Special delivery
Our ability to access and store information is ever expanding. Online search engines like Google have become so essential to modern life that google is now a commonplace verb. And ISO portfolios are packed with vital data. Keeping track of all that information can be overwhelming, but making the best use of it is crucial.
According to John Nix, Senior Vice President, International Sales and Marketing at Data Delivery Services Inc., few companies in 2000 - even major payment processors - had the tools for managing data for the Web that DDS offered. The company started under an ISO with a handful of employees. Today it is a privately held company serving over 800,000 merchants, with offices in Texas, Georgia, Japan and Vietnam.
"In the late 90's the owners of the [ISO] were really upset with the lack of tools that were available to manage a merchant portfolio via the Web," Nix said. For each merchant boarded, the owners wanted to know the monthly commission, the assessed discounts, issues of concern and so forth.
"The Web was really ripe for this type of information, and the major processors really weren't paying attention to it," Nix added. DDS' ISO reporting module allows ISOs (and sub-ISOs) to provide direct support to merchants. ISOs can run risk management and residuals reports from the module.
Nix said its most popular product is its customer relationship management tool, which tracks incoming phone calls, routes them to the appropriate department and analyzes call data. This information is then given to the appropriate sales agents or managers.
A custom fit
ISOs contend with numerous vendors, changing regulations, impending legislation and interchange revisions. For ISOs who don't want to learn yet another system, DDS can customize solutions to fit the ISO's platform. The system can have the client's name, look and feel so that merchants and merchant level salespeople (MLSs) don't realize it's a third-party system.
Nix explained that, though some DDS clients work with three back-end processors, they have a common view on their computer screens; their call centers use the DDS software packages to build and manage the interactions with merchants regardless of processing platform.
He added that this makes training simpler for DDS customers. "It's a lot easier to train somebody on a Web-enabled tool versus trying to train them on [processor specific] tools," he said.
Nix noted DDS was at times caught unprepared, staffing-wise, for its rapid growth. "In spite of those growth pains that we've had in the past, we've always been able to deliver what [the customers have] been asking for," Nix said. "And I think that's probably what sets us apart. We do what we say, and we say what we do."
He credits this rapid growth to the customization of DDS products. "We never want a customer to feel that the tools that they're using have to fit DDS' world," Nix said. DDS strives to adapt its software to its customers' processors, internal processes and computer user interfaces, he said.
That's a tall order, but not quite so tall when your programmers have been working in the merchant acquiring business for years.
"We're in a unique position that we can always bring in a team that's pretty much seen every processor, every front-end, authorization system, every back-end system," Nix said. "And not only here in the United States, but overseas as well."
Nix said the DDS management team comprises individuals who have run ISOs, worked for ISOs, or been in sales or operations for processors.
He added that all of the company's business analysts have master's degrees or higher in computer science or software engineering.
In-house or outsource
Nix said DDS' biggest competitors are always the internal information technology (IT) departments of potential clients. "There is no doubt in our minds that other IT departments can do this," he noted.
One decision ISOs have to make is whether to devote resources to managing their own development or pay to have someone else do it.
With ever-changing regulations, the cost of staying PCI compliant and the cost of being breached, many ISOs are thinking twice about developing the tools to maintain in-house compliance, Nix said.
"One of the things that separates us from the in-house IT departments is the fact that we spend so much money on security," he said.
"We encrypt all of our data at rest. So even if we were hacked, and God forbid someone was able to walk off with card numbers, they'd be meaningless. They don't have what they would need to be able to reconstruct the card."
DDS has multiple data centers around the world; the Internet-facing ones house truncated data (the middle six digits are missing). In 2008, the company rolled out a PCI management console for its merchant acquirer clients to use in building PCI management processes for merchants.
More applications
According to Nix, DDS' fraud and risk management module significantly decreases acquirers' fraud losses. In addition to reporting and crunching merchant portfolio data, DDS processes loyalty data and has recently added custom programming to its services.
"We'll do the business analysis," Nix said. "We'll do the development and turn the code back over to you as the customer, and you can maintain it yourself; or we can come in and do maintenance for you on a regular basis for things such as your own internal commission reporting, your own profitability reporting, if you need to do inventory management.
"Or maybe it's something ancillary. Maybe you're not only doing merchant processing, but you're in another business line. Maybe you're in the health care vertical, and you need to have some special programming to go along with your merchant business."
Rolling with the punches
Revenue streams have shrunk in the last several years. "I think probably three or four years ago making 50 basis points on a merchant wasn't unheard of," said Nix. "I think in today's environment, [the norm] is probably 20 basis points. As the margins continue to shrink, there's got to be new avenues for new growth.
"Unfortunately in our industry, we're becoming more and more regulated." He added that the positive side of that development is that it's providing more safeguards to credit card users. Nix also predicted a shift in the industry toward more fee-based revenue related to compliance and regulatory issues.
He expects merchants will become more selective in accepting card brands at the POS. Costly rewards cards are a case in point.
"I know in today's environment they're supposed to accept all cards," Nix said. "But I wouldn't be surprised if there's a point in time where [the merchant says to the card user], 'I really want you to use your debit card and not your sky miles card' - or whatever it might be."
Nix said Visa Inc. and MasterCard Worldwide would respond by attempting to enforce its honor all cards requirement, adding that the government may then step in on the merchant side, claiming the honor all cards agreement violates anti-trust statutes.
One recent piece of legislation is providing an oppor-tunity for DDS. The American Housing Rescue and Foreclosure Prevention Act of 2008 (HR 3221), which goes into effect at the close of 2010, requires acquirers that process more than 200 transactions, or more than $20,000 in volume per year, to turn over aggregate dollar amounts of credit and debit card transactions done by their merchants to the Internal Revenue Service each year.
"We plan to offer that reporting by the third quarter of this year," Nix said, adding that the ISOs DDS serves "can start being able to interface with the IRS to make sure they have the right Social Security number or tax ID that they'll be reporting under.
We have all that data for our current clients today. It's just a matter of being able to forward it to the IRS and create the 1099s for the merchants."
Rewarding experiences
Nix feels that when he walks into customers' or prospects' offices and learns of their issues, problems or obstacles he is "always be in a position to say 'we can help you with that.'"
He said hearing MLSs throughout the United States say they enjoy using DDS' software is recompense in itself. "The biggest reward is being able to offer a software product that is usable, gives a customer good return on their investment and that they continue to use us."
In a world of shrinking margins and financial uncertainty ISOs can control many things, not the least of which is having easy access to information that's vital to managing their portfolios and serving their merchants.
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