Corporate America Discovers Payments - Digital Transactions

Discovers PaymentsStartup payments companieslooking to challengethe dominance of financialinstitutions in payments arenothing new. Many havecome and gone over the years, especiallyin the arena of micropaymentswhere the sidelines are littered withupstarts that ran aground.Some of the survivors, such asPayPal Inc. and BillMeLater, both ofwhich are owned by eBay, have thrivedand made it into the mainstream ofelectronic payments, but only after atough slog of brand-building.For the most part, banks and processorshave had the luxury of sittingback watching these new playersscratch and claw to gain market sharewith merchants. But that may no longerbe the case.During the past year, heavyweighttechnology and Internet companiesAmazon.com Inc., Facebook, IntuitInc., and Microsoft Corp. have takena seat at the payments poker table andare looking to use their technologicalprowess and vast brand equity withconsumers and businesses to shake upthe status quo. A fifth, Google Inc.,tossed its hat in the ring a few yearsback with Google Checkout.Each company is laying thegroundwork to deliver e-paymentplatforms that deliver value to techsavvyconsumers and secure, low-costprocessing to merchants and smallbusinesses. By delivering what bankshave for the most part struggled toprovide, each company can expandits reach to merchants, small businesses,consumers, and, in the case ofMicrosoft, financial institutions.“Transactional capabilities are whatkeep consumers coming back as repeatcustomers, and for non-bank technologycompanies, providing transactionalcapabilities is a way to capture onlinetransaction revenues,” says Serge vanDam, head of marketing for MobileCommerce Ltd., an Atlanta, Ga.-basedprovider of mobile banking and paymentssolutions that built its BankAnywheremobile payment application onthe Microsoft platform. The companygoes by the name M-Com.In the following pages, DigitalTransactions profiles each of thenew outsider Goliaths in e-payments,where they stand in the market, andwhat they hope to gain.Microsoft GoesBehind the CurtainFifteen years ago, Microsoft chairmanBill Gates dismissed banks as dinosaurs,arguing that if Microsoft couldbypass them the software giant couldtransform the world of payments andreap huge profits. Today, Microsoftfinally appears to be making headwayin the world of payments.As it turns out, banks never forgotthe bull’s-eye Gates painted on theirbacks. They kept tight control overpayments by aligning themselves withonline authentication systems fromVisa Inc. and MasterCard Worldwide.That made it hard for Microsoft to lurebanks and e-merchants into embracingsoftware designed to centralize transactionsaround products from the giantof Redmond, Wash.Today, Microsoft is more discreet,working behind the scenes tosell banks on open payments platformsaround which application developerscan quickly innovate. “Innovation inpayments has pretty much been stifledthe past 10 years by legacy systems,”says Mustafa Shehabi, vice presidentof sales and marketing for ISTS WorldwideInc., a Fremont, Calif.-basedtechnology consultancy specializing incard-processing systems. “What Microsoftbrings to the table is an open platformthat opens the door again to applicationinnovation in payments.”ISTS is extending its use of theMicrosoft technology stack to deliverpayment-processing solutions basedon SQL Server 2008 and BizTalkServer 2009. Its new applications willfocus on payment switching, authorization,settlement, card issuing, andreporting. The applications will alsosupport gift and prepaid cards, loyalty,mobile payments, enrollment applications,promotions at the point-of-sale,e-commerce, and mobile commerce.That appears to be what SequoiaRetail Systems, a Mountain View,Calif.-based provider of point-ofsale,inventory control, mobility, ande-commerce solutions for higher-educationinstitutions, is looking for. Ithired ISTS to implement a secure,token-based e-commerce application.“Open platforms will move processorsand retailers away from proprietaryapplication code and givethem more control over their applications,”says ShehabiMicrosoft’s partnership withM-Com is another example of howits open platform is paving the wayfor the software giant in payments.M-Com chose to build its Bank-Anywhere mobile application on theMicrosoft platform because manyfinancial institutions have standardizedon Microsoft Windows, MicrosoftSQL Server, and Internet InformationServices, all of which enjoyvast support from the applicationdevelopercommunity.BankAnywhere, which launchedin September, is platform-agnosticand will link phones to back-end servicesin banks, making it a plug-and-digital27