutions. They sell what theyk n o w, and that's bankcard, she said.

"My experience is that the agents are a very tough sell onthe value add. I have to continually drill in their heads tostop selling just bankcard," she said. "The thing I keep try-ing to drive home to them is to stop leaving all thatmoney on the gro u n d . "

C rocker goes the extra mile to change her agents' mindset.One of the ways she does this is through an intensivet h ree-day training course she calls "boot camp." 2CP's topsellers run the classes.

She also has created all new marketing materials for 2CP'agents. "If you put the tools in the agents' hands that forc ethem to go in a diff e rent direction than just bankcard ,then you're ahead," she said.

C rocker's top-selling value-added solutions are check

Page 5 5

Value Added from Page 1

services such as check con-version, guarantee andauthorization, which shecalled "the ACH umbre l l a ; "gift and loyalty cards; andp repaid pro d u c t s .

2 C P also sells point-of-saleterminals as value-addedp roducts. VeriFone's Omni3750 is Crocker's terminal ofchoice because she said, "itsupports the bundle."

M e rchant Level Salespeopleknow the importance of selling a terminal—it's upfro n tcash. By offering a value-added, bundled solution with asophisticated terminal that supports value-added appli-cations, they have the opportunity to sell merchants notonly equipment, but also a gift and loyalty card solution,a pre-paid phone card program, age verification, a timeand expense capture solution and more .

" You get one deal, and then you start doing it corre c t l y ;you get another bundled deal and then your re s i d u a l

checks start coming in, and you start seeing the magic,"she said.

C rocker suggests that agents take the time to get back inf ront of the merchants in their portfolios, instead of onlygoing after new ones. Merchants to whom an agent soldc redit card processing services may also be interested incheck guarantee, but may not have been aware of such aservice. Or they may find value in a gift card pro g r a m .

"When one of my agents started selling the check servicep rogram, he revisited his portfolio, and in doing so, hesigned up about half of them with at least one other valueadded service," she said.

Learning about and selling all these new products andservices may seem a little overwhelming, but ISOs andMLSs will typically find a true partnership with theirvalue-added vendors. Many of these vendors will collab-orate with ISOs and agents on rates, opportunities for pri-vate labeling, marketing support and product positioningand added merchant incentives for closing the deal.

Valutec, a gift and loyalty card provider focused on small-to-mid sized merchants, sells its programs through about

Page 5 6

5,000 agents working withm o re than 200 reseller part-n e r s — a n y w h e re from asmall office with only a fewpeople to a super-ISO with500 or more re p s .

Valutec works closely withm e rchants once the sale hasbeen made—anything fro mc a rd design all the wayt h rough merchandising dis-plays, depending on a mer-chant's particular needs. Italso offers several diff e re n t

types of programs for diff e rent sized merchants. One pro-gram might re q u i re fees based on the number andamount of transactions, while another might charge onlya flat monthly fee for the pro c e s s i n g .

G reg Grove, Vice President of Marketing for Valutec, saidt h e re has been a recent change in the marketplace withvalue-added products. "There's a shift going on becausec redit card processing has become, frankly, a commodity, "he said. "It's who's got the lowest rate to get the job.

" With gift card and loyalty card, there still are absolutelyp roduct and service distinctions still in that marketplace.If you walk in the door with that then you have set your-self apart from your competitors."

G rove also said value-added products and services suchas gift and loyalty cards are being used much more byISOs as tools for merchant acquisition than as tools form e rchant re t e n t i o n .

" We have resellers that are actually doing it in re v e r s enow; they are walking in the door with gift card and thenadding credit card to the sale," said Gro v e .

"If you call up and say I want to talk to you about cre d i tc a rd processing you probably don't get a lot of intere s t , "he said. "But if you talk about stored value cards, giftc a rds, loyalty cards, and you've got a free start up pack-age and those kinds of things, you get appointments andyou get in the door. "

In a recent study on merchant retention, Valutec foundthat merchants with stored value programs in place havea retention rate of 93% from year to year for credit cardp rocessing versus an average of 75% without a store dvalue program. Merchant turnover is reduced from 25%to 7%.

C rocker has also seen improvements in merchant re t e n-tion. She has a zero attrition rate with a particular vendorshe uses for check processing. "I do not lose merc h a n t sonce they have that value add," she said. "If a merc h a n thas several products with you, the likelihood of themunplugging from the bankcard product is not highbecause you are a one-stop shop in your off e r i n g . "

Like Cro c k e r, Grove also believes in selling merchants afull solution. He said it's much more complicated for mer-chants to switch credit card processors and then re - d o w n-load all the value-added applications. "They are usuallyseparate pieces, but if a merchant assumes that it's gettingall these things from one company, then it's less likely toc h a n g e . "

Selling value-added products looks like a "valued" solu-tion for everyone: the vendors that are selling these pro d-ucts and services, and merchants, agents and ISOs whohave gained many new opportunities for generating re v-e n u e .

Now it's only a matter of getting your foot in the door.

Selling value-added products "is a significant changebecause it's a change in a selling style," said Cro c k e r. "Yo uhave to be willing to embrace the change. And commit tothe change no matter what. And that is a rare find in anagent."

Page 5 8

Ihave conversations with Merchant LevelSalespeople daily, and I am privy to many of theirobservations, concerns and questions. Recently, Ie n c o u n t e red an issue that inspired the topic for this

column: whether or not to attend the 2003 Electro n i cTransactions Association's (ETA) Mid-Year Meeting heldSeptember 16-18 in Boca Raton, Fla.

This year's meeting, "Ride The Wave to Success," aStrategic Leadership and Networking Forum, served as anew venue for the organization because it wasn't a tradi-tional trade show.

Based on the questions MLSs were asking me about theevent, it appeared many really had no idea what it wasa b o u t .

• "I'm a hardworking MLS. Should I go?" • "Is it worth the money?" • "I don't have the luxury of time.

What will I miss? "When time and money are issues, you want to be sureyou attend a conference that will provide you with valu-able re s o u rces. I hesitated advising them not to go, but, asa spokesperson for MLSs, I felt it was my duty to re p o r tback and answer their questions.

Our great industry offers wonderful opportunities forM e rchant Level Salespeople, but this year's Mid-Year con-f e rence wasn't one of them. We should recognize that notevery ETA event is designed for MLSs. Some target ISOsand acquirers; there f o re, this particular conference wasvery helpful for me.

I was delighted to attend, and I believe many other atten-dees share that sentiment. But MLSs are not part of thatg roup. If you are a MLS, this meeting wasn't for you.

A c c o rding to association's figures, there were nearly 500attendees at "Ride The Wave to Success." While it waswell attended by acquirers, providers and related pay-ment – processing professionals, I didn't run into fivepeople at this event that would call themselvesMLSs…and for goodreason.

The admission fee toattend the show was apricey $545 and someeducational and train-ing sessions re q u i re dadditional fees. A f t e ryou read about thetopics covered, you'llquickly see therew e ren't many issues ofrelevance for MLSs,nor were there any ses-sions that addre s s e dtheir special needs.

Here's a recap of the topics:

• Introduction to Electronic Processing Billed as appealing to "financial institutions, ISOs,p rocessors, hard w a re manufacturers, software develop-ers and card associations." A separate fee was re q u i re dfor this session.

• "Catch Me If You Can" – The Man Behind the Legend One-on-one presentation from the con man of themoment – Frank Abagnale, made famous by StevenS p i e l b e rg's recent movie starring Tom Hanks andL e o n a rdo DiCaprio. Later on the first day, A b a g n a l ealso delivered the Keynote A d d ress – "The Many Facesof Fraud."

• The New Cost of Privacy-Are You Prepared to Take the Hit?This session dealt with companies that are preparing to

Page 6 0

Education IndexAdam Atlas

68■ ■ ■ ■

Lin Fellerman72

■ ■ ■ ■

Interchange Untangled78

Eye on ETA

p roactively report compromised data of consumers aswell as new legislation affecting our industry.

