here is no doubt in Masih Madani's mind where the payment-processing industry is headed, and the CEO of HMSBLUE is just as convinced that his company will be one of the survivors. Madani believes the industry will continue to consolidate, and the card issuers will opt for more control.

"Visa and MasterCard are trying to get control of the environment and tightening up loopholes. They are trying to get a handle on mom-and-pop agents," he says. "I think we'll wind up with about 100-150 total ISOs across the board.

"Those that are left are going to have to get sophisticated. Some just don't have the infrastructure and are just selling. The ones that will survive will be the ones who will have value adds, and that is the reason we started heavy in technology. The ISOs and merchants who come to us have no reason to go anywhere else."

HMSBLUE is a technology-driven solutions provider of comprehensive merchant authorization, settlement and accounting systems as well as a broad range of point-of-sale products and services.

Focused on both brick and click merchants and the ISO channel that services them, HMSBLUE offers a myriad of benefits to its independent sales agents and organizations. They include:

• Increased cash flow through continuous residual income for every iPG transaction.
• Processed retention of 100% of all proceeds collected above buy rates.
• Immediate eligibility for residual income from day one.
• The ability to private-label iPG for any ISO.
• Around-the-clock, dedicated technical support.
• Positioning alongside a technology leader and innovator of the payment industry.

A key component of HMSBLUE's technology is its Internet payment gateway, certified with First Data, Vital Processing, CardSystems and a number of foreign banks. It boasts Web-based, real-time credit card authorizations, online ACH, access to real-time account information and various account-activity reports, state-of-the-art fraud prevention, intricate chargeback controls, a negative database to minimize abuse, a secure environment through SSL encryption and quick and easy integration.

Just how did HMSBLUE evolve to this impressive place in payment processing? It started in 1996 when Madani decided to find a viable solution to better handle credit card transactions and combat fraud.

The transaction arena was not new to Madani. His parents owned gas stations for 30 years, and Madani was well versed in card transactions, data capture, pay at the pump, chargebacks and fraud issues.

"My background is also in software development," says Madani. "I never looked at one particular brand or particular area that everything had to conform to. I've always looked at what is the most proper methodology to solve a problem, and then I'll get whatever component necessary to solve it."

That mission guided Madani to a small start-up out of his home. In a relatively short time, he brought two partners aboard. The original moniker was Blue Banana because Madani thought something exotic would garner attention. Unfortunately, it garnered the wrong attention since many thought it was an X-rated type of business.

Using the initials of Madani and his two partners, they changed the name to HMSBLUE in 2000. They moved to a 5,000-square-foot office space and never looked back at bananas.

"Our value-add is that we have a rapid-development environment," says Madani. "We offer very customized solutions in a matter of days through our own certified gateway, where other companies take weeks.

"What is so unique about our gateway is that it's in three pieces. The front end is universal, meaning it doesn't matter who your processor is on the back end. In the middle we have a unified messaging system that takes data in the front end and stores it. Our back end is modular, so we can send it to any processor. We can add on, whether it be NPC or Global. A merchant may have many banking relationships and multiple processors. We are their single front end. We make their lives very easy.

"It literally takes less than one day to integrate with our system. We publish all integration specifications online. Everything is online. There are no secrets at HMS."

With its core solidly based in e-commerce, HMSBLUE targets retail merchants across the board who deal in volume. More than 500 merchants take advantage of HMS solutions.

"We typically tend to work with midsize to large merchants simply because there is a greater return on our time and efforts," says Madani. "Our pricing is very competitive, and we even provide gateway access free of charge if we are providing the merchant account."

While HMS bills itself primarily as an MSP, it also is a licensed ISO with JP Morgan Chase Bank and, therefore, has the ability to provide both technology and merchant account services. In addition to JP Morgan Chase, HMSBLUE is partnered with Humboldt Bank as well as the aforementioned processors - First Data, Vital, CardSystems and others. Paramount to all of HMSBLUE's alliances is communication.

"This is essential," says Madani. "Without communication, you can't do anything. Also, the product the partner brings to the table has to have value-add in our marketplace, especially customer service. That is important. We want to be able to support our customer base efficiently and communicate effectively in those relationships back and forth in a timely fashion."

What does HMSBLUE require of its ISOs? In a word, integrity. "Above all, we want honesty," says Madani. "There have been lots of issues in the industry in the past, so we pick and choose carefully. We've seen lots of problems out there. The agents want to make quick money, and we try to educate them that there is another way in long-term relationships. It's all about building a revenue stream rather than just a quick sale or a quick lease or a quick piece of equipment."

Part of that education is centered around HMS's training program. Online-based ISOs get access to a repository of data and documentation that HMS makes available through protected passwords. ISOs review the documents that educate them on many issues, from underwriting to online account maintenance.

"Whether it be retail or e-commerce merchants, we educate our agents thoroughly," says Madani. "I personally meet with agents and talk with them. They all have my number and can call me directly. They also can pick and choose the residual program that works for them, either buy rate or share arrangement. We generally focus on the revenue-share program. Once the ISO understands how it works and that it's a long-term deal that truly is better, they usually choose that one."

Choice is also a challenge for HMSBLUE - as in choosing the next project. "We have a lot of projects on our table and just not enough manpower," says Madani. "We'd like to add more processors and banks to our back end - and that takes time."

Madani sees consolidation and shakeout of the industry as other challenges to be reckoned with.

"Just about anybody and anyone can become an ISO, and that has created a lot of problems," says Madani. "We need to go back to picking and choosing career-oriented people. Consider the dot.com world. Everyone was trying to get into that, and look what happened.

"Everyone trying to sell merchant accounts is not a healthy environment. It has not helped our industry. A lot of companies have gone belly up. Others have been acquired. It's created a harsher financial environment. We need to get away from that and look at this industry as a financial product rather than a gadget industry that anyone can sell."

Madani hopes the payment-processing industry will take a lesson from other industries.

"When you get too big, it becomes problematic and you can't control your environment," he says. "You're spread too far and too thin. The same thing happens in our industry - big companies like First Data are sometimes slower in certain areas. I'd rather see smaller companies stay afloat because they have the ability to provide more personal service and more innovative products.

"I greatly appreciate First Data being as big as they are, but I can do things that they can't do and support customers they can't. In some ways I am happy the big companies are big and slow."

HMSBLUE is counting on retention and loyalty to steer it through rough waters.

"We intend to grow steadily," says Madani. "We are not going to jump all over the place. We are also not interested in being acquired. I like staying in control of my environment. I like staying small. We have a great product, different from what others are doing. There is no pressure on us or any reason for us to sell. The products we offer allow us a very decent margin. We are not dependent on merchant accounts themselves for revenue. It's all about the services we provide."