Merchants who want to begin accepting credit cards at their Web sites usually must sign multiple documents in pen and ink and mail them back and forth to a credit card processing firm.
But some credit card processors including First Data Corp. are accepting electronic signatures from merchants and letting them apply for merchant accounts through the Internet. This means the typically small or midsize retailers can set up faster and with little or no paperwork.
The Electronic Signatures in Global and National Commerce Act of 2000, which took effect last October, gives Internet documents the same legal standing as paper ones when they are signed with an electronic signature. The law is intentionally vague about what constitutes an electronic signature, allowing the marketplace to develop its own standard.
Executives at some credit card processing firms said they have been interpreting electronic signature quite broadly, accepting as little as a click through on a statement of agreement, or a name typed on an application. But at least one processor, Concord EFS, considers this too risky and has no immediate plan to accept online applications or electronic signatures when signing up merchant accounts.
Denver-based First Data, the nations largest processor, said it has been accepting electronic contracts and signatures for more than two years, predating even the signing of the law. We went through any legal concerns that we had, said Steven Citarella, a senior vice president and the chief credit officer at First Data Merchant Services. I certainly think the Signatures Act strengthens our legal position.
Mr. Citarella said that no merchant has challenged the companys practice, and First Data has never had to go to court to validate an e-signature.
These days, about one-fifth of the merchants who approach First Data about setting up credit card acceptance accounts get the work done through an online application, Mr. Citarella said. Most of the businesses are mom-and-pop stores and midsize companies, he said. First Data has also expanded the program so that even companies that are opening brick-and-mortar sites can use the virtual application to open a merchant account.
Larger merchants with their more complicated payment processing needs generally like to meet with salespeople face to face to go through their programs, Mr. Citarella said.
First Data does credit checks once it gets an application, Mr. Citarella said. But since applications are electronically processed from end to end, the approval time is often less than 24 hours because all the information is verified and filed by computer.
Even some smaller processors are starting to use the technology. North American Bancard Corp. of Troy, Mich., announced this month that it plans to introduce an online application process and that the key ingredient will be electronic signatures.
You have to go through all these hoops and provide all this documentation, said John Waldron, the newly named vice president of Internet sales and marketing at North American Bancard. Were completely eliminating all that. Well just underwrite them and approve their account based on the electronic signature they did on the Web site.
Under the companys plan, which is called Value-added Reseller Program, a business could be approved and begin to accept credit cards within 24 hours, Mr. Waldron said.
During the application process, North American Bancard asks questions from the applicants credit report in real time, Mr. Waldron said. Once the application is completed, the merchant simply types his or her name into a box and submits it, and this constitutes the electronic signature.
The company plans to team up with Web hosting companies, Internet service providers, and billing software companies to market the streamlined application offer.
Not every processor has jumped on the e-signature bandwagon. Memphis-based Concord EFS, a leading credit card processor, is shying from Internet applications and electronic signatures. I think were willing to be on the cutting edge but not on the bleeding edge in this environment, said Kevin Smith, a senior vice president at Concord. Lets see when a merchant actually challenges that Web signature and see how it holds up.
Concord uses the Internet to transmit applications to potential customers, but the forms cannot be altered and must be printed out, signed with a wet or traditional signature, and mailed back to Concord for processing. It does not take faxed applications.
It is aiming at the small to midsize companies it already serves in other areas. This strategy allows you to increase your revenues from your existing client base instead of having to go out and solicit new clients to provide new revenue, Mr. Smith said.
One type of company that few processors are courting these days is the pure-play Internet company those that exist strictly in cyberspace. Pure plays are pretty much a thing of the past, said Paul Martaus, president of the consulting firm Martaus & Associates in Mountainhome, Ark. The business model didnt work because theres no there there.
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