• "To Take or Not to Take" – The Great Debit Card DebateThis presentation focused on recent changes in debitc a rd, settlement and legislation as a result of theVi s a / M a s t e r C a rd / Wal-Mart case.

• Appreciating Appreciation – The Evolving Role of PrivateEquity Investors in Our IndustryThis session concentrated on the minds and methods ofthe new breed of investors in the transaction industry.

• Surviving Data Security ConcernsUnderstanding obligation, risk and potential exposurein the face of changing data security re q u i rements wasthe gist of this session.

• Can One Size Really Fit All When itComes to Data Security?The goal of the closing session of the 2003 ETAM i d - Ye a rC o n f e rence was for attendees to get a better under-standing from the various card associations on theirplans for re q u i red data security and what the futuremight hold.

As you can see, the overall program lacked any MLS-cen-tric topics…and that was unfortunate. Please, don't getme wrong. ETAis very valuable to the acquiring industry,re g a rdless of your place on the food chain. I thought the2003 Strategic Leadership and Networking Forum hadmany topics of interest for ISOs and MSPs that are liablefor merchant losses—just not enough to warrant MLSparticipation.

You may also notice this column doesn't contain the usualquotes and opinions from MLSs. That's because nobodyresponded to my post on The Green Sheet MLS Foru mre g a rding his or her experience at the ETA M i d - Ye a rC o n f e rence. Was it because no MLSs attended?

If this was the case, then it supports my belief that whileE TA is a positive and productive organization, thesetypes of events—as well as membership in ETA — a re notfor the MLS.

While I don't think you, a hardworking and pro f e s s i o n a lMLS, needed to attend this event, I do think it is impor-tant that you understand why ETA exists and what it'sdoing for our industry…and for the companies you re p-resent.

Page 6 2

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They've even made getting started easy.Just call 1-800-797-5302 ext. 313.Or email [email protected].

E TA's mission is to "fully serve itsmembers and advance their pro f e s-sion by providing leadershipt h rough education, advocacy andthe exchange of information."

If you're a MLS, my advice to you isto call in and ask the executives ofyour ISO if they are indeed mem-bers of ETA, and if they were inattendance at Boca Raton.

Whomever you do re p resent shouldnot just be a member of ETA, butalso should have re p resentation atall events, including this past one.

I believe it is very important thatyou work for an ISO that not only isa member of ETA but also supportsits initiatives. This is a worthy asso-ciation. ETA is t h e o rganization ofthe industry, but not necessarilyessential for individual MLS mem-b e r s h i p .

As a merchant acquirer and staunchsupporter of our industry, I alwaysenjoy attending ETAevents. I partic-ularly look forward to seeing themany faces of our industry – somen e w, some familiar.

When I first walked into The BocaRaton Resort, almost immediatelypeople came up to greet me. I havecultivated many valuable friend-ships over the years at ETA m e e t-ings, and I'm always eager to spendtime with other industry membersand leaders at these events.

As I have stated in the past, some ofmy best friends are also my mostf i e rce competitors. In fact, at thisrecent ETA c o n f e rence, I took a lot ofabuse from my friends in the busi-ness, teasing me about writing thiscolumn. Some of my colleaguessaid, "Stop embarrassing yourself!"Others said "Give it up!"

Page 6 4

When I first walked into The Boca Raton Resort,

almost immediately peoplecame up to greet me.

I have cultivated many valuable friendships over

the years at ETA meetings,and I'm always eager

to spend time with otherindustry members and

leaders at these events.

I know—with friends like these, who needs enemies?H o w e v e r, during the event, several people also came upto me to thank me for writing "Street Smarts." They toldme I'm making a valuable contribution and to keep up thegood work.

I want to thank all the many professionals who havegiven me very positive feedback about this column. It isfor those people—and you, the MLS—that I will continuewriting.

As always, I'd love to hear from you. Please send yourfeedback on this topic (and any others) tos t re e t s m a r t s @ t o t a l m e rchantservices.com.

My next column will discuss the growing phenomenon ofregional acquirer associations and my experience withand opinion of the Southeast A c q u i rers A s s o c i a t i o n ' srecent regional meeting held in Orlando, Fla.

A d d i t i o n a l l y, I will also report on the First A n n u a lN A O P P (National Association of Payment Pro f e s s i o n a l s )c o n f e rence that is also scheduled during that time inOrlando. Please continue to look for my postings on TheG reen Sheet's MLS Forum.

I welcome all your responses and promise to includethem in my columns. Your voice must always be heard !

"Time is the most valuable thing a man can spend."

– Theophrastus (300 BC – 287 BC)

I'll see you next time where the rubber meets the ro a d .

Ed Freedman is founder and President/CEO of Total MerchantServices, one of the fastest-growing credit card merchant accountacquirers in the nation. Ed is the driving force behind all businessdevelopment activity as well as the execution of Total MerchantServices' marketing plan, including recruiting and training inde-pendent sales offices and establishing strategic alliance partnershipswith leading vendors, so that Total Merchant Services can provide itscustomers with the highest quality and most reliable services avail-able.

To learn more about Total Merchant Services, visit www.totalmer-chantservices.com. To learn more about partnering with TotalMerchant Services, visit www.upfrontandresiduals.com or contact Eddirectly at [email protected]

Page 6 6

8

By Adam AtlasA t t o rney at Law

No matter where you find yourself in the chainof participants in the processing business —association, bank, pro c e s s o r, ISO, sub-ISO,MLS or merchant — at one point or another,

you are very likely to have reserves on your mind.

A reserve, often re f e r red to in agreements as a "re s e r v eaccount" or a "holdback," is typically a varying amount ofcash withheld by one party in a processing or sales re l a-tionship in order to protect itself against losses for fraud,c h a rgebacks, association fines or other losses. The pur-pose of this column is to highlight certain issues thatevery participant in the electronic transactions businessshould keep in mind when negotiating or dealing with areserve account.

1. Which Reserve Account? Never forget that betweenthe acquiring bank and the merchant, and all ISOs inbetween, there could be as many as four or more sepa-rate reserve accounts. When there is fraud involved in am e rchant account, one of those reserve accounts isdrawn upon. No matter which entity you are, make ityour business to inquire which of the reserve accountsis being drawn upon. For example, suppose you are anISO with 100% liability, and the bank that you are indi-rectly selling for maintains: (a) a reserve account foreach merchant you sign-up and (b) a separate re s e r v eaccount on amounts owed to you.

If a merchant sends through $10,000 worth of fraudu-lent transactions, which reserve account do you thinkshould be debited first, yours or the merchant's? Iassume that you would prefer the merchant's re s e r v eaccount be the first line of defense in protecting youri n t e rests. If you are a pro c e s s o r, you also have an inter-est in your bank debiting the merchant reserve accountb e f o re yours. It is critical for all parties to know whichreserve account is at issue at all times.

2. Which Agreement? Once you have identified thereserve account in question, consider which agre e m e n tgoverns that reserve account. For example, if it is a mer-chant reserve account, terms governing that accountwill most likely be defined in the agreement betweenthe applicable bank and merc h a n t .

3. Due Diligence. Every participant in the businessp rofits from the reserve account being set at the rightlevel. The reserve account must not be so low as to leavethe bank, processor and ISO (who is liable) unpro t e c t e d .H o w e v e r, the amount on reserve should not be so highthat it will be cost-prohibitive for the merchant. Eachparticipant in the business benefits when appro p r i a t edue diligence is undertaken at the outset; the nature ofthe merchant' business and the appropriate amount ofreserve account should be set out from the beginning.

4. Adjustments. Banks and processors are sometimesquick to increase a reserve account balance, but slow toreduce the same account. It makes good business sensefor banks and processors to monitor larger re s e r v eaccounts and take steps toward reducing them when itis reasonable to do so. This kind of proactive customerservice will build loyalty. Live reporting of all re l e v a n treserve accounts should be the industry standard .

