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multiparty recordkeeping, and it does away with secrecy,
In case you think this emphasis on since everything is transparent.
regulation and compliance is overbearing,
let me remind you of what has transpired in The logic of blockchain is powerful: it cuts costs
the last decade. Boston Consulting Group and overhead dramatically for high-volume, paper-
intensive, logistically complicated financial systems and
reported that globally, since 2009, the largest recordkeeping. It also can achieve regulatory compliance
banks have agreed to pay in excess of $321 more easily, which is not a trivial benefit today.
billion in fines and penalties
for egregious behavior. In March 2017, we were in the 93rd month of a post-
recession recovery. The only two longer recoveries were
the 1991–2001 "Tech Boom" recovery from the recession
This is important to ISOs and the acquirer community that hit in 1990, and the 1982–1990 "Morning in America"
in general for one simple reason: acquiring (and issuing) recovery from the recession that began in 1980. It is easy
credit and debit cards is a business of huge scale (literally to forget about the financial crisis of 2008–2009 today, but
tens of millions of cards on the issuing side). Today, all the that would be a big mistake. The same BBBB players are on
large issuers are also the largest acquirers (although this the court now as then.
was not always the case).
For a particularly good sense of what happened, pull down
The card brands decided some time ago (when they were the following article from the web: "Bank of America – Too
still associations, not publicly traded companies) that Crooked to Fail," by investigative journalist Matt Taibbi
they didn't want any small bank acquirers with direct (one of the best in the business), published in the March
membership. But not many community banks were so- 29, 2012, Rolling Stone magazine, www.rollingstone.com/
called principal banks for the card brands, because a small politics/news/bank-of-america-too-crooked-to-fail-20120314.
bank just cannot get to the critical mass that it takes to This should reinforce my suggestion that you pick your
support an in-house bankcard sales, underwriting and financial institution carefully.
processing operation.
Don't gripe, monitor your bank
This means, inevitably, that an ISO will either be a sub-
ISO of a bigger firm or will need to sign up with a large Here are a couple of suggestions for you. First, stop
bank, most likely one of the BBBB banks that have been complaining about regulation. It's the financial services
deemed too big to fail. industry, duh. You are playing with other people's money.
If you don't like regulation, try another business. Second,
In January, Professor Richard Benham, Chairman of the compliance is not just about spending money; it has a
British National Cyber Management Centre, predicted that return on investment, too – namely, insurance against
this year a major bank will fail as the result of a cyberattack doing stupid things, and giving your firm a leg up on your
(data theft, fraud or cyber propaganda), leading to a run on competitors if you are well prepared and knowledgeable.
the bank. We now have to confront the reality that hacking
can break the Internet. So monitoring the performance of Only a small number of ISO agents work for firms large
your sponsor bank is vitally important. enough to be processors. Most ISOs work as merchant
level salespeople or as sub-ISOs. As such, you will have
Blockchain could help prevent abuses limited interaction with the bank that is processing your
customers' transactions.
A while back, it seemed common knowledge that the
new world of fintech entrants would solve a lot of these But this doesn't mean you should put your head in the
problems, but this turned out not to be the case. Some sand. Choose a bank that you would feel comfortable
people are now saying that blockchain could be the putting your life savings in, and continue to update
answer. Here's why: the root of the problem with BBBB yourself regularly on the bank's performance, particularly
is that it was difficult to discover the wrongdoing with if it is one of the BBBB banks. The other 5,000+ banks – the
any specificity, because someone had to get access to the community banks, regional and super-regional banks –
bank records of the illegal transactions. Blockchain allows will do just fine, thank you.
multiple parties to transfer and store sensitive information
in a space that's secure, permanent, anonymous and easily
accessible. Brandes Elitch, Director of Partner Acquisition for CrossCheck Inc., has
been a cash management practitioner for several Fortune 500 com-
Moreover, it works best when there is some kind of transfer panies, sold cash management services for major banks and served
of title or ownership, which is where a lot of the banks' as a consultant to bankcard acquirers. A Certified Cash Manager
bad behavior was focused. Blockchain is ideal for keeping and Accredited ACH Professional, Brandes has a Master's in Business
track of remittances, cross-border transfers, shareholder Administration from New York University and a Juris Doctor from Santa
records and exchanges, securities trading, and complex Clara University. He can be reached at brandese@cross-check.com.

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