The credit card industry has come a long way since 1951, when Diners Club issued a credit card to about 200 members, which they could use at any of 27 restaurants in the New York City area. Then in the 1960s Bank of America began issuing Bank Americard, then came MasterCharge, American Express and the rest, as they say, is history.
In 1970, that little magnetic strip was added and credit cards became part of the Information Age. A merchant with a simple reader based on the same technology as a magnetic tape player could transmit a transaction to a central clearing point over a phone line. Credit cards became the payment vehicle of choice for phone-order merchants, catalog-sales companies and others where the customer could not write a check or present cash to make a purchase.
Fast-forward to the age of the Internet and you enter a time when credit cards, debit cards, electronic checks and new forms of digital currency are accepted by tens of thousands of merchants who sell goods and services on the Internet. While most of us accept with some awe the fact that we can sit at out desk or in a coffee shop, and make a secure purchase of, say, a new computer or a cheesecake, even those deeply involved in buying and selling on the Internet tend to be amazed by the payment processing system.
At any given time, millions of these electronic transactions are taking place in brick and mortar stores, movie theaters, restaurants, gas stations and in virtual stores online. Roy Banks understands how it all works, especially online. He needs to, because he is the President of Authorize.Net, one of the largest online payment gateways in the world. Authorize.Net is one of those payment processors that connects all the dots between the merchant, the customer, the credit card issuer and the merchant’s bank, where the money ends up after any given transaction.
Banks went to work at Authorize.Net in 1999, “dialing for dollars” as he calls it, trying to convince online merchants to use the Authorize.Net gateway. He must have convinced more than a few folks, because now he’s running a key component of the ecommerce infrastructure, providing services to over 136,000 merchants. But, the question still is, what in the world is a gateway?
Roy Banks: “Think of it as that little device at the hardware or department store through which you swipe your card. The payment gateway is a virtual point-of-sale credit card reader that gathers the information that the terminal would normally gather when you swipe the card. It then puts it with the information about the sale, submitted by your shopping cart, and checks the records to see if the card is valid, is being submitted with the right ZIP code, and that the credit limit will support the purchase.”
PeC: What separates one gateway or processor from another, in other words, why would someone choose Authorize.Net as opposed to one of the many others that are out there?
Banks: “Probably the one reason that stands out the most when you’re first evaluating any payment gateway is, that we are the de facto standard, the solution that most people would recommend. Because Authorize.Net has been around for ten years, we are one of the early pioneers and leaders in developing payment gateway technology and solutions. So, by virtue of our tenure in the industry and our proven track record, we have an incredible brand and name recognition. By virtue of the fact that we’ve been in the business and industry so long, we’re a ‘demand brand.’ Everyone knows who we are, and we’re recommended by most solution providers.
“The other thing is that, when merchants look to build an ecommerce presence, they select a number of tools to create their website. Authorize.Net has benefited from the fact that we have been an integrated solution, meaning that other solution providers have built an integration component into Authorize.Net, or have built Authorize.Net into those solutions so that they have integrated us as a core part of their solution.
“The other thing is, we differentiate on other areas of our business such as customer support. We provide free customer support. We believe that by supporting merchants and helping merchants with the use of our products, we can build a great experience for them. So, we really focus and differentiate our customer support.
“Authorize.Net has focused on the delivery of its services at a low cost level, where we believe that we gain economies of scale with every new merchant that we add to our platform. We really focus on delivering a fair value, a fair price to value mix for the service we provide.
“Further, you need to look for a payment processor that focuses on security. We have been and continue to be a company focused on delivering and securing our platform. We are PCI-compliant, which is an industry security standard, published by the credit card associations. We embrace new security solutions as they come to the market. So, we focus on making the transaction experience between merchants and consumers as safe as possible, given the technologies available and security standards which are published at an industry level.”
PeC: Fraud is one of the issues on the minds of probably every single e-merchant. Are there some specific things that you can talk about that would give the customers, or an Authorize.Net potential customer, an idea of what you do to help them in that fraud area?
