I posted this last week about a company that’s trying to launch an electronic payment system that bypasses the middleman on transaction fees and wants to piggyback their system onto magstrip-bearing driver’s licenses.
A couple of days later, I received a comment on the post from a gentleman named Randall Shake, who is the CEO of ACH Pay, LLC, one of the companies involved in trying to introduce this business. The comment provides some additional background. I subsequently traded a couple of e-mails with him which I’ll share with you because I think he’s made some interesting points.
More after the jump…
I’ve edited slightly for space, but have not altered any content:
I have been in the Merchant Processing Industry since 1997, and have watched the escalating fees impacting Merchants. In February, I was invited to address the Merchants Payment Council in Washington D.C. …I was asked why as an ISO, I wanted to promote a solution that cut the revenue by 80%. I told them that their members were paying much more than they were posting on their web site. Which is www.unfaircreditcardfees.com. And the Interchange Fees were negatively impacting their ability to financially viable. The answer to the problem I believed and still do is to be found in the Free Market. And that with a Loyalty incentive program Merchants could take back their Cash Flow from the Card Associations. Visa and MasterCard needs competition, consumers are paying for these hidden Fees.
My own opinion here — this is why I think their idea is going to get a lot of traction. Not because it’s better for the consumer up front, but because it’s a significant benefit for small independent retailers. I’ve had more than one conversation with store owners in all sorts of retail categories about how the cost of processing credit card transactions has risen so much that it’s a major detriment to doing business. Mr. Shake recognizes the lock that Visa and Mastercard have on payment systems and is arguing that a payment system that bypasses them will naturally attract business and force them to play more fairly. It may be Economics 101, but he’s dead on.
I asked Mr. Shake about security and privacy concerns, particularly since the push toward RFID-enabled payment systems is rife with these problems, and whether or not his company was considering an RFID-enabled system as well. His reply indicates that they are sticking solely to magstrip cards:
We are working on an interface with the 2D Bar coded Driver’s Licenses. And have no relation or association with RIFD technology. The Driver’s License is used as an access device to identify the checking account. A private labeled Loyalty Card with magnetic Stripe could also be utilized as long as the Merchant controls the Card Deck and it is not on a Visa or MasterCard Debit platform.
Sticking with magstrips obviates the problems assoicated with RFID, of course. There are other security and privacy issues related to electronic payment systems in general, even for magstrip cards, but at least they won’t be inviting any additional problems into their system by using RFID tags. Eventually, the increased prevalence of RFID will probably force them to change direction, but the adoption of RFID-enabled cards and fobs remains a little slow and probably gives them enough time to get their system into retail stores and establish their presence before having to go that route.
We are actively working on a program for the Trucking Industry as well. And are in discussions with companies that can provide additional Risk Scoring services for Merchants as an additional option which they can purchase for additional transaction fees. One card can be tied to multiple accounts. With each having a separate Pin #. Our First terminal to market will be from TechTrex which has marketing in Chicago IL…We are seeking both Consumer Groups support, because Interchange Fees impact the costs of goods and services sold to Consumers. And from Merchants who would be interested in a beta test in their market. We are 30-45 days away from having our Terminal application ready for market. Grocery Stores who operate on thin margins could greatly benefit from our service as well.
Any readers from the Chicago area might want to keep an eye out for these terminals beginning to appear toward the middle of the summer. If you see them and use them, I would be very interested to hear about it…as I’m sure Mr. Shake would be.
Lastly, here’s a link to a podcast of a radio interview with the CEO of National Payment Card, Inc., Joe Randazza.
