David Leppek has an opportunity that many in the ISO and acquiring business encounter infrequently in their careers. He has the chance to design his ISO, Transaction Services LLC, without having to use years old legacy technology.
ISOs usually have a couple of choices when it comes to developing technology to make back-office functions more efficient and less costly. They either can hire a development staff or use outside developers. Many rely on a combination of the two.
ISOs that find the right balance between the two approaches often benefit from making the best use of their funds and employees’ time.
Newark, Del.-based Transaction Services chose the first option. It has an in-house staff to work on its technologies, says Leppek, Transaction Services president.
Leppek, whose ISO will go live processing merchant transactions in June, realized it was only natural when creating the Transaction Services online-payment gateway that he also build in other electronic business processes, such as a system to sign up merchants for accounts. As such, the gateway will include access to its boarding tool and another tool to manage residual splits. (Boarding is the process of entering a merchant’s information to set up a card-processing account. Residuals are the recurring revenue ISOs and agents make from merchant transactions, often split between the ISO and its sales agents.)
The system also manages lead generation and creates scanned versions of documents that sales agents fax in, Leppek says. “We have lower costs because we can handle all this in-house,” Leppek tells ISO&Agent Weekly. All of this automation requires fewer support staff and increases his ISO’s ability to work with more sales agents, he says.
Keeping It In
Fast Transact Inc., now part of FrontStream Payments Inc., a Brentwood, Tenn.-based merchant-services provider, also has developed its own automated technology.
For the past three years, Fast Transact has used a residual tracking application it designed, says Josh Hulbert, the merchant-services company’s information technology director.
FrontStream’s technology uses data from various sources, such as processors and banks, to merge into its database, Hulbert says. FrontStream can aggregate the data into one source for the ISO and its sales agents to use, he says.
FrontStream’s Hulbert works with nine other developers, abundance not often found among ISOs.
Because in-house developers have direct access to the ISO’s business processes and the workers who oversee them, they have an advantage over third-party software developers, Hulbert says.
The payoff is that in-house developers see how everything fits together, or should fit together, he says. That could mean having the ability to share not only transaction information but also data on a merchant’s security status, which sales agent last talked to the merchant and when, Hulbert says.
Transaction Services’ Leppek, himself a computer programmer, hired a staff of five developers to get his ISO ready. After spending the first six months raising money, Leppek’s next task was to design the back-office automation technology.
“We realized we needed the infrastructure of a gateway,” he says. With the gateway in place, Leppek’s staff will be able to see what happens with each transaction that passes through it.
Transaction Services’ automation includes processes for enrolling merchants, tracking their applications for processing services, housing lead resources for sales agents and managing residual splits.
“Everything is being routed through our back-office tool,” Leppek says. Merchants, even after signing a paper account application, will need to affirm they have read the terms and conditions online, he says.
The residual management is vital because his ISO will rely on referrals, and Transaction Services will compensate many referring entities through residual revenue, Leppek says. The system also will give agents reports on what their residual revenue should be, he says.
Agents will be able to log on to the Transaction Services system and see any information about their merchants, Leppek says. “We can even get into an individual transaction and see which interchange category it fell into,” Leppek says, noting this ability does not reveal sensitive cardholder data.
Having its own customized technology also will enable Transaction Services to remake merchant statements into friendlier documents, Leppek says.
Transaction Services will take the daily files from its backend processor and put the data into the back-office tool to create an easier-to-read merchant statement. Merchants often complain about complicated statements, and Leppek hopes his ISO’s statement will be a distinguishing factor among his competitors.
But in-house staff may not be able to develop everything. FrontStream often will hire outside developers on a selective basis. Hulbert says.
“We’re not a software-development company, so it’s hard to justify developing everything internally,” Hulbert says. FrontStream chooses which projects to outsource based on various factors, such as the importance of in-house staff knowledge to the final product, he says.
