hen five industry veterans met an extraordinary woman with equal expertise and an innovative product idea, the result may very well have changed the status quo of payment processing. "We all came from different backgrounds," says Kathy Johnson, CEO of Merchant Cards International, "We formed our company to bring a new aspect in merchant cards processing."

Different backgrounds - what an understatement. Johnson was an electrical engineer. CIO Corday Farnam's specialty is computer science. CFO Ray Pasili's expertise is in accounting. COO Jason Tharp is a Webmaster extraordinaire. VP Michael Vaught excels in sales. Throw in a general counsel, Nathan Sheridan, to watch over the contracts, and you have the unique melange of Merchant Cards.

"We came together to build a product that a merchant can afford and won't feel he's been taken advantage of - and gets complete customer service 24/7 at the same time," says Johnson. "Merchant Cards is a privately held Independent Sales Organization established in 1998 to bring new solutions to the payment industry. That means I don't have some board member telling me to get a better price so he can buy his Benz. We combine our expertise with a focus on customer service and constant research and development of new, innovative products."

With its core competency entrenched in merchant acquiring, Merchant Cards sets itself apart first and foremost through its dedication to bringing about those new products. "We are giving people alternative ways to process so it's cost effective for both our company and their company," says Johnson. "We really pat ourselves on the back for that."

How exactly does Merchant Cards provide a processing alternative? Through its state-of-the-art products, the latest being AirVerify.com. An Internet-based, payment processing software program that can be used with a Palm Pilot or Samsung 300i or even a Kyocera 6035, AirVerify processes credit card transactions, including Visa, MasterCard, American Express and Discover, all in the palm of one's hand.

AirVerify also does check guarantee with CrossCheck and has signature-capture capabilities. AirVerify captures the customer's signature on the PDA screen, for storage and retrieval on the transaction servers.

The software package allows the merchant to perform sales, credits and voids electronically and wirelessly. For those mobile merchants in the food service, transportation and other industries that accept tips, the software even offers comprehensive tip collection and management functionality.

AirVerify uses commercially available card readers made for PDAs as well as the "Pocket Merchant" combination credit card reader and 42-column thermal printer. The AirVerify.com unit has a printer attachment that can be hooked to the user's hip and prints out transaction data.

All data captured by the unit is stored on Merchant Cards' gateway, which is co-anchored with Plug & Pay Technologies, Inc. The transactions are processed, using secure SSL technology, through the gateway. The sale signatures are stored on Plug & Pay's servers and retrieval requests are accomplished through the administrative interface provided with the gateway.

Storing the signatures on the transaction server allows the merchant to recall the credit card receipt, with the customer's signature on it, from any Internet-enabled computer. With this new combination of technologies, mobile merchants can be freed from the tedious task of filing and storing thousands of customer signatures.

Simply put, AirVerify allows mobile merchants to achieve the same retail or "swiped" discount rates that traditional storefront owners always have enjoyed. AirVerify takes e-commerce gateways to the new area of providing retail or "card-swiped" rates to the merchant who traditionally has not been able to enjoy those savings.

Priced competitively, AirVerify sells as a complete unit, ready to go out the door loaded with merchant account information so merchants can start taking transactions immediately. "We also sell options piece-by-piece," says Johnson. "The merchant can either take it bundled or in separate parts. We customize for each account. We'll do whatever the merchant needs."

Turnaround time from start to finish averages three days. Merchant Cards does all deployment unless the merchant already has his or her own PDA - if that's the case, then Merchant Cards just sends the software and a manual. "Downloading is simple," says Johnson. "A child could install it."

More than 100 merchants already have taken hold of Merchant Cards, which targets high-risk accounts and larger merchant accounts with revenue of at least $1 million, mainly MO/TOs.

Just how is Merchant Cards reaching the marketplace? It's banking on expanding its independent sales force beyond the hundreds of agents it already has. The appeal is obvious. In a word - cost.

"ISOs can now sell services to a merchant who can't afford to pay a lot for a piece of machinery," says Johnson. "It all comes down to cost and giving them something else to use to take a credit card. Merchants can e-mail it. They can go on online for all functions, functions that a standard POS terminal just doesn't have, for a quarter of the standard costs."

Merchant Cards' revenue program is equally appealing to the independent sales agent. "We sell at cost and ISOs can use any bank they want. We are unproprietary across the board," says Johnson. "Our program is based on a per-transaction commission, just like any other bank. It's the same setup anyone else would give them."

What Merchant Cards also gives its agents that many other processors don't is a unique referral program. Each unit out there can take a referral and when a new referral comes into the Merchant Cards' offices from that machine, the agent holding the unit automatically gets the referral added to his or her portfolio. Merchant Cards calls it a multi-level sales advantage.

"We want to encourage people to sell our product," says Johnson. "The product will sell itself, so why not give the agent more opportunity to make more money?"

Why not, indeed? At present, Johnson says hundreds of agents are touting AirVerify, and that figure is expected to grow rapidly. The reason, according to Johnson, is that many years ago brick-and-mortar accounts were not able to hook up to virtual terminals.

"Now merchants can get Internet hookup vis-a-vis their Palms," says Johnson. "They're getting two pieces of equipment for the price of one. Any merchant with an Internet site can add this product easily. It's ingenious, and everyone in the service business should have it."