5. Talk First. B e f o re taking any drastic action with

Legal Ease

How About Them Reserves?

respect to a reserve account, all parties concernedshould have a conversation. I have seen many goodm e rchant-bank and ISO-processor relationships fallapart because of poor communications over one or twom e rchant reserve accounts.

All parties concerned could save tens of thousands ofdollars or more, for example, simply by discussingwhether to double or empty a reserve account.R e m e m b e r, the personal relationships in this businessa re far more valuable than the sum of all re s e r v ea c c o u n t s .

6. Interest. It would be fruitful to consider who shouldkeep the interest earned on reserve accounts. A n u m b e rof processors hold tens of millions of dollars, if notm o re, of reserve accounts for ISOs. By law, those monieshave often already been earned by the ISOs, but are keptsimply as security for the pro c e s s o r. ISOs should speakwith their processors, and processors should speak withtheir banks about shared entitlement to interest on thosereserve accounts.

7. Merchant Termination. Educate merchants to claimwhat is rightfully theirs in a reserve account followingt e r m i n a t i o n .

8. ISO Te r m i n a t i o n . Educate ISOs to claim what is

rightfully theirs in a reserve account following termina-t i o n .

9. Rights on Tr a n s f e r. When an ISO portfolio is trans-f e r red from one processor to another, consider whathappens to the reserve account left at the old pro c e s s o r,especially following the 180 days standard hold periodfor such reserve accounts.

10. Avoid Using It. By undertaking the right due dili-gence and following up with subsequent adjustmentsand adequate communication between all parties, areserve account ideally should go untouched for thee n t i re term of the applicable agre e m e n t .

Like all safety equipment, reserve accounts are helpful toall concerned, when properly used. When misused, theycan be catastrophic to an otherwise healthy business re l a-tionship. As usual, I advise to proceed with caution andto keep the lines of communication open.

In publishing The Green Sheet, neither the author nor the publisheris engaged in rendering legal, accounting, or other professionalservices. If legal advice or other expert assistance is required, theservices of a competent professional should be sought. For furtherinformation on this article, please contact Adam Atlas, Attorney atLaw e-mail: [email protected]; phone: 514-842-0886.

Page 7 0

2

By Lin FellermanS e c u re Payment Systems

I 'm not one to be concerned with the fallout overa d d ressing controversial subjects, so I thought itwas a good time to test the decibel meter to meas-u re the furor over this topic. I've straddled the fence

when it comes to creating hard and fast rules re g a rd i n gthe use of imagers.

As a means of aiding in the decision, let's first look at therelatively short-term history of the imager marketplace,as well as the pricing evolution of the "traditional" MICRre a d e r.

For those old enough to re m e m b e r, the first check re a d e r sw e re large, bulky, had a big footprint and price tags ofa round $800. Naturally, they didn't sell very well. A b o u tfifteen years ago Checkmate (now Ingenico), Soricon,Welch-Allyn and MagTek first released their small re a d-ers, many of which are still in use today.

M e rchants can pick up one of these older, re f u r b i s h e dunits for approximately $50 to $75 from any one of a num-ber of resellers; there is really no reason to not have acheck reader in this day and age of expedited checkout.

It's safe to say that as time marches on, given the inhere n t"dog eat dog" nature of competition, imager pricing willgo the way of reader pricing: down, as more manufactur-ers enter the playing field.

The market once dominated by RDM Corp. is today pop-ulated with models supplied by Ingenico, MagTek, andVeriFone. Epson is now marketing an integrated print-er/imager compatible with PC registers, where A x i o h mhad been successfully marketing an integrated, non-imaging re a d e r / p r i n t e r.

TeleCheck has also marketed their proprietary Eclipseintegrated imager terminal for several years now.R e c e n t l y, both RDM and 4Access Communications havebeen trying their best to bring to market a stand-aloneimager/terminal.

The icing on the cake is that franking has become com-monplace in most of these units as well.

As a result, we can expect to see continually decliningprices, improved technology, smaller footprints, fastermodems, IP c o n n e c t i v i t y, wireless connectivity and inte-grated keypads. Maybe an armrest, re a r-view mirror orintegrated DVD player will be next!

Simply stated, you will see improved form and functionat reduced cost per unit. Five hundred dollars becomes$400 becomes $350 becomes $295 and so on and so on.

Let's go back to the question of image vs. non-image in aconversion environment. This is simply a matter of eco-nomics. To demonstrate this easily, if you envision a two-by-two array, you can then measure value based on com-paring risk and average ticket. If you separate both riskand average ticket into subsections of 'low' and 'high,'you can then "fill in the blanks" yourself.

Do you need an image in a low risk/low average ticketm e rchant? You need to determine if imaging is necessaryin every segment. On the other hand, you only have tocollect an additional $10 per month over 48 months to payfor an imager.

Do you need an image in high risk/high average ticketm e rchant locations? Collecting a service charge on 50% ofall the return items means a 100% collection rate on halfthe items.

It only takes one large uncollected check to contradict thetheory that imaging has no place in today's menu of hard-w a re alternatives.

Low risk, high-ticket industry segments can escape theadditional imaging cost, despite the relatively small priced i ff e rence between a new "traditional" MICR reader anda new imager. In today's environment, we are looking ata spread of roughly $200.

Over 48 months (if leased) we're not looking at a verysubstantial number, and it seems almost foolhardy to passon the advantages of having an imager on premises. Forthe already installed base of non-imaging MICR re a d e r s ,the risk re w a rd described earlier should dictate the even-tual hard w a re selection.

In the absence of an image what are you left with? If the

Beyond Bankcard

To Image or Not to Image … That Is the Question

m e rchant is sold verification (notguarantee), then it makes little dif-f e rence to the check companies ifan imager is used. What the heck… the lack of an image and subse-quent reduction in collectionincome becomes the merc h a n t ' sp roblem!

Capturing a phone number in acheck transaction is not an optionmost check companies haveo ff e red. This eliminates the abilityto use online re v e r s e / c r i s s c ro s sphone directories to help in thecollection process.

Capturing phone numbers in a ter-minal program results in substan-tial operating leverage and posi-tive file cro s s - re f e rencing capabili-t i e s .

Conducting secondary and tertiaryrisk analysis on unlisted numbers

re q u i res additional databases e a rches that can sometimes becostly per item as well as chew upvaluable point-of-sale time (even iffor only a second).

While there may be no magic for-mula for determining if an imageris necessary, it is safe to say that thelikelihood of greater collectionswill always be on the side of them e rchant with an imager.

W h e re the average ticket is gre a t e rthan $30 to $40, I would alwaysrecommend the imager becausethe long-term benefit outweighsthe incremental monthly lease cost.

If the reader is already installed,the yield is simply the benefit asm e a s u red against the cost of theimager spread over the life of thelease (or its useful life if less thanthe lease term).

Page 7 4

While there may be no magicformula for determining

if an imager is necessary, it issafe to say that the likelihood

of greater collections willalways be on the side of the

merchant with an imager.Where the average ticket isgreater than $30 to $40, I

would always recommend theimager because the long-term

benefit outweighs the incremental monthly

lease cost.

6

If the lease is not marked up by ane g regious amount, the expenseshould turn out to be around $10 permonth, again, well worth the invest-ment from my perspective (Over thelast 25 years, I've dealt with risk onh u n d reds of billions of dollars inguarantee authorizations and withh u n d reds of millions of dollars inbounced checks).

The additional advantages thatimaging offers, like providing asigned customer receipt and theability to cro s s - re f e rence that sec-ondary image to the primary check

image, creates a compelling arg u-ment for eliminating the merc h a n tretrieval requests on "not author-ized" bank returns.

So, to image or not to image? Thehands-down answer is 'yes.' If Iwant to maximize the collectionrate, earn a reasonable return andultimately minimize the merc h a n t ' sdiscount rate, I would image on 80%of the merchants our sales agentsbring to us.

If you decide to include alternativeuses of imagers at the point of sale,

such as those for non-check re l a t e dtransactions, then the decisionbecomes even easier.

