Behind FDC’s Effort to Get Beyond Credit Cards on the Web

With Internet merchants increasingly demanding transaction capabilities beyond credit cards, acquirers and processors are starting to look into ways to simplify and standardize the introduction of such payment alternatives as electronic checks, debit cards, and third-party billing. The latest such effort comes from the nation's biggest transaction processor. Denver-based First Data Corp. announced today it is introducing a service that packages into one bundle electronic check services, the Verified by Visa and SecureCode transaction-security protocols from Visa and MasterCard, and the Bill Me Later service from Timonium, Md.-based I4Commerce Inc. Dubbed First Data Encompass, the new platform is aimed at acquirers and processing gateways that sell payment services directly and through independent sales organizations to Web-based merchants. Although First Data will not reveal pricing, it is positioning Encompass as more cost-effective for acquirers and merchants than piecing the various services together, since First Data can spread integration costs over multiple clients. “We're passing on the savings of the fixed costs of (our) integration,” says Margaret M. Weichert, vice president of Internet services for First Data Merchant Services. Merchants can let First Data host the payment capability or modify their sites to collect payment data and pass them on to First Data. So far, 3,000 merchant sites are using First Data's electronic check verification and processing service through its TeleCheck unit, rolled out about 18 months ago. Weichert expects that with the addition of the other services, the company will see “three-digit” growth in percentage terms in sites supported by Encompass over the coming year. The company refuses to release or project transaction volumes. Verified by Visa and SecureCode allow consumers to authenticate themselves on merchant sites by entering passcodes and bits of secondary information at the time of purchase. Bill Me Later allows consumers to charge Web purchases to accounts they set up with I4Commerce, which assumes the risk of collection. Weichert's optimism for Encompass stems from research First Data conducted that showed a strong need for a single, standardized platform for alternative Web payments that can be packaged and sold to retailers as readily as credit card services are currently. As things stand now, she says, the sale is confusing for acquirers, ISOs, and merchants while the technology represents too much time and effort for integration. “This is how a lot of great ideas fail,” she says “The logistics of getting (them) into the hands of the feet in the street are so challenging they don't want to touch it.” At the same time, she says, the Web has come to be dominated by so-called multi-channel retailers, or merchants that maintain physical as well as virtual stores. These merchants want to accept the same payment media online as they do in their stores. They are also less and less willing to pay credit card discount fees that include a premium for fraud when many of their transactions are with repeat customers with low risk profiles.