We've all heard the phrase, "location, location, location," when people speak of the prime components of business success. A brick-and-mortar store located in the right neighborhood and offering easy customer access has a distinct advantage over competitors that are not similarly situated.
However, in the Internet age, location is not just a physical storefront or office; it is also a URL accessible instantaneously to anyone on the planet who has Internet access. And electronic-commerce merchants face the same dilemma as their brick-and-mortar counterparts: They need to drive traffic to their stores and get customers to buy once they are there.
Once a virtual store is laid out and user friendly, ensuring customers can make purchases efficiently and safely tops the priority list. Authorize.Net, Cybersource Corp.'s payment gateway provider, started helping small businesses move their products online just as e-commerce was gaining steam in the 1990s.
Since then, the company has expanded to a variety of payment scenarios, all of which go through the Authorize.Net gateway.
Jeff Knowles, founder of Authorize.Net and several other payment solution companies, started out as an ISO for Card Services International. According to John Bodine, Vice President, Small Business at Authorize.Net, many of the merchants Knowles called on in his Utah region in the mid 1990s wanted to know how they could either move their businesses online or supplement their brick-and-mortar locations with online stores.
Bodine said Knowles "designed and built a virtual terminal to take transactions electronically over that Web in a non-face-to-face environment." Knowles started Authorize.Net in his garage, writing the code himself. "He had some background in engineering and he literally worked night and day as a side job putting that together," Bodine added. Authorize.Net's goal was to capitalize on the power of the Internet as a sales engine and provide merchants the full gamut of payment solutions so consumers, in turn, "could feel comfortable and secure in using those in a non-face-to-face environment," Bodine said.
Authorize.Net has been acquired four times. When it was bought by Go2net Inc. in 2000, Knowles moved on to other endeavors. In 2007, Authorize.Net was acquired by Cybersource Corp.
"One-hundred percent of the payments that we process are Web-based, meaning that they are somehow connected to us through an IP, or an Internet Protocol, structure," Bodine said. "We have retail merchants; we have tens of thousands of them. We have strictly online merchants. We have MO/TO merchants. We have mobile merchants."
Most of the transactions Authorize.Net processes are e-commerce. One of the company's biggest customers is New York City, which is converting most of its parking meters to solar-based, wireless payment terminals.
"There's hundreds of different ways that merchants are connecting to us," Bodine said. In addition to handling credit, debit, automated clearing house (ACH) and other traditional transactions, Authorize.Net always has an eye out for "additional payments and service solutions," he added. Authorize.Net is now considering adding alternative payment option BillMeLater.
"We have an open integration environment," Bodine said. "So the ability to connect to us is open to any type of solution provider that's out there who wants to integrate payment solutions with their own internal solution. We know payments. We do it securely. We do it compliantly. We're going to be doing it in a reliable way. [The ISOs] just connect that platform to us and we can then offer that to merchants.
"That will continue to be our model: to support the cutting edge of technology that other people are putting together. They just don't want to do the payment portion ... and that's where we are successful."
Bodine said merchants can comfortably use cutting-edge applications, such as Inner Fence LLC's i-Phone payment gateway, knowing the back-end support is provided by Authorize.Net.
Authorize.Net has over 230,000 active merchants on its platform. According to Bodine, it processed hundreds of millions of transactions worth tens of billions of dollars in 2008.
"Thankfully we've been able to invest in the infrastructure and the architecture to build a scalable and reliable and secure processing platform," Bodine said. "It's all about staying in front of the trends and giving both our distribution partners - our resellers, those ISOs - and the merchants the tools that make them successful."
Bodine said the economy and high-profile data breaches have caused many smaller merchant service providers (MSPs) to rethink doing their own gateways. He also pointed out that Authorize.Net hit the market right when e-commerce was gaining traction.
"We provided a very simplified way for our merchants to get online and start taking payments," he said. "I think it would be nearly impossible to enter this market as a payment gateway today, just due to those complexities and the expenses associated with building such a solid transaction platform."
"Focusing our core efforts on the ISO community has paid off in spades for us and has benefited the Authorize.Net business," Bodine said. "But moreso, it's given us a chance to be involved in the success not only of the individual ISOs but on a merchant by merchant level as well."
ISOs are attracted to the Authorize.Net and Cybersource names, Bodine said. "We are considered the top and preferred brand out there," he said. "I think it came from supporting the ISO community from day one. ... We have a channel team that's dedicated to not only signing new resellers, but taking them through the process of getting trained and educated on Authorize.Net." The company also has a reseller toolkit for new resellers. "Everything that we do is really geared to support that ISO and MSP [merchant service provider] community, so any marketing effort that you see from us is centered and focused in that area," Bodine said.
David Schwartz, Director of Marketing at Authorize.Net, said the company doesn't do any outbound lead generation marketing for new merchants so as not to compete with its ISOs. The only marketing directed at the merchant is to introduce value-added services to its existing merchant base. "But the thing is that when the merchant signs up for a value-added service we have a revenue share with the ISO whether the ISO had any involvement in that merchant signing up for that value-added service or not," Schwartz said.
Value-added services offered by Authorize.Net include a fraud detection suite, recurring billing, a customer information manager and simplified payment methods. The company also partners with ancillary service providers to compliment its own offerings.
Authorize.Net has a Web site for its resellers (http://reseller.authorize.net/) where it provides training information, notice of tradeshows at which the company will have a presence, archived newsletters and other items, Schwartz said.
Bodine was on the board of Authorize.Net in the late 1990s before it was incorporated. He said the education he received by being involved in a small, bootstrapping startup as it grew into a publicly held company was uniquely rewarding.
Schwartz, who came on board six-and-a-half years ago when the company had only 72,000 merchants, said, "I feel very fortunate to have been able to come along for the ride and participate in the ride. It's not often that you get the opportunity to work for a company that experiences the type of growth that we've had." Bruce Frymire, Director of Corporate Communications for Cybersource, said during his first year with the company there would be a "big internal announcement when we had a million transaction day and now ... during the peak period in Q4 , we had 8-million transaction days, 7-million transaction days. Common were five and six. And it's just been stunning to see that kind of development."
Bodine added that Cybersource processed one in every four dollars that went through e-commerce in the United States, based on its 2008 processing volume.
When Authorize.Net began selling its payment gateway, "we had to educate resellers as to what it was all about," Bodine recalled
"We had to help resellers educate their merchants. ... From the early days, I felt like we did as much training and education to get people to understand the process involved and how it worked as we did anything else.
"Over the years, not only have merchants become more savvy, but it's pushed the ISO and the MSP community to also become more educated because they're coming in the door with so many good questions, or they already know how they want to build their business model online or to take advantage of an IP infrastructure, and they want to know how the reseller can provide those solutions and services to them."
Bodine said Authorize.Net takes "compliance very seriously because one breach or one security mishap would bring the potential of the whole platform coming down."
The company has internal security and audit teams, a back-up data center and a redundant geographic data center. Merchants "can go to sleep at night knowing that they're being watched over and protected by Cybersource and Authorize.Net," he said.
Bodine added that he could see the "regulatory nature of the business get more and more confined and more and more strict." But neither new legislation and regulation nor the state of the economy are scaring Authorize.Net, which continues to "be bullish on the growth and opportunity of e-commerce," he said.
"We see e-commerce as a bright spot of economic news, and in my PR efforts, I've been attempting to move that out, but right now the media is still very focused on the negative issues," Frymire said. "They don't want to really hear about any bright spots. But there's no question, in our minds at least, that e-commerce represents a very, very solid business opportunity going forward, no matter what the economic news right now."
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