Lin Fellerman is founder, President andCEO of San Diego-based Secure PaymentSystems, a national provider of electroniccheck and gift card processing services.Prior to founding SPS in 1996, Lin was for-merly a 20-year employee and 10-yearP resident of Te l e c redit/Equifax CheckServices (now Certegy Check Services).

To learn more about SPS visit www.secure-paymentsystems.com, or you can send ane-mail to Lin at lfellerm a n @ s e c u re p a y-mentsystems.com .

So, to image or not to image? The hands-down answer is 'es.' If I want to maximize the collection rate, earn a reasonable return and ultimately minimize the merchant's discount rate,

I would image on 80% of the merchants our sales agents bring to us.

8

This is the second in a series of articles written in response to numer-ous reader requests for definitions of interchange levels. We areworking with several industry experts to explain the interchange"buckets" and how transactions are assigned to the processing lev-els. In this installment, we will discuss the definitions of the bucketsexclusive of the interchange rates. For the most current rates, pleaserefer to the table distributed with the August 25, 2003 issue of TheGreen Sheet.

Supermarket Rates

Both Visa and MasterCard have special re d u c e d - r a t ei n t e rchange programs in place to entice supermarkets toaccept credit and check cards at the POS. The super-market industry convinced the associations that gro c e r ys t o re profit margins were too slim to aff o rd the samei n t e rchange rates applied to retail merchants.

Visa CPS Supermarket Check Card Rate

For a transaction to qualify for this rate, a Vi s a - b r a n d e dcheck card must be used to make the purchase. TheM e rchant Category Code (MCC) for the location mustbe 5411, the transaction must meet all the Visa CustomPayment Service (CPS) Retail re q u i rements and them e rchant has to have been pre - a p p roved by Visa to par-ticipate in the program. To be certified by Visa, the mer-chant must sign a form available from the acquiringbank. The merchant must meet the following re q u i re-m e n t s :

• Be a retail store primarily engaged in selling food forhome preparation and consumption

• Offer a complete line of food merchandise, including self-service groceries, meat, produce and dairy products

• Have monthly perishables (defined as packaged and in-store bakery goods, dairy products, delicatessen prod-ucts, floral items, frozen foods, meat and produce) rep-resenting at least 45% of total monthly sales

• Accept credit cards for purchase of all goods and servic-es sold in the store at all check out lanes that acceptchecks

Once the form is completed and sent to Visa through thea c q u i re r, it can take four to eight weeks for an appro v a l .Once the approval is granted, work with the acquire rand/or processor to ensure the merchant is set up toc o r rectly process as a SIP m e rc h a n t .

Visa CPS Supermarket Tier II Rate

For a transaction to qualify for this rate, a Vi s a - b r a n d e d

c redit card must be used to make the purchase. TheMCC for the location must be 5411, and the transactionmust meet all the Visa CPS Retail re q u i rements. Thisrate replaces what used to be known as CPSSupermarket Credit Card .

Visa CPS Supermarket Tier I Rate –Select Merchant

For a transaction to qualify for this rate, a Vi s a - b r a n d e dc redit card must be used to make the purchase. TheMCC for the location must be 5411, and the transactionmust meet all the Visa CPS Retail re q u i rements.

The merchant must also meet specific monthly pro c e s s-ing volume re q u i rements. For a 12-month period, them e rchant must have processed at least 24 million trans-actions resulting in $1 billion in gross sales volume.

MasterCard Supermarket Rate – Debit(Offline) and Credit

For a transaction to qualify for this rate, it will dependon whether a credit card or check card (offline debit)was used to make the purchase. The MCC for the loca-tion must be 5411. The transaction must meet all theMerit III re q u i rements, and the merchant must be pre -a p p roved by MasterCard to participate in the program.

To be certified by MasterCard, the acquiring bank mustsubmit the proper form to MasterCard on the mer-chant's behalf. The merchant must meet the followingre q u i re m e n t s :

• Be a retail store primarily engaged in selling food forhome preparation and consumption

• Offer a complete line of food merchandise, including self-service groceries, meat, produce and dairy products

• Have monthly perishables (defined as packaged and in-store bakery goods, dairy products, delicatessen prod-ucts, floral items, frozen foods, meat and produce) rep-resenting at least 45% of total monthly sales

• Accept credit cards for purchase of all goods and servic-es sold in the store at all check out lanes that acceptchecks

Once the acquirer completes and sends the form toM a s t e r C a rd, it can take four to eight weeks for ana p p roval. Once the approval is granted, work with thea c q u i rer and/or processor to ensure the merchant is setup to correctly process as a supermarket merchant.

Interchange Untangled – Part 2

Companies and individu-als who solicit businesst h rough e-mail will wantto pay close attention to

recent actions and legislation thatstops junk e-mail promoting pro d-ucts and services, both legitimateand otherwise.

A judgment against one Texas com-pany in particular should be ofi n t e rest to those who use spam togenerate business.

In early October 2003,ClickForMail.com Inc. agre e dto repay customers $815,000in order to resolve charg e sb rought by the Federal Tr a d e

Commission.

The FTC alleged the company, doingbusiness as A l l P re A p p ro v e d . c o m ,sent e-mail "spam" off e r i n ga p p roved credit cards in exchangefor advance payments of $49.95 foreach card.

The federal charges held the compa-ny liable for failing to deliver onp romises it made over the Internetto provide the credit cards.

Thousands of people who paid thefee did not get the cards, accord i n gto the FTC. By settling the case,though, the Austin-based companydid not acknowledge breaking anyl a w s .

The case is one resulting from jointe fforts by government and lawe n f o rcement agencies and severalinitiatives targeting Internet fraud.The settlement also came on theheels of legislation signed into lawin late September banning spam inC a l i f o r n i a .

The FTC, Securities ExchangeCommission, U.S. Postal Inspection

Page 7 9

Scamming Spammers and theScamming Spams They Spam

Service, three U.S. attorneys general,four state attorneys general and twostate regulatory agencies have filed45 criminal and civil law enforc e-ment actions against Internet scam-mers and deceptive spammers.

In addition, the FTC and 21 U.S. andinternational agencies havelaunched an initiative to get org a n i-zations in 59 countries to shut downthe open relays allowing spammersto avoid detection by spam filtersand law enforc e m e n t .

The law enforcement actions targ e tdeceptive schemes and illegal scamsp romoted via e-mail such as auctionfraud, the sale of illegal contro l l e dsubstances, bogus business opportu-nities, deceptive money-makingscams, illegal advance-fee cre d i tc a rd offers and identity theft.

The California law makes it illegal tosend most commercial e-mail mes-

sages to anyone in the state who hasnot explicitly requested them. It alsop rohibits California companies fro msending the same sort of unsolicitede-mail to people outside the state,and imposes fines of $1000 for eachmessage and up to $1 million foreach campaign.

The law puts the burden of deter-mining whether the recipient of junke-mail is a California resident on thes e n d e r, a technically challengingp roposition. It also applies to a com-pany whose product is advertised,not just the company sending thes p a m .

By some estimates, California re p re-sents up to 20% of e-mail sent andreceived in the U.S.; it is the mostpopulous state and is home to manyl a rge Internet companies.

The law goes into effect January 1,2004 and is the most wide-re a c h i n g

law of any other in 35 states that arealso attempting to regulate spam, orof any proposed bills in Congre s s .Opponents of the law argue it willdo little to stop spam, that it isunconstitutional and that any feder-al laws passed will supercede it.

The FTC approved theClickForMail.com settlement unani-mously 5 – 0, and the U.S. DistrictCourt for the Northern District ofIllinois finalized the agreement.

Under terms of the settlement itreached with the FTC, ClickForMail.com is prohibited from makingfalse claims about credit cards andselling its customer lists. If the courtfinds that the company misstated itsfinancial condition, it is subject to afine of $3.6 million.

And that's a lot of spam and eggs.

