The payment toolkit can either power or significantly restrict the scalability of an enterprise.
Zorrik Voldman is a Co-Founder of C9PG, a 25-year-old Payment Gateway company. Mr. Voldman co-founded SIVA Corp (sold to PARTech) and M Gateway (sold to Merchant Online), in addition to five other companies in the payments, point of sale, and military communications space. As someone who has seen the transition from DOS to Windows to SAAS, from Dial-Up Modems to Ethernet to WiFi to 4G/5G, Zorrik has a fine sense of the payment industry current direction and plausible future trends.
SourceForge recently caught up with Zorrik to talk about most pressing payment processing issues for today, and beyond.
Q: Can you briefly describe C9PG mission?
A: In simple terms, we seek to balance the monopolization of the industry. We give our clients the ability to combine and switch between payment service vendors transparently. There is not a single payment processor in the US that covers every requirement in the industry. Our Cloud9 Payment Gateway (C9PG) and legacy CreditLine Secure payment processing software give merchants and point of sale developers freedom to switch between payment processor at will. The industry term for a company like ours is ISO friendly or processor agnostic payment switch.
Q: Before we talk about the future, let us touch on the past. What development, in your opinion, has created the most changes in the payment industry?
It seems like ancient history today, but few people know that EMV transition was full of drama. Many players were forced out of business, class action lawsuits were flying. Suddenly, the barrier to entry for hardware manufacturers, gateway providers and processors has been elevated. The industry was not ready, which resulted in certification delays, putting the final nail in the coffin for many companies.
The search for answers created the following trends:
- Semi-integrated payment processing hardware, which was a shortcut for those not willing to go through the full EMV L3 certification for every device with every processor.
- Consolidation of hardware and software offerings
- Monopolization of payment space
Q: How did this change your company?
A: We found our own way. Instead of following the path of least resistance, we decided to follow through with full direct certifications of payment terminals. C9PG is now one of the few processor-independent directly integrated payment gateways on the market. We have the full transparency of the payment flow, as opposed to being at the mercy of a black box processing module in the payment device and/or device gateway with its own idiosyncrasies and lack of flexibility.
Q: What is the most important success driver for merchants from payments perspective?
A: Without a doubt, reducing payment failure rates and shopping cart abandonment rates. This has less to do with reliability of payments and more with idiosyncrasies of fraud prevention systems at these three end points: payment gateway, payment processor and card brands. Majority of valid transactions are rejected because one or more of these services marks the transaction as fraudulent. At the payment gateway end, it is important to leverage Address Verification Service (AVS) and Card Verification Value (CVV) correctly. The best payment gateways will allow every business to create its own custom card verification business rules. The full AVS & CVV info must be available (such as availability of AVS/CVV for the country of issue and type of card, separate address and zip code match, etc). Normally this information can be obtained by point-of-sale (POS) payment processing API, with a Verify/AVS command. This is something that we pay particular attention to in our conversations with clients, as well as monthly payment flow quality reviews.
Q: Do eWallets solve this issue?
A: They help, especially for returning clients. There are open loop eWallets, such as PayPal, ApplePay, GooglePay. However no business can completely rely on them, as their use is not universal. We have implemented our own closed loop secure payment wallet (payment token vault), which is being used by our customers to store payment methods for their recurrent clients. We also offer access to the open loop wallets, of course. On the crypto side, the acceptance is still lagging, mostly being driven by Cannabis Related Business (CRB). The main difficulty I see with crypto is instability of its price, which makes most conventional merchants hesitate to transact in it. Regardless, I do see crypto moving into mainstream and it would be prudent to keep an eye on it. This is where open payments vs close payments question arises, pitching convenience vs flexibility. Consumer is the ultimate judge here.
Q: What is the biggest mistake that companies make when it comes to payment decisions?
A: Getting locked up into an exclusive (or likely soon to be exclusive) merchant account relationship with a single payment processor or clearing house. Historically, most gateways, owned by a processor, eventually corral its customers into a single payment processor box. Doing so eliminates the bargaining power of the merchant and can place limits on scalability of the business. For our part, C9PG supports all major payment processors and is entirely processor agnostic. I would encourage companies to do some research before investing in something that can restrict future effective credit card rate improvements. On a side note, when looking to attach third party modules, JSON is my favorite method of integration. Our motto is “integrate once, access everything, switch any time”.
