In an advertisement that has frequently appeared in the pages of The Green Sheet, National Processing Co. states that First National Merchant Solutions provides the back-end settlement function for NPC's card processing. Why? Because, as the ad states, FNMS "sets the standard as a strong, stable, dependable, back-end service provider."
As Diana Mehochko, President of First National Merchant Solutions, points out, that mention is a testament to the Omaha, Neb.-based processor's stature in the payments industry. "That's right in your magazine, their advertisement - the second bullet point," she said.
FNMS, a subsidiary of First National Bank of Omaha, started processing electronic transactions in 1953. The family-owned bank, which was founded over 150 years ago, is still owned by the Lauritzen family. Boasting low employee turnover and 190 sales professionals in 45 states, FNMS claims stability and reliability in an often turbulent industry and economy.
"It's not only from a knowledge and experience standpoint, but certainly from a reputation standpoint," Mehochko said. "That's what we bring literally in spades. It's our reputation, our stability in bringing the level of service that I think truly is unparalleled in the marketplace." In 2008, FNMS processed $51 billion in sales, which breaks down to over 700 million transactions at more than 300,000 locations.
In Bankcard today: 2009 acquirers report, GSQ Vol. 11, No. 4, December 2008, FNMS was ranked seventh among acquirers. It reports over 19 ISO relationships and has dedicated a specialized internal group to maintain its ISO, agent- and referral-bank programs.
According to Mehochko, FNMS is still one of the few processors to provide its customers with full, in-house services - from card production to back-end processing. That attribute gives the company a flexibility and agility that its competitors do not share, she said. "I think with the large processors out there, like a TSYS, a First Data, a Global, those entities certainly did outsource [functions] in the past years," she noted. "They haven't brought it back in-house because it is an expensive venture to start from scratch to do that."
Keeping functions in-house enables FNMS to respond to customers' needs comprehensively and speedily, since FNMS executives can quickly convene to make prompt, informed decisions, Mehochko said.
Along with a push into the Puerto Rican and U.S. Virgin Islands markets, FNMS is expanding its operations into three key areas: health care payments, data security compliance and prepaid cards. About FNMS's health care payment program, Mehochko could only say the company is on the verge of signing a relationship with an entity that will bring a first-in-class product to the marketplace. But the processor is also aggressively undertaking a Payment Card Industry (PCI) Data Security Standard (DSS) compliance program targeted toward level 4 merchants.
Mehochko agrees that level 4 merchants - businesses that process fewer than 20,000 Visa Inc. or MasterCard WorldWide e-commerce transactions per year and all other businesses, regardless of acceptance channel, that process up to 1 million transactions annually - are the most vulnerable to breaches because they lack the funds and know-how to put in place state-of-the-art security systems.
Therefore, FNMS has partnered with security compliance firm Trustwave to offer Trustkeeper, Trustwave's on-demand, proprietary vulnerability assessment and compliance management solution. FNMS merchants go to www.getcompliantwithfnms.com to enroll with Trustkeeper. Then merchants are guided through the steps to bring their businesses into compliance with the PCI DSS.
Mehochko considers the service to be part of FNMS's responsibility as a consultant to its merchants. But it is also part of a larger strategy. "[We're] certainly looking at how we can manage our business in this economic crunch," Mehochko said.
The third area of expansion for FNMS is in the prepaid card arena. In January 2009, Yellow Cab Cooperative of San Francisco, which operates 500 taxis in the city, began offering the smartOne Visa Inc. Pay Card to its cab drivers.
According to Scott McCormack, Vice President of Prepaid Solutions at FNMS, the co-op had to have tens of thousands of dollars on hand to pay their cabbies in cash at the end of their shifts. On some days, the co-op would run out of cash. So the co-op contracted FNMS to furnish a program that would alleviate the burden of having to make daily trips to the bank.
Now, instead of being paid entirely in cash, the co-op's cabbies get most of their pay loaded onto open-loop, Visa-branded cards. Now cabbies - mostly recent or fairly recent immigrants - don't have to leave the co-op with large amounts of cash on their persons. Additionally, the cards provide cabbies with greater convenience and flexibility in their financial choices. Cabbies can use the cards to withdraw cash from ATMs or make purchases anywhere Visa debit cards are accepted - online, over the phone or in-store.
For the co-op, the program has been a "significant" money saver, McCor-mack said. On the front-end, the co-op is not charged fees by the bank to withdraw large sums of cash every day. And, by doing daily automated clearing house deposits to the cards versus doling out cash payments to cabbies standing in line, the co-op speeds up payments to cabbies and can divert staffing resources to other areas of the business.
Metavante Corp. provides the authorization and denial engine for the taxi payments solution. Mehochko said that function is the only one FNMS outsources. FNMS chose Metavante because of its expertise in prepaid card processing, McCormack said. Another deciding factor was that the two companies were a "good fit" for each other, with both having evolved out of similar banking cultures, he added.
Parking is another vertical that FNBS is looking at as a possible way to expand its prepaid card services. "Certainly the existing relationships we have in the parking lot [vertical], we are using those as stepping stones to provide or sell or cross-sell other products and services," Mehochko said. "We have a large sales force here - close to 200 people," McCormack said. "Certainly our opportunity is to utilize that sales force to bring additional solutions to not only prospects we are talking to in various different vertical markets, but also our existing client base."
FNMS's definition of a client includes agent banks, merchants and ISOs. Since the company views ISOs as customers, it operates a full-service Account Management Team to support its ISO partners. Its duties include operational, technical and conversion support. Mehochko said the team is there to answer ISOs' questions. If needed, FNMS representatives will travel to ISO locations to offer in-person education and training.
Additionally, FNMS offers annual First Focus seminars to ISOs to bring them up to speed on chargebacks, fraud, security and other issues. FNMS's hands-on services seem inextricably tied to the moderate size of the company.
Mehochko believes FNMS is of a business size neither too big nor too small. It is big and strong enough to withstand tough economic conditions. But it isn't too big that customer service is affected as it may be for giant corporations. Mehochko said FNMS is in "a nice niche" in terms of its size which enables it to enjoy "having the control from an in-house processing standpoint, having that flexibility, having that nimbleness, and certainly today, having that stability and that wherewithal that perhaps other financial institutions are not appreciating in this economic time."
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