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Education

e
Payments, a retrospective of their customers' individual "wallet" accounts. Of course,
Payments, a retrospectiv
it was not called a wallet back then, and technically, this
merchant was in violation of the card network rules, as
they did not yet allow for payment facilitators (payfacs).
The merchant processed nearly $30 million the following
month and left us for a big bank. It took companies like
Square to effectively break the rules until Visa and Mas-
tercard recognized the internet fundamentally changed
the paradigm and established programs for payfacs (for
more details on this, see www.greensheet.com/emagazine.
php?article_id=7244).

In the late '90s, the only way to sell online was with a
PC-based solution like ICverify. Then payment gateways
emerged which, for the first time, allowed merchants to
connect via https protocol and SSL encryption. We were
One professional's among the first resellers of payment gateways. Cybercash
was the most well-known gateway, but incredibly difficult
to use. It raised a bunch of money before filing for bank-
journey – Part 2 ruptcy. Others like Authorize.net, USAePay and eProcess-
ing Network were nimbler and had owner operators in the

By Ken Musante trenches. They would survive, innovate and integrate.
Now up for sale
Napa Payments and Consulting
When my boss retired, the new CEO had no idea how to
[Note: The first article in this series was published in The Green Sheet on explain our division to bank investors. We were a NAS-
Sept. 11, 2023, in issue 23:09:01, and covered major industry develop- DAQ-traded bank. We had sponsored income, ATM spon-
ments during Ken Musante's early days in the payments industry. ] sorship and our own proprietary portfolio. We had high-
s our business grew, I made plans to start an risk merchants with enormous reserves and almost no
ISO. My boss, Humboldt Bank's founding losses from card processing.
CEO, Ted Mason asked if I would build it
A within the bank. Jamie Savant and I knew each We also, however, had an enormous black eye from an
other through his work at CardService International, and ATM funding loss, where the principal skipped out with
he became my partner. Jamie recognized the promise the millions of dollars and ended up drugged and dead in
internet had for card processing and pushed us to invest in Florida. Insurance money eventually paid off the claim,
processes and technology to support internet merchants. but he had enough smoke to convince the board that we
did not fit the risk profile of a community bank.
Almost all of the first internet merchants and related leads
were a bust. We would get hundreds of accounts from in- We bifurcated the sponsored business. Humboldt Bank
dividuals who were as familiar with the internet as I am wound that business down and entered into an agreement
with a sewing machine. They had no business contract- to sell the bank-owned merchants to one of our sponsored
ing for a merchant account. Most never processed. Jamie ISOs. Unfortunately, after the agreement was signed, the
persevered, however, and we continued to invest in the market went sideways, and the buyer backed out. I've nev-
Internet channel. er been more insulted than to have someone pay me $2
million not to buy my company (for more details, see www.
A sudden surge after false starts sec.gov/Archives/edgar/data/1140184/000095012302011600/
y65042sv1.htm).
We opened an account for a tiny internet company. Like
many of our internet accounts, it did not process until one Through my time at Pacific Coast Banking School, I had
December it processed $50,000. The next month it pro- come to know Pat Lamb. Pat, who was part owner of a
cessed $4 million. We traveled to the company's headquar- privately owned bank holding company in Arizona and
ters in Palo Alto, Calif., and saw a paper sign with the par- Nevada, heard of our sale falling through. I tried to talk
ent company's name taped to the window. It was a single him out of the purchase as his bank was the same size as
letter, followed by .com. Humboldt Bank ($1.5 billion) and would have some of the
same issues. Undeterred, he and his partners purchased
In the center of the building was a courtyard. Seven staff Humboldt Merchant Services.
members poured over a printed ledger which was the size
of a travel suitcase. These were the ledger balances for each Because Humboldt Bank was explaining to the commu-

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