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Stopping Fraud in its E-tracks

"We can essentially eliminate fraud chargebacks."

In an industry of bold statements, this one ranks right up there. It's being made by Gerry Croghan, President of Payment Technologies Group, a newly formed company offering a unique solution to a much talked about problem - namely, fraud. The solution comes in the form of software products called Transact-Secure and CSR-Secure.

Seamlessly integrated with e-shopping carts or telephone-order software, these products boast significant reduction in e-commerce and telephone-order merchant exposure to credit card and check fraud.

The bundled solution aims to eliminate chargebacks from both criminal and friendly fraud by U.S. cardholders. Authenticated transactions are guaranteed up to $5,000 per transaction by none other than Lloyds of London. Transact-Secure is used for real-time e-commerce transactions, and CSR-Secure is designed for telephone-order transactions.

"Industry experts predict that credit card fraud from Internet transactions will exceed $2 billion in 2002," says Croghan. "Credit card fraud in the 'cardholder not present' environment has always presented risk for financial institutions, processors, merchants and cardholders.

With the robust growth of the identity theft phenomenon, it's only going to become more costly and inconvenient for everyone. The Transact-Secure system is unique in its ability to put a stop to those losses today."

How exactly does this product do it? With a robust database, Croghan says. Through contractual arrangements with Experian, Equifax, even the FBI, Transact-Secure has aggregated an impressive database that accesses limited information, just enough to authenticate the identity of the cardholder.

"We do it by asking questions," says Croghan, "Even the coolest crooks steal questions. Through our system, the merchant is protected."

Under Croghan's guidance, Payment Technologies Group is committed to marketing that protection nationwide.

Originally employed by the company that developed this software, Croghan took his decade of experience in the payment-processing industry, coupled it with his marketing expertise and formed his own entity in October 2001 to promote fraud elimination.

"I decided to do my corporation," says Croghan. "I am not much different from a marketing VP. Instead of being on the payroll, I now have my own company."

Although the products are available to merchants directly, Payment Technologies recognizes that transaction processors and ISOs in the e-commerce marketplace represent the most efficient channels to reach merchants with the most obvious need for their protection.

Payment Technologies not only sees credit card processors at risk from the effects of fraud on their merchants and offers a solution; aside from the product, it offers ISOs and processors an opportunity to earn revenue by marketing these products within their portfolios.

Croghan reports that processor response has been overwhelmingly positive. "End users are ecstatic," he says. "Their chargeback reductions are in the 80-90% range." According to Croghan, Paymentech and Authnet are already on board, with negotiations for many others in final stages. "The thing you have to know is that there is a chain of liability," says Croghan. "After the merchant, the next person in line is the processor. It is in the interest of the processor to make sure there are no fraudulent chargebacks. Our channel is processors."

Croghan continues, "We provide a specific product to the payment-processing industry. Transact-Secure is a stand-alone product for all credit cards and the only solution on the market today that incorporates the new Verified by Visa initiative in a bundled package, as an added benefit to our acquirer and merchant clients, if desired.

The certification process for Verified by Visa is another value-added service offering, often at no investment risk to the processor/acquirer."

Payment Technologies Group's target market is processors and ISOs who deal with the highest-rated chargeback merchants, such as gaming or electronic goods - any high-ticket items.

"There are certain processors that really like that type of business," says Croghan. "We're not necessarily talking to the largest ones but those that handle the highest risks. We are looking at processors whose merchants are doing hundreds of thousands of dollars in transactions."

Croghan says that the implementation of Transact Secure and CSR-Secure requires nothing. The software plugs into any shopping cart on the market. Standard pricing is 50 basis points or $.50 per transaction, whichever is higher. There is a $99 application fee paid by the merchant, not the processor. Payment Technologies guarantees a 48-hour turnaround time from application to integration.

So how does the ISO community fit into Payment Technologies' scenario? According to Croghan, in a big way for those who work with big-risk accounts. "We're realistic about this since there's only a limited number of resellers who are going to be connected with those merchants," says Croghan.

"Is it worth the time for ISOs who don't have high-risk merchants? Maybe not. But for those who do, they can make a pile of money. They get a piece of the per-transaction fee the merchant is charged - a recurring residual stream with no upfront costs."

Croghan hopes ISOs will see the problem as he does - a numbers game, numbers calculating merchant losses.

"We're talking about losses from chargebacks," says Croghan. "We need to talk about merchants losing from each transaction, the cost of the goods, then the chargeback fees, then all kinds of management and overhead for staff that deals with chargebacks all day long.

"With our system, that all goes away. Our product authenticates the identity before the card gets sent out for authorization."

Keep in mind that through contractual arrangements with the development company of the software, Payment Technologies is the exclusive agent for Transact Secure and CRS-Secure to the ISO community. In other words, it's the only place an ISO can go to take advantage of this product that guarantees merchant piece of mind from e-commerce fraud. The biggest challenge facing Payment Technologies is getting the message to those ISOs that have high-risk merchants.

"Recently, the Gartner Group reported that e-tailers need a vendor who is very strong in fraud protection, ideally one providing real-time credit card authorizations and payment processing for e-checks and ACH payments," says Croghan. "Payment Technologies Group intends to be just that organization, through forming relationships with the leading transaction-processing enterprises and offering solutions that co-exist to further secure global e-commerce." Payment Technologies Group ISO contact: Gerry Croghan Phone: 866-715-1108 E-mail: info@paymentechnologies.com

Company address: 5433 Airport Pulling Rd., Suite 126 Naples, FL 34109 Phone: 866-715-1108

ISO benefits: • Authenticated transactions guaranteed up to $5,000 per transaction by Lloyds of London, making it ideal for high-risk merchants. • ISOs and processors get opportunity to earn revenue by marketing security products within their portfolios. • Establishes chain of liability. • Recurring residual stream with no upfront costs.