A direct link to large merchants

Electronic Payment Exchange boasts of being the smallest of the top 10 companies that have direct connections to Visa Inc. and MasterCard Worldwide. But being lean has enabled EPX to develop innovative technology. EPX also claims to have a closing ratio of over 50 percent, having boarded key stakeholders in e-commerce, education, health care, insurance, utility and financial institution sectors.

As a full-service international payment processor, EPX has engineered an integrated, end-to-end payment processing platform that is designed to deliver secure front- and back-end processing. Acting as a payment gateway and acquirer, the platform handles brick-and-mortar, Internet and MO/TO merchants, as well as corporate environments where electronic payments are accepted.

In January 2012, EPX expanded its reach beyond the United States, Canada, Latin America and the Caribbean by becoming a direct merchant acquirer in the European Union. Before then, EPX offered payment processing indirectly to EU merchants on behalf of its bank clients.

According to Joe Babin, EPX Executive Vice President, the EU initiative grew from merchant demand for access to more than payment processing. "Our single-source offering will provide all the technical requirements and financial services required to accept payment, including merchant accounts, front-end technology, authorization and settlement processing, comprehensive reporting, exception handling, and customer support," he said.

Ground floor technology

In 1979, Bill Robinson, formerly with Wilmington, Del.-based WSFS Bank, founded EPX as a small automated clearing house (ACH) processor focused primarily on health club membership programs. In the mid-1990s, investment banker Raymond Moyer joined the firm as President and Chief Executive Officer and evolved the company into an ISO with a payment gateway.

"Shortly thereafter, we had the good fortune of also developing a back-end settlement capability," Babin said, at which point EPX applied for and was granted direct connections with Visa and MasterCard. "We ended up as a direct-connect processor very early on in our history, which is a big differentiator, certainly against all the ISOs because they're not able to price the business at the same levels as we are," he added.

Another distinguishing factor is the company's internal development and technology team. "We didn't have to go out and buy the technology," Babin said. "We developed it ourselves. The value proposition showed up in the e-commerce world because we were the first to do online web reporting. We were able to report on the transaction through its entire lifecycle because we handled the authorization all the way through settlement."

Targeting e-commerce businesses attracted investors seeking access to the emerging online retail sector, and in 2002, EPX was acquired by InterCept Inc. A few years later, Moyer and members of the original management team bought back segments of the company, including its name.

"We weren't a startup from the perspective of technology, name brand and management with core competency," Babin said. "We were able to bring those three things back to the table and effectively go back out and start building our revenue stream again."

Starting in 2006, EPX rebuilt its entire platform, which included developing a security tool set. "We were the first ones to come out with a token," he noted. "But what's even more powerful is that our platform offers end-to-end encryption together with tokenization."

He also said the new platform addressed issues like interchange and Payment Card Industry Data Security Standard compliance. And mobile payment technologies are in the works.

The merchant angle

EPX's inside sales force is accustomed to dealing with Level 1 and regional merchants, as well as multinational clients. A typical candidate "has a mix of e-commerce, call center and point-of-sale, and then they push that globally to multiple locations and end up in Europe as well as the United States," Babin said. "We bring one platform to the table to handle all payment types, all distribution methods, in all regions for them."

One such client is RIVA Payments. "Their technology was a big draw for us," said Tom Varian, RIVA Chief Executive Officer. "I have a lot of middle market clients. In the middle market arena, you have a lot of customers that need to leverage the end-to-end encryption and tokenization that EPX offers.

"We have a number of publicly traded companies that we've been able to put on the platform, and the technology coincides with their SAS 70 reporting requirements."

Varian was also drawn to the EPX platform's flexible reporting features. "If you go to some other platforms, they have very basic, static reporting," he said. "If you look at EPX's reporting tool, it's very dynamic. You can pull all kinds of information out of the Web suite tool in any format you need."

With 10 user-defined fields, merchants can use EPX's reporting tool to track data throughout the transaction life cycle. "We find that every single one of our clients takes full advantage of the 10 user-defined fields," Babin said. "We're the only one in this space that offers it."

Varian also praised the platform for its ability to handle everyday retail situations. For example, when a customer contacts a merchant call center to return an item for a refund or to void a charge, the system handles the entire process.

"The EPX platform allows them to use the token rather than the actual card number from the consumer to do that refund or process that void, or to talk to them about whatever their issue is without actually having the card data," Varian said.

Babin added that EPX's BuyerWall Recognized Identification Code (BRIC) token is virtually impossible to reverse engineer, and the consumer's card number is not contained in the token - period.

"We step in between the origination of the transaction and the point in time where the merchant receives sensitive cardholder data," said Steven Kendus, Marketing Director for EPX. "That's where we think of placing a wall between the merchant and the consumer.

"The BuyerWall technology actually captures the transaction, sends it out for authorization and settlement, but we only provide the BRIC, or the token, back to the merchant."

Kendus said the BRIC combined with end-to-end encryption significantly reduces the scope of PCI compliance because merchants can only view the token and never touch or store sensitive data, which is encrypted at the point of swipe.

Going to bat for merchants

EPX's hosted platform also provides chargeback adjudication. "We do have a chargeback department where we'll actually fight the chargebacks for the client, but all of that is done in a fully automated way," Babin said. Statements are also fully automated; clients receive them electronically.

To help merchants economize, the platform features a real-time interchange engine that searches the best available interchange category for individual clients. And EPX does not charge gateway fees, which some other companies do, Babin noted.

Although EPX has about 400 U.S. hospital clients operating on its platform, Babin believes the health care market has yet to be deeply penetrated. Another market where he sees great potential is the unattended self-service kiosk vertical - DVD rentals, ticketing, parking and electric car charging stations, to name several.

According to Babin, EPX is the payment processor behind the Blockbuster Express movie rental kiosks. It is also the exclusive payment partner for Sprint Nextel's machine-to-machine mobile solutions market.

"For kiosks that aren't hardwired into the Internet, they use wireless technology to communicate and transact," he said. "That's an example of a machine communicating back through the Sprint network. It's leveraging their network in that space as opposed to just handing out devices."

RIVA's Varian also pointed out that EPX stands behind its products. "You get the benefits of a robust processing platform, but when you do business with them, you get the feeling of being part of their family," he said.

That said, the EPX ISO model is unique for its hands-on approach. "We send our sales team in to sit either alongside of the ISO or to take the lead," Babin said. "What we don't do is give ISOs our product quote and then allow them to then represent it to the client. That's just not our model. We need to be at the table in front of the client."

Babin admits that while their ISO model may not fit everyone, there is a segment of the ISO community that views the partnership as an opportunity to pursue larger accounts and as a possible hedge against merchant attrition.

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