Page 8 0

If you're brand new to the pay-ment processing industry,reading the book, "How toSurvive and Thrive in the

M e rchant Services Industry" is oneway to get started. This isn't some-thing you'll need to sit down andread cover to cover (who has timefor that anyway?) because the bookactually serves more as a re f e re n c es o u rce than the "how to" manualimplied by its title.

Authors Marc J. Beauchamp andWilliam Graham have a combinedexperience of 20 years in theb a n k c a rd industry and have workedwith multiple ISOs and financialinstitutions throughout theirc a reers.

They present their knowledge inshort chapters broken out into bold-faced sections, so it's easy to flipt h rough quickly and find exactlywhat you're looking for. There arem o re than 300 pages of useful infor-mation for someone trying to learnthe basics of the industry.

In fact, the first section of the book istitled 'Industry Basics,' and it func-tions as a sort of in-depth glossary ofterms, providing words, acro n y m sand background on all of the termsyou hear used every day in the pay-ment processing industry, such asdebit, EBT, ACH and gift and loyal-ty cards.

This section also describes the ro l eof the ISO, merchant, processor and

a c q u i rer and defines the latestindustry buzzwords, such as wire-less, m-commerce, e-commerc e ,smart cards and contactless pay-ments.

U n f o r t u n a t e l y, there are only a fewpages dedicated to interchange in'Industry Basics,' which is disap-pointing since this is one of the maintopics new salespeople often needthe most help with.

The authors did not overlook, how-e v e r, that their readers are salespeo-ple; they devoted two sections of thebook to instruction on sales tech-niques and personal development.

They included chapters on where top rospect, how to present and how toclose and even added an appendixcontaining simple worksheets tohelp you set income goals and dailycall quotas, develop a telemarketingscript and create a good ad. (Forsome successful sales veterans, thisinformation may be immaterial, butreviewing to keep skills fresh can behelpful at any stage of one's care e r. )

A chapter in the beginning of thebook takes you through all of thesteps involved in processing a cre d i tc a rd transaction (both retail and e-tail); another illustrates the "anato-my" of a credit card and anotherfocuses on the history of cre d i t

Page 8 2

"How to Su r vi ve andThr ive in the Merc h a n tS e r v i ces Indust r y"

By Marc J. Beauchamp and William GrahamCopyright Performance Training SystemsISBN: 0-9741884-0-9324 pages$19.95

Despite Missing a Few Wrenches,Industry Toolbox Comes in Handy

c a rds, including timelines on theevolution of the Vi s a ,M a s t e r C a rd, American Expre s s ,Discover and Diner's Club –even JCB International – brands.

T h e re's a lot of good informationh e re, but perhaps what's missingin "How to Survive and Thrive"is the "evolution" of theM e rchant Level Salesperson.Readers who are salespeoplemay ponder such questions as"Who am I?," "Why am I here ? "and "How did this niche in thepayment processing industrycome to be?"

After all, many argue the industry is where it is todaybecause of the efforts of these salespeople – those who areout there selling the products and services day in and dayout.

The most blatant omission, in our opinion, was that theinception of this industry was completely overlooked.T h e re were no non-bank sales of merchant pro c e s s i n g

accounts before AMCOR's con-tract with Citibank.

When Paul Green convinced Citito authorize independent salesreps to sell on behalf of the bankt h rough his company, A M C O R ,this industry was born. Not inci-d e n t a l l y, so was The Green Sheet.

To w a rd the back of the book aretranscripts of interviews withindustry moguls, which mayshed more light on the innerworkings of the business forthose just getting started.

Bob Carr, Mary Dees, MaryG e rdts, Lee Ladd and Paul Green give their opinions onthe major legal issues facing the industry, predictions andchallenges for the future and what they think are thehottest products on the market.

They also offer advice to new salespeople entering thei n d u s t r y, such as important skills to have and useful toolsfor selling.

Page 8 4

There''s a lot of good information here,but perhaps what''s missing ...

is the "evolution" of the Merchant Level Salesperson.

Readers who are salespeople may ponder such questions as

"Who am I?," "Why am I here?" and "How did this niche in the payment processing industry

come to be?"

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6

Hy p e rcom Corp. sold allassets of its leasing sub-s i d i a r y, Golden EagleLeasing, Inc., to

Northern Leasing Systems, Inc. onOctober 9, 2003 for $30 million inc a s h .

Northern Leasing, headquartered inNew York City, said it plans to con-solidate Ridgefield, Conn.-basedGolden Eagle's operations under theNorthern Leasing name. GoldenEagle provided micro-ticket (pricedunder $5,000) leases to merc h a n tc a rd processors, equipment vendorsand MSPs.

T h i r t e e n - y e a r-old Northern Leasingis also a lessor of micro-ticket equip-ment (priced under $10,000) andspecializes in providing leases andfinancial services for point of salec redit card terminals.

The company has been workingt o w a rd growth through strategicacquisitions, Jay Cohen, Founder,P resident and CEO of NorthernLeasing said. Before foundingNorthern Leasing in 1991, Cohenwas a sales rep for an ISO, sellingboth POS terminals and credit cardp ro c e s s i n g .

H y p e rcom sold Golden Eagle tocontinue focusing on its electro n i cpayment and transaction pro c e s s i n gbusiness and improving pro f i t a b i l i-t y, Chris A l e x a n d e r, Hyperc o mChairman and CEO said.

As a result of the transaction,H y p e rcom will recognize a fourthquarter pre-tax gain on sale ofa p p roximately $7 million, whichwill be included in income from dis-continued operations. The net pro-ceeds from the transaction are pro-

jected to be between $28.5 millionand $29 million after transactionclosing and employee severanceexpenses. As of June 30, 2003,H y p e rcom reported it had $51.6 mil-lion in cash, including about $14million related to Golden Eagle.

"And I expect that our leadershipposition within the industry, nowcomplemented by a war chesta p p roaching $80 million, positionsus well as an acquirer or businesspartner of choice," Alexander said ina statement.

In July, Hypercom closed its sub-sidiary The Horizon Group's St.Louis facility. It transitioned servicesto Hypercom headquarters inPhoenix and transferred additionalHorizon customers and services toTASQ Te c h n o l o g y.

Hypercom Sells Golden Eagle Leasing

Product: Wireless payment-processing solutionCompany: AIRCHARGE and Infinite Peripherals

Put together a mobile computing device, a PDAcompatible-printer and some Palm software forw i reless payment processing, and you have afull solution for accepting credit cards for pay-

ment on the go.

Infinite Peripherals and AIRCHARGE have combinedtheir technologies — Infinite Peripheral's PP-50MS PDAprinter/magnetic stripe reader and AIRCHARGE's PalmOS software–with the Kyocera 7135 smart phone.

The Kyocera 7135 is a phone, PDA and portable comput-er all in one. It fits directly into Infinite Peripheral's print-er/ reader to transform into a mobile credit card pro c e s s-ing machine. The phone is available from several majorU.S. wireless carriers such as Verizon Wi reless and QwestWi reless.

You can load AIRCHARGE's payment processing soft-w a re onto the phone using a standard Palm HotSyncoperation. The application is compatible with the ninel a rgest credit card processing systems in the U.S.

Infinite Peripheral's 15 oz. PP-50MS PDA printer has aninternal re c h a rgeable battery and a thermal printer thatprints 2 inches per second. It accepts standard paper ro l l sand comes with a one-year warranty.

It's compatible with the Palm III series, Palm V, Palm VII,Palm m125, m130, m500, and m705, VISOR and Handera.

Several AIRCHARGE customers are participating in abeta test of these technologies and are using the devicestogether to accept credit cards at trade shows, flea mar-kets and other types of outdoor events where standardphone line access in limited, expensive or simply notavailable.

A I R C H A R G E / World Products, Inc.

