Merchants, acquirers, processors, anti-fraud providers and others serving the card-not-present payments market met in Orlando, Fla. recently at the first annual CNP Expo. For our readers who were unable to attend the groundbreaking event, CardNotPresent.com will be offering glimpses of the important information covered in two-and-a-half days of panel discussions on a host of issues relevant to merchants that take card-not-present payments and the technology providers that serve them.
By D.J. Murphy, Editor-in-Chief
During the course of the CNP Expo, the different sessions comprising the educational tracks reflected the diversity of the event’s attendees. On Day 2, a session titled “How to Choose a Processor” aimed squarely at smaller merchants seeking advice on how to evaluate potential processing partners for the first time and growing retailers that might be ready for a different partner as their e-commerce business achieves a new scale.
For smaller merchants establishing an e-commerce program, just wading through the jargon and industry terms tossed around by payments insiders makes it difficult to know who is who, never mind finding the right processing partner, according to Paul Larsen, president of Paul Larsen Consulting and moderator for the session.
“Acquirers, processors, gateways, ISOs, PSPs. All of those are entities that can play a role in processing transactions,” Larsen said. “How in the world do merchants begin to try to figure out who they need to have a relationship with?”
They figure it out, the panelists agreed, by knowing themselves and knowing their potential partners. In short, merchants should ask probing questions and be realistic about their place in the market. A simple place to start is to understand that the size of your business can indicate what type of processor is appropriate and who you should be dealing with, said Rey Pasinli, executive director of Total Apps Inc.
“It’s really an equation of how big the merchant is. That’s going to be your starting point,” said Pasinli. “If you look at the marketplace today it’s kind of a pyramid, where you have a broad base of small merchants at the bottom. As the merchants get bigger and bigger there are less and less of them. In addition to that pyramid of merchants, there is a corresponding pyramid of payment service providers. If you’re at the lowest end of it, the guy who’s going to help you is your local street agent who may be pestering you six weeks in a row, calling you and pitching you a lower rate. But he’s going to help you fill out the paperwork and show you how to use the terminal.”
As merchants begin to grow into midsize businesses, Pasinli said, they ought to look toward ISOs or processors that can provide a payment gateway. As merchants reach enterprise class, he said they begin to have the clout to deal directly with acquirers.
While many look at various processing services as commodities differentiated only by price, Kevin Hoehn, CEO of payments consultancy Cultaca Group, said every provider has an area of expertise. To find the best match, a merchant needs to ask the right questions of peers (at events like the CNP Expo) and potential partners.
“There are acquirers and ISOs in the space that specialize and have a different risk tolerance and a different knowledge base,” Hoehn said. “So as you’re looking to evaluate a solution, you need to ask very specific questions related to your business. Having this forum here [is a chance to ask] ‘who is great for digital downloads?’, ‘Who’s a great one for video cams?’ or ‘Who’s great for physical products?’ They all specialize and if you find the right acquirer or payment processor, it’s a wonderful, amazing relationship. But the converse is also true.”
Merchants were represented on the panel by one of the most recognizable names in e-commerce. Robert Hamilton, senior director of global billing and payments for eBay, said fees are not the online retailer’s main consideration when evaluating processing partners.
“Fees are not the biggest factor,” said Hamilton. “It doesn’t do us any good to find the lowest cost provider. [In that case] when something fails and breaks on Sunday night, that usually means we’re not going to be able to get hold of anyone until Monday at 9:00. We have 24/7/365 service from all our providers and we value that a great deal.”
Stay tuned to CardNotPresent.com in the coming weeks as we present summaries and audio clips from the most exciting and relevant sessions at the 2012 CNP Expo. If you’re interested in being involved in next year’s event as a sponsor, exhibitor or attendee, contact Steve Casco at email@example.com.