Banks: “With any commerce medium, whether it’s a brick-and-mortar store, online, mail order, or telephone order, there is always going to be a nefarious segment of the population, which is going to try to defraud the true, honorable citizens of commerce. The Internet is no different. So, Authorize.Net, recognizing that Internet commerce is a target for fraud, has built and developed solutions, which we believe arm the merchant with the ability to thwart and mitigate the instances of fraud that could be leveled against the merchant.
“We developed, in addition to the already available standard industry features that are available to help with fraud, what we call our Fraud Detection Suite or FDS. FDS is a rules-based product that we offer to merchants to help them address and fight against the typical means of fraud. In addition, we employ and support industry standard fraud tools such as Address Verification and Card Verification Value, things that merchants can use to employ the assistance of the credit card infrastructure to also identify and potentially expose and reject fraudulent transactions. We also focus on awareness campaigns, where we send communications to our merchants to educate them about fraud trends and the availability of our services that can help them fight and again thwart the efforts of fraudsters to take advantage of their businesses. We recognize that as a valuable service we must provide our merchants to help them be successful in their commerce endeavor.”
PeC: How far back does Authorize.Net go in the Internet commerce industry?
Banks: “We were founded in November 1996 by Jeff Knowles, who was a bank card salesman to brick and mortar businesses. He conceived the idea based on his vision that the Internet truly would become a worldwide commerce network and there would be a need to develop a worldwide digital point of sale solution.”
PeC: You’ve seen the Internet and Internet commerce go from a tiny part of the economy that was considered to be fringe at best, to a very important part of the economy. What are the things that you have seen or that you think drove the growth of this segment?
Banks: “I have been able to watch an entire revolution occur. It has been interesting to watch the Internet become a ubiquitous worldwide-accepted commerce medium. As a result of my involvement, I have seen a tremendous amount of change and maturity with respect to Internet commerce. I think the thing that has really influenced the growth is, quite frankly, the convenience of shopping online. Convenience has absolutely spawned and accelerated the acceptance of ecommerce. People love to do their shopping behind the keyboard of their PC, or any other Internet-enabled device.
“The other thing is the ease with which someone can establish an online business and sell goods and services. It used to be that you had to have a product or a service, you had to find a location and lease a storefront or build one, you had to purchase fixtures and all of these other things really spelled out incredible cost. But, with ecommerce, virtually anyone can get into the game and participate in the wonderful, experience of selling goods and services online in the worldwide market.
“Additionally, the tools that are available now, versus what was around five years ago, allow people to do so much more. You are able to create better websites and you can buy solutions that establish your storefront for you and help you advertise and reach customers. Then you think about search companies and how far they have come and how far auction companies have come to unite buyers and sellers. Those opportunities have increased a hundredfold.
“I think the last thing is, people are no longer sitting on the sidelines watching the commerce game. People are actually participating in ecommerce. They have now gained confidence in the medium and they are venturing onto the Internet, and they are exploring and realizing the benefits of shopping, and selling, online.”
PeC: Having said that, do you see any impediments that still might create problems for the industry down the road?
Banks: “You know, I think the market is still very much under-penetrated and has a lot of room to grow. As far as impediments, sure there are going to be challenges. There will always be attempts by fraudsters to erode consumer confidence and if I had to label one potential impediment, it would be what we need to do to boost the consumer confidence in ecommerce. Consumers want to feel comfortable about their experience of shopping online, but when you consider all of the criminal activities that are going on in the way of identity theft, credit card theft and those sorts of things, that to me is the one impediment that could impact commerce over time.”
PeC: It must not be much fun to know that, at any given moment, there are bad guys out there who are trying to figure out and execute ways of robbing your bank, so to speak.
Banks: “Yeah, you know we feel sometimes like the Department of Defense or the Secret Service. We don’t rest on our laurels. We fight those battles for our merchants so they do not have to. That’s the responsibility we have as citizens of this industry. And as a vendor, a leading vendor, that is exactly what we’re employed to do on behalf of our merchants. We have to be prepared to defend them against those kinds of threats. Is it fun? No, it is not, but it goes with the territory and that is why Authorize.Net stands apart, because we’re committed to that. We have the resources and the intellectual and financial capital to fight those kinds of threats.”