Q: What is the top problem that you came across, in the payment space?
A: Surprisingly, reliability of payment networks. Outages do not happen often but when they do, it is a disaster of epic proportions. Quality of service (QOS) real time data from the payment gateways is all but nonexistent. We have implemented our own extensive real-time QOS metrics service, for our clients. C9PG Metrics utilize custom language, informative graphs, and alerts. We made some limited cross processor quality of service metrics publicly available.
Speaking of outages, an important feature is Store and Forward Offline Payment Processing, or the ability to process payments while the payment network is down. This used to be more important in the dial-up days, but we have seen entire processing networks going down for hours. For a large business, this can mean millions in lost revenue. Store & Forward is a high-risk high-reward strategy of continuing to process payments during the outage. The payment gateway stores the payment information, waiting to transmit it to the payment networks for clearing. One must decide whether the risk of some of the payments being declined live is offset by the saved revenue. C9PG uses dual factor Store & Forward design, making intelligent decisions based on the QOS data from both the local client and the remote server/processor end.
Q: What is the one important thing most often overlooked in conversations about payment services?
A: Downgrades (per transaction increase in credit card fees) due to incorrect or incomplete data. Millions of dollars are lost by merchants every minute, due to downgrades. It is important to demand AVS, CVV, Level2 and Level3 features from your gateway. Any decent payment gateway must have a Verify or AVS type transaction that allow you to validate a payment method before authorization, as well as Level 2 and Level 3 for corporate and purchasing cards. We certify all these features for every major processor interface, as a matter of company policy.
Q: What should companies look for in a payment partner?
A: Assuming the basics of competent operations, support, and value, I would say flexibility. With recent acquisition and merger craze, the service is becoming more rigid. It is more and more acceptable to say No. During initial calls, sales tends to overpromise, so make sure you engage the technical management in the early negotiations to confirm the viability of your ask. In our 25 years in business there were only a handful of times, when we said No to a reasonable ask by a potential or existing client. We also make sure to deliver within 30-90 days, depending on the complexity of the alteration.
Q: What is the most important innovation for brick and mortar businesses to stay relevant in the social distancing environment and post-COVID-19 times?
A: While not the most exciting of technologies, the boring old Bar Code has been given a new lease on life. Many of clients are Point of Sale companies, so we understand their business very well. I have been closely watching the development of Point of Sale systems under the pressures of social distancing. The Bar Code based identification and control transfer is the way to go. We have been advising all our POS clients to think about transferring the order flow, including the menu of items, to client devices with a simple Bar Code scan procedure. Our own mobile app already has a Bar Code hookup, and we are teaching our clients how to implement theirs.
Q: There is a lot of talk about Everything as Point of Sale. What do you think about that?
A: Yes, we see this everywhere now: Facebook, Twitter, Instagram, TikTok, games, chat, etc. You have all these calls to action, buy buttons. There is a strong drive to monetize everything at this point. It is exhausting, but also can be convenient. It’s not so much an innovation, as market penetration.
Q: Final question: Is this the end of credit cards?
A: Maybe in their physical form, at some point. However, the instrument of credit remains, regardless of whether you use PayPal or a physical card. Particularly in USA, credit drives much of the economy and consumers prefer it to cash transactions. Large industry players will always try to muscle in with their own proprietary closed loop credit systems. However, as gift card industry demonstrated, open loop is the way to go, in the long term. Crypto will expand and Card Brands might consolidate but I see the continuation of open loop credit facilities and the industry that is attached to them. The demise of Card Brands has been greatly exaggerated.
About C9PG
C9PG or Cloud9 Payment Gateway was founded in 1995, as 911 Software, INC. C9PG is a cloud based payment services company, serving retail, restaurant, lodging, eCommerce, unattended kiosk and MOTO industries. For more information, see https://c9pg.com
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