Cardservice International Inc. was catering to small merchants and start-ups long before most people had heard of electronic commerce, and today the credit card processor says its fit with the Internet could not be better.

The company estimates that it handles processing for half the merchants accepting card payments on the Internet.

Some banks and processors try to steer clear of young retail firms, which are perceived as posing higher risks of fraud and chargebacks. Cardservice, based in Agoura Hills, Calif., said it has built its success by serving this market with fraud detection and investigation programs that have minimized losses.

The company serves 180,000 merchants, including more than 40,000 Internet retailers, executives say. It signs 4,000 to 6,000 new customers a month, about half of them on the Web.

The Internet has "positioned Cardservice to be absolutely in the right place at the right time," said Scott Dueweke, vice president of business development.

This year the company introduced an on-line account application for merchants that want to begin accepting credit cards in a hurry. Merchants can get approval within hours, the company says.

Last year Cardservice introduced its LinkPoint Secure Payment Gateway for Web transactions, which eliminated the need for its customers to use other vendors for payment-system gateway services. In the past, executives said, a merchant might have used Cardservice's processing and Cybercash Inc.'s gateway.

Cardservice was founded in 1988 by Charles Burtzloff and his wife, Lisa, who at first ran it out of their living room. The company now has 600 employees and more than 2,000 independent sales agents; 140 banks, including Fleet Boston Corp. and Bank of New York, use Cardservice for their higher-risk merchants. Mr. Burtzloff remains president and chief executive officer.

The company has helped polish the reputation of independent sales organizations (ISOs), which were once regarded as the seedy side of the merchant-acquiring industry.

Today, Cardservice is relying on a high-profile list of technology companies that resell its services to their own merchant customers. These partners include International Business Machines Corp., Hewlett-Packard Co., and Computer Associates International.

At the Fall Internet World '99 conference in New York this month, Cardservice announced a host of new relationships, including deals with the Web portal Lycos, which will offer Cardservice processing to merchants hosted by its shopping site, and the Internet service provider Earthlink, which provides on-line store-building services.

Cardservice has also signed partnerships with Orbit Commerce Inc., which builds and manages Internet marketplaces, and the Internet Professional Publishers Association, which plans to rebrand Cardservice's on-line account application form for use by its merchant clients.

In all these deals Cardservice stands to gain new merchant customers, and the partners typically benefit by marking up their own fees to the merchants.

Another of Cardservice's new joint efforts is with KPMG. The consulting giant tends to work with larger merchants and says the Cardservice agreement will help it branch into new markets. Cardservice, in turn, will benefit from KPMG's brand recognition.

"This joint effort is really a way for both of us to be, collectively, more than the sum of our parts," said Thomas W. Patterson, principal of KPMG eCommerce Infrastructure Consulting.

The first deal to emerge from the Cardservice/KPMG initiative is with Nexgen Solutions Inc., a Silver Spring, Md.-based technology consulting company that provides hosting software and services enabling businesses to aggregate in niche Internet malls.

Such merchants sometimes have problems trying to sell goods on the Web: They might lack a relationship with an Internet-savvy bank or might be required to have an established track record to get a merchant account, Cardservice says. Through Cardservice/KPMG and Nexgen, merchants can sign up for processing easily and be practically assured of acceptance, executives say.

Cardservice charges 2.35% of the transaction amount plus 30 cents; it says other merchant service providers charge up to 15% of the transaction amount.

Mr. Dueweke said the partnership with Nexgen creates "a virtual urban enterprise zone" for minority businesses.

Ed Howlette, president and chief executive officer of Nexgen, said the arrangement "doesn't solve all the problems" but is "another step in the right direction."

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