Profitable management of a merchant portfolio requires banks and other
acquirers to manage multiple systems and relationships on an up-to-the minute
basis. Acquirers face the challenge of increasing their business in a
cost-effective manner while handling complex interactions among their sales
channels, ISO relationships, the processing companies, the settlement
companies and card issuers. In fact, timely communication and coordination
with these entities can literally mean the difference between profit and loss.
As acquirers examine how changes in the technology landscape can potentially
improve their operations, two factors come to the fore. First, the Internet is
now pervasive, and the associated communications and security standards are
mature. Second, POS terminals and other transaction devices and systems offer
significantly increased power and flexibility.
Yet technology providers in this space who have tried to address the needs of
acquirers and capitalize on recent technology advances have only done so by
overlaying multiple systems. In effect, this results in a patchwork of
interfaced systems, built up in layers over many years. This approach is
attractive over the short run, but introduces two problems. First, the ability
of these patchwork systems to fully utilize Web-based applications is
constrained by their pre-Internet design origins. Even worse, their capability
to integrate all of the different aspects of an acquirer's operation is
severely hampered by the patchwork approach of tying multiple systems together.
Consider the typical options presented to acquirers seeking to enhance their
total systems environment. There are several solutions on the market that do
address specific needs, but each is a separate application and system. The POS
management system is probably different from the transaction processing
system. The tools and solutions that report on accounts, process sales and
manage commissions is another system. Others address the risk monitoring side.
Faced with this picture, the typical acquirer has two choices, neither ideal.
The normal course is to patch several tools together to manage the complex
array of tasks, and accept sub-optimization. Some elect to build in-house
systems that address their specific needs, and accept the significant,
on-going burdens of high costs and management distractions that cause
acquirers to lose focus on their core competencies.
Cornerstone Payment Systems, an Atlanta-based merchant acquirer, wanted to
find a better way. Cornerstone wanted a solution that would help them with
rapidly growing their business and providing superior service to their agents,
ISOs and merchants. At the same time, they wanted to keep their focus on their
business goals, not on a technology implementation.
They set four important criteria to guide their selection:
- Rapid time to market
- A single system solution for all of their business
- Affordable investment
- Extensive use of the Internet
Cornerstone partnered with Infonox to use the Infonox solution
tailored for acquirers. A new generation system developed entirely in
the post-Internet era, the "off-the-shelf" solution met all of
One of the most compelling advantages
Cornerstone desired was an all-in-one approach that eliminated the
need for multiple systems. They wanted to handle sales, merchant
signup, underwriting, boarding, risk monitoring/mitigation, reporting,
support, profitability and commissions � all online and in a single
system. In addition, Cornerstone wanted new payment solutions to offer
for PC-based merchants and mobile payment transactions, and provide
management and payment gateways for those systems.
The results have
been impressive across the board, and particularly in sales and new
accounts. Cornerstone was able to make the entire application process
paperless, Web-based and seamlessly integrated with the back-end
Cornerstone has processed over 20,000 applications since
December 2001, all done completely online. The system allows
Cornerstone to process merchant applications from more than 200 ISO
offices across the country, with more than 400 individual login Ids
for agents and other independent sales representatives in those
Cornerstone's agents submit merchant applications using an
easy-to-use, Web-based, online application form. The progress of
applications is tracked directly by agents and sales representatives
throughout the application approval process for status updates. The
agents find the application forms easy to fill out and the entire
process very efficient, which motivated them to submit more merchant
applications and do more business with Cornerstone. Extensive
validations and checks during application entry, which integrate the
front-end with back-end systems, led to a reduction in costs and time.
The boarding of merchant accounts is reduced and manual intervention
minimized, because the editing of all data elements entering the
system is done at the source as applications are entered.
submitted, an automated rules-based underwriting module offers
powerful tools that help Cornerstone make faster and better decisions
on merchants. The system aggregates the key information needed for
underwriting merchants, such as credit reports, Terminated Merchant
Files and additional risk parameters including background checks on
addresses and bank account numbers. To further speed up the process
and reduce risk, application information is pre-validated and the
system provides automated interfaces to the processing platforms of
various credit agencies. The entire application package is then
processed automatically or presented to an underwriter for a decision,
depending on the parameters set by Cornerstone.
Approved merchants are
then "built" and setup on the back-end and host systems immediately so
that merchants can start processing transactions almost instantly on
various platforms such as AMEX, Discover and FDMS. With the entire
process online, progress is communicated to agents and sales
representatives as decisions are made at every step.
The time required
to underwrite applications has been reduced from what used to be
several days down to several minutes. This is because integration and
Web-based tools work together to enable the rapid exchange of
information between parties, as well as the aggregation of required
data, pre-validation, data correction and other time-savers throughout
the process. Some other positive results in sales and account setup are:
- The communication costs for new application processing have
been reduced to zero, eliminating need for phone calls and faxes
- ISOs and Agents get the information they need quickly
- Account setups on systems such as AMEX, DISCOVER, and FDMS have been fully automated,
eliminating data entry errors and delays
- Online sales lead management and communications led to an overall higher level of
collaboration and loyalty
- Resources throughout the process are optimized, lowering costs.
Another area of importance to Cornerstone was the addition of new
value-added payment products to offer their clients. One of the most
important was e-commerce. Cornerstone forged relationships with large
e-commerce providers and online storefront builders, which made it
easy for both parties to keep merchants satisfied. Cornerstone is able
to quickly set up merchants that need a virtual terminal and to
interface their Internet shopping carts to the payment gateway.
Cornerstone is also able to address the opportunities presented by the
increasing use of PCs by merchant operations with an application
called MerchantPC. This integrated PC-based POS software solution for
food service retailers connects counter service, home delivery and
table service into one powerful and comprehensive system. Capitalizing
on the latest in wireless, PDA and Internet technologies, the POS
system integrates orders, transactions, payments, customer reporting,
inventory control and financial management activities for food service
operations. Optional modules include PalmPay for mobile credit card
payment at the customer doorstep and ActiveTables for tableside
ordering and payment.
Cornerstone management and staff use the
customizable Web-based reporting features to stay current with
information on key performance indicators and the analysis of trends.
The system provides reports and graphs both historically and as they
happen with hourly, daily, weekly, monthly and yearly views. Agents
and ISOs are provided with reports that help them track and manage
their own merchants, and merchants can see reports on their
transaction activity and marketing data.
A full-featured risk module
provides extensive risk monitoring tools to monitor and analyze risk
on a daily basis. The risk module processes tens of thousands of
transactions every day and flags potentially risky transactions for
corrective action. A built-in risk operator workflow system that
optimizes resources lets Cornerstone manage risk with lower manpower
As can be seen from the results, implementing a new online
generation, single system across all of the diverse activities of an
acquirer is not only feasible, it is extremely attractive. Faster
account setup, integration of the front-end and back-end systems and
online Web-based user interfaces all work together to increase sales
and improve customer satisfaction. Other benefits are reducing
development expenses and decreasing the time to market.
In a business
as competitive as merchant acquiring, these advantages present a new
and strongly compelling option with clear advantages to the
traditional approach of implementing acquiring systems from multiple suppliers.