5465 W. Grand Av e .G u rnee, IL 600318 4 7 - 8 5 5 - 1 4 8 3w w w. a i rc h a rg e . n e t

Infinite Peripherals

625 W. University, Unit CArlington Heights, IL 600048 0 0 - 2 7 8 - 7 8 6 0w w w. i p c p r i n t . c o m

A Flexible BillingOption for Merchants Product: Automated Recurring BillingCompany: Authorize.Net, an InfoSpace, Inc. service

Me rchants selling products and services overthe Internet typically re q u i re a paymentgateway in order to accept payments online,so their customers can pay promptly with

c redit cards and/or electronic checks. But many mer-chants also want to offer their customers a way to sched-ule and pay bills on a recurring basis.

H o s t i n g / I S P companies, online dating services, telecom-

Page 9 1

Triple Teaming for Powerful Mobile Payment Solution

munications, health clubs and e-magazines are some ofthe merchant categories benefiting from A u t h o r i z e . N e t ' srecurring billing services.

Authorize.Net now offers its merchants the A u t o m a t e dRecurring Billing service that allows them to create billing'subscriptions'' that include a customer's payment infor-mation, the amount to bill and appropriate billing inter-vals and duration. The product also stores and secures allof a customer's personal and billing information.

Once merchants have these data, then Authorize.Net gen-erates subsequent recurring transactions based on mer-chants' defined billing schedules and customers' paymentp re f e re n c e s .

Some of the features of the product include: multipleways to create subscriptions; flexible options for billingincluding weekly, monthly and other merc h a n t - d e f i n e dintervals; a search tool for locating subscriptions; andsubscription status alerts.

By using automated recurring billing, merchants can ben-efit from reduced payment authorization declines andexcessive administrative tasks.

Brick-and-mortar merchants using A u t h o r i z e . N e t ' s

Virtual Terminal solution can also benefit from theAutomated Recurring Billing product.

Virtual Terminal is a bro w s e r-based product merc h a n t suse to authorize, process and manage credit card transac-tions from any computer with an Internet connection anda Web bro w s e r.

Virtual Terminal replaces standard authorization termi-nals or software and provides an ideal solution for mer-chants manually entering credit card transactions forM O / TO sales.

Authorize.Net Corp.

915 South 500 East Suite 200American Fork, UT 840038 0 1 - 4 9 2 - 6 4 5 0w w w. a u t h o r i z e n e t . c o m

InfoSpace, Inc.

601 108th Avenue NE, Suite 1200Bellevue, WA 98004 4 2 5 - 2 0 1 - 6 1 0 0w w w. i n f o s p a c e i n c . c o m

Page 9 2

In addition, Comerica Merchant Services also offers you many

other benefits you just won't find anywhere else. For example:

• Overnight approval process

• Web-based application submission, processing, and tracking

• Guaranteed Lease Program with a 48-month factor

as low as .0285

• Interchange as your Buy Rate

• 100% vested residuals from day one

• American Express® sign-up commission

• Full debit processing with 12 debit networks

• EBT processing

• Web-based merchant reporting

• An affiliation with one of the nation's leading

business banks

• A dedicated relationship manager providing

unparalleled agent support to help you make

more money

• A 33-year history of continuous residual payments

to all our sales partners! Comerica provides a safe

and stable sales environment for you.

If you are looking for an exceptional, long term relationship with a rock solid Merchant Processor, call Comerica Merchant Services today and find out how you can become part of the Comerica family of sales agents.

Call Ken Stewart at 1-800-790-2670 and get started rightn o w !

Comerica Merchant Services

offers you a whole series of new

bonus opportunities to help you

earn extra money up front. You can

earn up to $6,600 in bonus dollars

per year and up to $5,000 for every

major merchant you bring in.

F o u rth ar ticle in a series on developing an overall business plan

Now that you have gathered information aboutyour competition, you are ready to developyour marketing plan. This plan should notonly identify your customers but should out-

line how you plan to present your services and pro d u c t sto them. It's essential to the success of your business thatyou make people aware of you and the unique servicesyou off e r.

The marketing plan is important to your overall businessplan. Investors will want to know that you have a goal formarketing your services. It is not enough to simply havea great product or service; you must also be able to re a c hyour audience to let them know about you.

One of the first things to do is to identify your customers.If you define several types of customers, break themdown into groups. This will enable you to market to eachparticular segment.

Describe how you want your target customers to perc e i v eyour business. What do you want them to focus in on?When you have done this, step back and do a re a l i t ycheck. Talk to some of your better customers and find outhow they actually see you. Now you can devise a plan tohelp them think of your business the way you would likethem to.

This plan can also assist you in making sure that everyonein the company is presenting the same message. Sendingmixed signals to the clients can cause confusion and mayresult in lost sales.

What are your marketing goals? Spell these out and dis-cuss strategies to accomplish them. Devise a timeline formeeting your goals.

F i n a l l y, plan a budget. Spending money on marketing isvital to the continuation and growth of your business. Thebudget will need to include:

• Production: design, paper, printing, envelopes, labels,postage, etc.

• Advertising: print (magazines and newspapers), flyers,b roadcast (TV, radio), etc.

• Labor: in-house or out-sourced labor dedicated to themarketing of your business

Next issue: Creating a Financial Statement

Consider the Next StepsF o u r th art icle in a series on effective ad campaigns

The design team that created your ad has re a l l yknocked itself out, took it to the hoop andmade the CEO squeal with delight … in short,the ad is ready to motivate your target audi-

ence and increase your revenues. However, your job isnot quite finished yet.

T h e re are a few things to check before you drop a diskcontaining the ad into an express courier envelope andtake it to the local mail center with a smile of satisfactionas wide as the equator. When that envelope arrives at itsdestination the next day, will a publication find a diskwith some cryptic scribble in permanent marker on itf rom an unknown company to an unspecified recipient?

Receipt of a mystery disk will delay the delivery forhours, maybe days. A worst-case scenario could have them a i l room refusing the shipment and sending it back, oradding your envelope to the trouble stack where it mightnever be seen again. All your hard work could go downthe tubes because there was no paperwork enclosed withyour package.

First and foremost, find out the deadlines and pro d u c t i o nschedule of the publication to which you are sending anad. Most provide a media kit to advertisers to refer to forspecs, print and online rates, publication dates and evenreader demographics. If you can't find it, check the publi-cation's Web site or call your sales re p resentative. It's bet-ter to bug a few people now than to throw a wrench in thep rocess when it's deadline time.

Page 9 5

"Effective leadership is putting first things first.Effective management is discipline, carrying it out."

– Stephen R. Covey

A Marketing Plan Will Lead Them to Your Doorstep

A completed insertion order is also very important for avariety of reasons and should not be neglected. It tells thepublication:

• Your contact information• The name of the company you or your agency represents• The name or number of the ad reference• When the ad is scheduled to appear

The insertion order is a key piece of the puzzle in your ad'sappearance in most publications, and it re i n f o rces the stat-ed terms of the legally binding, signed ad contract.

Another extremely important part of the process is pro-viding a printed copy of the ad to show how it is supposedto look in print. This is re f e r red to as a composite, mechan-ical or proof. The composite should be as close to an accu-rate a re p resentation of the ad as possible; the publicationwill appreciate this so they don't have to guess. Shades ofgray and tricky size diff e rences are very difficult toa p p roximate, and if problems arise with the ad at pro d u c-tion time, you could be held accountable for the mistake.

When submitting color artwork containing specific com-pany colors that must be matched dead-on (for example,for a company logo), provide a color-match proof. Locate aservice bureau or pre - p ress specialist in the Yellow Pagesof your phone book. These companies can generate a highresolution, true-to-color output (often called an IRIS orVeloprint) of your design from your disk on their special-ized equipment, which the publication's layout depart-ment can use to verify accuracy.

Last but not least, label the disk with your company'sname, a re f e rence to the ad and anything else that will helpthe layout department match the disk to the ad and com-p a n y. If the disk gets separated from the ad folder and allit says on it is something to the effect of "ZZY102503.jpg,"this might cause confusion and delays.

