My Merchant Account Blog

First Data and The Future

Friday, August 28, 2009

Back in June 2009, Charles Fote announced he was going to start a new, "complete package" of payment product.  Mr. Fote was the CEO of First Data from 2002 to 2006.  One first has to wonder if starting another company will be worth it.  He has a management team already and some private investors.  I am sure the management team consists of individuals who were laid off from First Data.

Changing merchant account providers and electronic payment gateways can be very difficult for some merchants.  For others, it can be as simple as changing a few lines during the checkout process. 

For years, First Data was a giant in the industry - able to withstand a buyout and usually the ability to buy any company it wanted.  But in 2005, the LinkPoint gateway was moved from Burbank, CA to Denver, CO.  Unfortunately, First Data decided to basically build the LinkPoint gateway from scratch.  This caused a strain on a lot of merchants.  The development team built the gateway, basing it on LinkPoint's features.  However, most of those features were deprecated.  The only fraud prevention LinkPoint had to offer was Address Verification Service (AVS) and CAV2 / CVC2 / CID / CVV2 verification.  They did have a product called LinkShield™, but neglected to develop a billing procedure, so they don't offer it.  However, if you want something very similar (but better), the Quantum Gateway offers MaxMind at no additional charge.

In 2008, First Data decided to re-brand the LinkPoint gateway as First Data Global Gateway.  Nothing was changed then, the gateway was still the same. 

If Mr. Fote is successful, First Data might have to re-consider its business plan.  When the LinkPoint gateway was first developed, it provided merchant with fantastic tools.  Years later, most of those tools are standard with most electronic payment gateways.  For a merchant to switch, the merchant account provider and the electronic payment gateway, must be able to provide the merchant with tools to help prevent chargebacks and fraudulent transactions.

Mr. Fote might have approached a few electronic payment gateway companies to buy them out.  Or he took his knowledge to build another electronic payment gateway.  He will probably vie for Wal-Mart, since Wal-Mart paid over $1 billion last year for credit card transaction costs.  If Wal-Mart's discontent continues, I am sure it would be easy for Mr. Fote or another provider to make a case to Wal-Mart to consider switching.  Plus, there might be another contender for that business already.

Switching Merchant Account Providers

For merchants to switch to another merchant account provider, the provider must make a case why their company is better.  Usually this is done by telling the merchant how much money they can save.  If the merchant does make the switch but keeps the same gateway, usually the switch will be easier.

However, switching to another electronic payment gateway is a bit more involved.  The above though is true - they must explain to the merchant why their service is better.  Most gateways are somewhat the same, but the Quantum Gateway does stand out. 

Besides offering the "basics", the Quantum Gateway offers merchants extra tools at no extra charge.  As a matter of fact, the Quantum Gateway is free.  Unlike other electronic payment gateways that charge from $10.00 to $100.00 a month, Quantum Gateway does not have a monthly fee or transaction costs.

The Quantum Gateway goes above the other gateways by providing the merchant numerous tools to help reduce chargebacks and fraudulent transactions.

So one has to wonder if First Data can keep up with the times?  They had a great opportunity in 2005 to add extra fraud prevention tools but did not use it.  Will merchants keep waiting or will chargebacks make merchants re-consider another electronic payment gateway?

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