Internet Payment Provider
INTERNET PAYMENT PROVIDER
Because they are widely used to pay for goods and services online, credit cards are an important part of e-commerce. According to Electronic Transfer Inc., analysts in the credit-card industry estimate that out of every four card holders, three use credit cards to place orders online. Just as consumers must apply to a card-issuing bank before they can receive and use a credit card, companies wishing to accept them as a means of payment must set up merchant accounts with banks. Although companies can establish merchant accounts directly with banks, it also is possible for this service to be handled by Internet payment providers. In addition to setting up merchant accounts, Internet payment providers also provide additional services that fill companies' needs related to the processing of financial transactions.
CyberCash Inc. was one leading Internet payment provider during the early 2000s. According to the company, it offered electronic payment software and services to more than 25,000 Internet merchants. Besides offering merchant accounts to companies so they could accept credit card payments from consumers, CyberCash provided solutions in the area of business-to-business transactions. These transactions extended beyond credit cards to include electronic fund transfer (EFT) and purchasing cards. The company also provided services in the area of fraud detection and risk management via FraudPatrol, its product that worked "by combining the advanced technology used by nine out of the top ten U.S. credit card issuers with comprehensive historical transaction data."
VeriFone was another leading Internet payment provider in the early 2000s. A division of Hewlett-Packard, the company provided payment solutions to consumers, merchants, and banks throughout the world. Its products included the point-of-sale terminals used at physical retail locations to process credit-card transactions, as well as software that accomplished the same for companies doing business on the Internet. VeriFone also provided installation, repair, and consulting services. According to the company, VeriFone has "shipped more than nine million electronic-payment systems, which are used in more than 100 countries."
Besides VeriFone and CyberCash, there were many other Internet Payment Providers in the early 2000s. Some catered to small- and medium-sized companies that experienced difficulty obtaining merchant accounts directly from banks. Others specialized in servicing companies in industry segments like adult entertainment or online wagering, which are considered to carry a higher-than-average risk for fraud or disputes. Many banks were leery to offer merchant accounts to e-commerce companies because of concerns over fraud and high charge-back rates, especially those in high-risk categories.
"About CyberCash, Inc." CyberCash Inc. June 13, 2001. Available from www.cybercash.com/company.
"Delivering E-payment Solutions to the World." VeriFone. June 13, 2001. Available from www.hp.com/solutions1/verifone.
Hisey, Pete. "At War Over Merchant Risk." Credit Card Management, July 2000.
Messmer, Ellen. "Credit Crunch for E-comm Wannabes." Network World, May 31, 1999.
Sisk, Michael. "Enabling On-line Credit Card Use in Minutes, Not Weeks." US Banker, April 2000.
SEE ALSO: Acquiring Bank; Card-Issuing Bank; Charge-back; Interchange and Interchange Fee