Publications re q u i re paperwork for ads for a number ofreasons: to help the production processes go smoothly andto help keep the production team organized–yours is notthe only ad that will appear in an issue. Insertion ord e r sre i n f o rce the stated terms of the legally binding ad con-tracts. A file folder holding all the necessary paperwork,f rom signed contracts to insertion orders and composites,benefits both parties involved in case a dispute arises.

Next in the series: What to do if problems occur and how to craft aneffective follow up ad

Page 9 6

"EBT: The Next Generation" UniversityElectronic Funds Transfer Association

Highlights: The Electronic Funds Transfer Association is thenation's leading inter-industry trade association dedicatedto the advancement of electronic payment systems and com-merce. The Association's diverse membership includes thenation's leading commercial banks, ATM networks,bankcard associations, major ATM and POS manufacturingcompanies, systems integrators, smart card and advancedcard technology companies, retailers, electronic commercecompanies, retailers and a host of other companies thatserve the EFT industry. EFTA's EBT Industry Council is thenation''s longest standing trade group providing leadershipon the business and policy issues of EBT. The sixth annualEBT Industry Council Conference, "EBT: The NextGeneration" University, will provide participants with anumber of opportunities for expanding their knowledge ofEBT. Issues covered will include legislative and regulatory;WIC; the health industry; card technologies; strategic plan-ning; and improving profit margins. A roundtable discus-sion of critical issues facing EBT in the near future is sched-uled.

When: November 9 – 12, 2003Where: Doubletree Hotel at Reid Park, Tucson, Ariz.Registration Information: Visit

www.ebtthenextgeneration.com or phone 630-986-0864.

BASC Annual Vendor Expo/Quarterly MtgBankcard Association of Southern California

Highlights: The Bankcard Association of Southern California(BASC) was formed in 1977 by a group of credit card andATM managers, sales organizations and vendors to pro-mote methods of e-commerce and support payment cardindustry products. Through its meetings, BASC educatesmembers on industry trends, regulation updates, hardware,software, online banking services and other importantissues in the payment processing industry. BASC differsfrom other regional associations by focusing on providingbanks and credit unions with information and access to thecard associations rather than focusing solely on theMLS/ISO. The quarterly meetings are designed to be ofinterest to all financial services professionals in the SouthernCalifornia area.

When: November 6, 2003 Where: The Holiday Inn, Monrovia, Calif. Registration Information: Write to BASC, P.O. Box

301772, Escondido, Calif. 92030 or phone or e-mailSherry Friedrichsen at 760-243-7990,[email protected]

Good Selling!

Paul H. Green

8

ATM/SCRIP ISOs LOOKING FOR AGENTS

Access AT M(866) 874-0384

Access to Money(888) 501-5246

ATM Merchant Systems(888) 878-8166

Data Capture Systems, Inc.(800) 888-1431

NationalLink(800) 363-9835

B A N K S L O O K I N GF O R A G E N T S

Redwood Merchant Serv i c e s(800) 528-6661

BANKS LOOKING FOR ISOs/MSPs

Best Payment Solutions(866) 289-2265

C e n t r a l B a n c a rd(866) 797-2317

Chase Merchant Services, LLC(800) 622-2626 x86016

Comerica Merchant Serv i c e s(800) 790-2670

First American Pymt Sys(866) GO4 FA P S

G roup ISO(800) 960-0135

Humboldt Merchant Services, L.P.(877) 635-3570

National Processing Co.(800) 672-1964 x 7684

Redwood Merchant Serv i c e s(800) 528-6661

Retriever Payment Systems (800) 376-3399

CHECK DRAFTINGS E RV I C E S

C F IG ro u p(888) FON-CHEX

Checks by Phone/By We b(561) 998-9020

CHECK GUARANTEE/V E R I F I C AT I O N

Abanco Intl., LLC(866) 231-2030 x2347

C rossCheck, Inc.(800) 654-2365

E Z C h e c k(800) 797-5302 x303

Global eTelecom, Inc. (GETI)(877) 454-3835

Global Payments (800) 638-4600 x888

Nationwide Check Serv i c e s(800) 910-2265

Red Check Investments(877) 238-0415

S e c u r- C h e x(866) 464-3272

COMPLIANCE/PIN E N C RY P T I O N

I N F O R M AT I O N EXCHANGE, INC.(888) GO-INFOX

C O N S U LTING AND A D V I S O RY SERV I C E S

Adam Atlas Attorney at Law(514) 842-0886

First Annapolis Consulting(410) 855-8500

Integrity Bankcard Consultants, Inc.(800) 816-4224

Service Dimensions, Inc.(800) 578-3800

Strategic Mgt. Partners, LLC(800) 886-4465

C R E D I T C A R D C A S HA D VA N C E

P O S Payment Systems(718) 548-4630

DEBIT TRANSACTION P R O C E S S I N G

C a s h l a n e(800) 325-2862

Global Payments, Inc.(800) 801-9552

E F T-ACH SETTLEMENT S E RV I C E S

Intercept Corporation(800) 378-3328

Universal Payment Solutions(877) 889-7500

E Q U I P M E N TAbanco Intl., LLC

(866) 231-2030 x2347B A N C N E T

(713) 629-0906B a rtlett Info Tech Svcs, LLC

(901) 384-6151C a rd Wa re Intern a t i o n a l

(740) 522-2150General Credit Forms, Inc.

(800) 325-1158Global Payments

(800) 801-9552I n g e n i c o

(800) 252-1140Lipman USA, Inc.

(516) 484-9898 M I S T

(866) 955-6478M LT & Assoc., Inc. Plastic Refurb

(775) 358-2922Nationwide Check Serv i c e s

(800) 910-2265P O SP o rtal, Inc.

(866) 276-7289TA S Q Te c h n o l o g y

(800) 827-8297Te e rt ronics, Inc.

(800) 856-2030Vital Merchant Serv i c e s

(800) 348-1700

FREE ELECTRONICCHECK RECOVERY

C h e c k A G A I N(800) 666-5222

Check Recovery Systems(800) 721-0930

C h e x c o l l e c t . c o m(866) 691-0666

Gulf Management Systems, Inc.(800) 947-3156

G I F T / L O YA LT YCARD PROGRAMS

P O S Payment Systems(718) 548-4630

T E N D E R C A R D(800) 383-8280 x202

I S O R E L ATIONSHIPS AVA I L A B L E

Abanco Intl., LLC(866) 231-2030 x2347

AmericaOne Payment Sys(888) 502-6374

BioPay Biometric Payment Systems(866) 324-6729

Business Payment Systems(877) 700-7947 x242

C e n t r a l B a n c a rd(866) 797-2317

C o C a rd Marketing Gro u p(800) 882-1352

C y n e rgy Data(800) 933-0064 x5710

E V O Payment Systems(800) CARDSWIPE x7800

First American Payment Systems(866) GO4 FA P S

First Data Merchant Serv i c e s(866) FDMS-ISO

F M B S(800) 966-5641

Global Payments, Inc.(800) 801-9552

G roup ISO(800) 960-0135

Lynk Systems, Inc.(866) MSP-LY N K

The Resource Guide has grown toaccommodate increased interest!

To add your company to our expanding listing,

call 800-757-4441 today.