Merchant Cards backs up that bold statement with its customer support. A 24/7 help desk is at the ready, together with a strong, Web-based support service. 24/7 reporting is also available through the virtual terminals.

Training is a key component to the support. Teleconferencing training, online manual and on-site local training all figure into the mix. Tech support? That's a given.

"We completely support our products," says Johnson. "We offer demo account training to our agents. We provide a help desk for them as well. We recognize that agents just want to sell it and get money for their sales. They don't want to spend a lot of time learning how to use something. We get more calls from agents than merchants and are happy to answer all questions."

In addition to its internal customer support, Merchant Cards also relies on its partners for external support. Keeping deployment, activation and some sales in-house, Merchant Cards outsources R&D, risk, some software manufacturing among other services. Plug & Pay is the gateway partner for AirVerify.

"Plug & Pay made us unproprietary so we can go to Global, Vital, Omaha," says Johnson. "We are literally across the board with bigger institutions like Bank of America and Union."

Another important alliance for Merchant Cards is with Card Ready, a merchant acquiring bank that wrote merchant accounts for their sister product, MerchantMover.com. "That alliance was proprietary and MerchantMover.com couldn't be written with any other bank," says Johnson. That's why we went to AirVerify so agents don't have to write for just one bank. They can now write for 10 banks."

Their software developer partner is Advanced Merchant Solutions. "They're so smart and know the market," says Johnson. "We really complement each other."

Merchant Cards' most recent partnering is with CardService International. Trying to get away from other banks and looking to position CardService as its main processing bank, Merchant Cards is hoping this alliance will give it the opportunity to have it all under one roof. Changes take time, and Merchant Cards is still working on that vision.

One question does come to mind when looking at in-house versus out-source services: Does Merchant Cards' internal direct-selling force compete with its independent agents?

"We haven't had any problem," says Johnson. "We're not real big on competing with our agents. If a problem would ever arise, we'd back away from the sale. We are here to sell through agents. In the near future, we just want to have agents selling for us. At the moment, we have to get our name out there, so we do limited direct sales."

Getting its name out there isn't the only challenge Merchant Cards faces. According to Johnson, a big obstacle to overcome is not acceptance of Palm-based processing but industry understanding of it.

"The industry already accepted this type of processing," she said. "It's educating them on the hardware because people are afraid of Palms and smart phones. A lot of people still don't even use computers, but people are getting more savvy.

"Now, you have to be honest, give a good price, good service and stay on top of changes in technology. People don't want to be stuck with a dumb terminal anymore. They want to be able to check e-mails, access reports and databases, check their portfolios. They want technology - and our product provides all of it."

Johnson continues, "On the other hand, the majority say they're not ready to use something like this. We are dedicated to educating them. What the industry needs are more articles on smart phones, Palm-based processing. People shouldn't be afraid of them. They are easy to use."

Another dark cloud looming on Merchant Cards' horizon is the prospect of competition. "There probably are more companies coming up with a similar product to ours," says Johnson. "We may have competitors now, but we are more advanced than anyone else. You turn around and they're right there, but we are a level ahead and want to stay that way. That's why we are constantly developing, changing and adding to our software."

Johnson sees the future of the payment-processing industry heading toward what Merchant Cards is already doing. "The marketplace is heading toward multi-based technology and equipment where everything can be done on one unit. I believe one day everything will be electronic and all processing will be done online."

To keep up with that prediction, Johnson is leading Merchant Cards toward even more innovative solutions. "We're presently working with Nextel on a non-Palm based system," says Johnson. "We're developing a radio phone to process cards. All those plumbers and cabdrivers who use Nextel, stay tuned. We're going to blow the market wide open. We are here to stay in this industry. We are constantly re-inventing what we are selling so that it stays up with the trends. But always, our integrity to selling and effectively processing merchant accounts is first with us."

What may threaten the smooth road to success for Merchant Cards is what threatens many other young and ambitious companies in the marketplace - consolidation.

"Mergers and acquisitions are limiting choices," says Johnson. "They are negatively affecting the market. Say you're trying to set up accounts with two banks, one of which refuses high risk. Then one gets acquired by the other and now there's just one and you have no chance of getting your business set up. What happens is that a lot of these people aren't going to get accounts. Where smaller companies were taking risks, now they are swallowed up and no longer able to take risks. It's scary."

But Johnson, together with her corporate comrades, has faced scary situations before and won, and will continue to win.

"It's not always been easy for me," says Johnson. "This is a male-dominated business, and sometimes I have had to have my male partners make the presentations. I am attractive, and clients sometimes look at me and see the other side of the fence. I'm learning to use it to my advantage, to get in the door and up the corporate ladder to the decision-maker. At times, you have to play the game."

However, Johnson doesn't play a game when it comes to her philosophy.

"I really want the industry to know that women can run the show. Sometimes it takes a little tenderness. It's about trust. These people trust me with their money, and I feel an honor. I'm not trying to get everything I can get out of them up front. I want them to make money, keep going and have a great life - not let someone talk them into something they can't afford and later it ruins their life. Most people I talk to have a dream, and I want to be a part of that."