Finding the right partner for merchant acquisition programs

Merchant payment processing services, the capability for all types of businesses to accept a wide range of electronic payments, is an increasingly important service offering component for financial institutions (FI) of all sizes. A payment processing partner should offer secure, reliable merchant support, a comprehensive product offering and also deliver added business value to the FI. In addition, FIs should work with a partner that can deliver consistent level of service regardless of a merchant’s size and type. Merchant benefits could include one provider for all payment solutions, convenient services such as consolidation of statements and anytime, online account access. Other considerations include the cost structure and transparency of costs for the merchants, which can help eliminate funding questions and surprises.

Another key area of focus and understanding is security-for both the merchant and the consumer. Small businesses are prime targets for sophisticated, relentless cybercriminals, because they are seen as easier targets. A Visa analysis has found that small merchants accounted for more than 80 percent of data security breaches.¹ And every compromised record can cost a business more than $200,² exposing them to liability for chargebacks, legal issues and fines from banks or regulators, in addition to a decrease in customers' trust. The challenge is to find an easy-to-implement and cost-effective solution that improves security at every transaction stage-for both merchants and consumers-while providing the added benefit of simplifying compliance with the Payment Card Industry Data Security Standard (PCI DSS).

The First Data® TransArmor^SM solution, introduced in September2009 and developed in partnership with RSA, a global leader in information security, is an easy to-implement, service-based solution that encrypts sensitive cardholder data and then removes it from a merchant's environment, protecting consumers' sensitive information and limiting merchant liability. The solution protects vulnerable data in transit with state-of-the-art encryption and removes the need for a merchant to store card data by replacing it with a randomly generated number, called a token, which can be used for other business processes such as returns, chargebacks, recurring payments, sales reports, analytics or marketing programs. However, the token cannot be used by an unauthorized party to conduct a fraudulent transaction.

According to Craig Tieken, VP Product, First Data, "Up until now, there have been few easy and cost-effective solutions to the growing problem of managing the risks of handling sensitive payment card data. TransArmor represents a fundamental change in how merchants can confidently protect and manage cardholder data."

The TransArmor solution addresses the root cause of merchant data security issues by removing payment card data from the merchant environment as part of processing the transaction, significantly reducing risk and the scope of PCI compliance efforts. In addition, if merchants are protecting their point-of-sale (POS) systems with TransArmor, it can also save the financial institution in time and cost from notifying merchants and sending new payment cards.

Leveling the Playing Field for Smaller FIs

Community banks and other smaller FIs can offer a complete suite of payment processing services on par with larger FIs. The key is finding a partner that can provide a one-stop resource for a full range of products, including check acceptance, debit and credit acceptance, and prepaid card programs.

Smaller FIs need a partner that can qualify new merchant prospects, help them determine which products and services they need, and ultimately decide what types of customer payments to offer, such as gift cards, debit cards and electronic benefits transfer (EBT). The partner should be able to support gift cards, cash advances against future credit card receivables, Web-based payment options and be ready to enable transactions through mobile devices.

The Bottom Line

Electronic payments are becoming increasingly important to consumers and businesses. By looking to outside payment processing partners, such as First Data, FIs have an opportunity to offer a robust payments program that can tie merchant customers more closely to the institution, provide additional opportunities to reach prospective customers and ultimately enhance FI revenue.

About First Data

First Data powers the global economy by making it easy, fast and secure for people and businesses around the world to buy goods and services using virtually any form of payment. Serving millions of merchant locations and thousands of card issuers, we have the expertise and insight to help you accelerate your business. Put our intelligence to work for you.  For more information, visit www.firstdata.com.

Neal Korzekwinski is Senior Vice President of Strategic Partner Management, responsible for sales and business oversight of all merchant acquiring partnerships within Retail and Alliance Services.  He joined First Data in 1995 as an Accountant and would eventually hold a number of senior finance roles within the merchant division, including chief financial officer of the Revenue Sharing Alliance (RSA) group and chief financial officer of National Merchant Services. Earlier in his career, he spent two years working for Richard A. Eisner and Co., a top 10 accounting firm in New York.  For more information, please call Neal at 1-800-844-8801 or visit http://www.firstdata.com/en_us/first-data-partners/financial-institution-partnerships .

¹Visa "Drop the Data" Web site, www.visa.com/dropthedata, 2009

²Ponemon Institute "2009 Annual Study: Cost of a Data Breach"