0 0

M S I - M e rc h a n tS e rvices, Inc.(800) 351-2591 x9-23


P a rt n e r- A m e r i c a . c o m(800) 366-1388

United Bank Card (UBC)(800) 201-0461

I S O S / B A N K SP U R C H A S I N G AT MP O RT F O L I O S

F T I(866) 450-9815 x22

ISOs/BANKS PURCHASINGMERCHANT PORT F O L I O S


C e n t r a l B a n c a rd(866) 797-2317

Chase Merchant Services, LLC(800) 622-2626 x86016

C o n c o rd EFS, Inc.(800) 778-4804


Global Payments Inc.(416) 847-4477

PaySystems Corporation(514) 227-6894 x407

Southwest Financial Services, Inc.(800) 841-0090

ISOs LOOKING FOR AGENTS

Abanco Intl., LLC(866) 231-2030 x2347

Aliant Financial Serv i c e s(877) 377-0788


A p p roval Payment Solutions, Inc.(888) 311-7248

AT S / C o C a rd(877) 334-0272

B a n c a rd Payment Systems(866) 783-7200

Best Payment Solutions(866) 289-2265

Business Payment Systems(877) 700-7947 x242

C e n t r a l B a n c a rd(866) 797-2317

C e rtified Merchant Serv i c e s(800) 732-7099

Comerica Merchant Serv i c e s(800) 790-2670

C o n c o rd EFS, Inc.(800) 778-4804

C y n e rgy Data(800) 933-0064 x 5710

E - C o m m e rce Exchange(800) 748-6318


EXS Electronic Exchange Sys.(800) 949-2021

First American Payment Systems(866) GO4 FA P S

First Card Merchant Serv i c e s(800) 404-9118

F M B S(800) 966-5641

Innovative Merc h a n tS o l u t i o n s

(800) 397-0707I R N PAYMENT SYSTEMS

(800) 366-1388M e rchant Processing Inc.

(800) 605-5581 x7791M e rchant Services, Inc.

(800) CARDSWIPEMoney Tree Serv i c e s

(800) 582-2502 x2M S I - M e rc h a n tS e rvices, Inc.

(800) 537-8741 x9-12National Processing Co.

(800) 672-1964 x7655Nationwide Check Serv i c e s

(800) 910-2265Netcom Data Southern Corp.

(800) 875-6680Orion Payment Systems

(877) 941-6500P re f e rred Card Services, Inc.

(800) 656-0077 x16S i g n a t u re Card Serv i c e s

(888) 334-2284

Transaction Payment Systems(800) 999-8674 x309

United Merchant Serv i c e s(800) 260-3388 x236

Worldwide Merchant Serv i c e s(800) 847-2662

Xenex Merchant Serv i c e s(888) 918-4409

L E A D S G E N E R AT O R SHot Leads Xpre s s

(866) 244-2593

L E A S I N GAbanco Intl., LLC

(866) 231-2030 x2347A B C L e a s i n g

(877) 222-9929Allied Leasing Corp.

(877) 71-LEASEAmerican P.O.S. Leasing Corp.

(800) 349-6516B A R C L AY SQUARE LEASING, INC

(866) 396-2754First Leasing Corporation

(888) 748-7100First Manhattan

(800) 220-5125G l o b a l Tech Leasing, Inc.

(800) 414-7654 x 3002Golden Eagle Leasing, Inc.

(800) WE LEASE Integrated Leasing Corp.

(800) 398-9701LADCO Leasing

(800) 678-8666Lease Finance Gro u p

A Division of CIT(888) 588-6213

Leasecomm Corp.(800) 515-5327

MERCHANTS LEASING SYSTEMS(877) 642-7649

Merimac Capital(866) 464-3277


N o rt h e rn Leasing Sys., Inc.(800) 683-5433

S i g n a t u re Leasing, LLC(877) 642-7649

TA S Q Te c h n o l o g y(800) 827-8297

L O YA LT Y C A R D SF L E X G I F T / U M S I

(800) 260-3388 x236

POS CHECK CONVERSION

Abanco Intl., LLC(866) 231-2030 x2347

B - C H e X(877) 700-7947 x242

C rossCheck, Inc.(800) 654-2365

E - C h e x(877) 474-8924

ElectCheck Plus(800) 863-5995

E Z C h e c k(800) 797-5302 x303

Global eTelecom, Inc. (GETI)(877) 454-3835


S e c u r- C h e x(866) 464-3272

POS SUPPLIES

C a rd Wa re Intern a t i o n a l(740) 522-2150

General Credit Forms, Inc.(800) 325-1158

TA S Q Te c h n o l o g y(800) 827-8297

Vital Merchant Serv i c e s(800) 348-1700

P R O C E S S O R SLOOKING FOR ISOs

First Data Merchant Serv i c e s(866) FDMS-ISO

Global Payments(800) 801-9552

Lynk Systems, Inc.(866) MSP-LY N K

National Processing Company(800) 672-1964 x4883

P a y m e n t e c h(888) 849-8980

The Resource Guide is paid classified advertising. The Green Sheet is not responsible for and does not recommend or endorse any product or service. Advertisers and advertising agencies agree to indemnifyand hold the publisher harmless from any claims, damage, or expense resulting from printing or publishing of any advertisement.

0 2

INDEX TO ADVERT I S E R S :REAL-TIME CHECK/ CREDIT CARDP R O C E S S I N G

E - C o m m e rce Exchange(800) 748-6318

e P ro c e s s i n g N e t w o r k . c o m(800) 971-0997

U S A e P a y. c o m(866) USAePay (872-3729)

R E A L - T I M E C H E C K / D E B I TP R O C E S S I N G

Payment Option Sol., LLC(888) 767-7674

SITE SURV E Y SP ro p e rty Resource Network Inc.

(800) 676-1422

S U P P O RT DESK FORP O S TERMINALS &PC SOFTWA R E

C a rd Wa re Intern a t i o n a l(740) 522-2150

TA S Q Te c h n o l o g y(800) 827-8297

Vital Merchant Serv i c e s(800) 348-1700

2GS, LLC ..............................................................................80ABANCO International ..........................................................30 ACCPC..................................................................................85Advanced Payment Services.................................................. 66AmericaOne Payment Systems ..................................................9Authorize.Net ........................................................................37Bancnet Corporation ............................................................ 74Barclay Square Leasing ..........................................................10BASC ................................................................................38Best Payment Solutions ........................................................ 90BUDGET Terminals & Repair....................................................22 Business Payment Systems ......................................................51Central Bancard ....................................................................62Certified Merchant Services .................................................... 75Charge Card Systems .......................................................... 24Comerica Bank .................................................................... 94Comstar Interactive ................................................................18 CrossCheck ............................................................................43 Cynergy Data .................................................................... 39Electronic Payment Systems ....................................................61Electronic Payment Systems II ................................................70EVO Payment Systems................................ 44-45, 48-49, 52,53EZCheck ................................................................................63First American Payment Systems ..............................................47First Data Merchant Services-MD ............................................57Frontline Processing ............................................................ 65FTI ......................................................................................20General Credit Forms ............................................................73Global Electronic Technology ..............................................11Global eTelecom ....................................................................36GO Software ........................................................................56Golden Eagle Leasing.......................................................... 34Heartland Payment Systems ................................................ 69Hypercom.......................................................................... 104Integrated Leasing ..................................................................12Integrity Payment Systems ......................................................71 IRN/PartnerAmerica .......................................................... 81JR’s P.O.S. Depot ............................................................ 46, 55 Lipman USA ..........................................................................15Lynk Systems, Inc. ................................................................ 32Lynk Systems Inc. II ................................................................84 Merchant Processing Incorporated ..........................................86MSI-NJ ..................................................................................19MSI-NJ 1-800-BankCard ........................................................99Nationwide Payment Solutions ................................................42 North American Bancard ......................................................7Northern Leasing..............................................................88, 89NOVA Information Systems ................................................ 92NPC .................................................................................. 13Payment Option Solutions .................................................... 101Paymerica..............................................................................28Paypoint ................................................................................97 Paysystems Corp. ..................................................................21Plug 'n' Pay ..........................................................................76POS Portal ............................................................................79Pueblo Bank & Trust ............................................................ 14Retriever Payment Systems .................................................. 26Secure Payment Systems ........................................................54 Signature Card Services ..........................................................68Star Systems .................................................................. 17, 93TASQ Technology ................................................................103 Terminal Superstore ................................................................58Thales e-Transactions................................................................2The Phoenix Group ............................................ 27, 29, 31, 33Transaction Payment Systems ..................................................77 U.S. Merchant Systems ..........................................................83United Bank Card .............................................................. 40United Merchant Services .................................................... 64 VeriFone ..........................................................................25, 67Vision Payment Solutions ........................................................50 Vital Merchant Services ..........................................................23Vital Merchant Services II ........................................................59Xenex Merchant Services ........................................................87

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