CEO Interviews Michael Keresman, CardinalCommerce (cont.) “Cardinal is uniquely positioned in the marketplace to provide authentication services, connections and transaction harmonization in a way no other provider can.” What’s the biggest problem facing (e-commerce) merchants today as it relates to their payments needs? Merchants face many challenges today. They have to balance sales with managing the acceptance cost of doing business. A large aspect of acceptance cost is the cost associated with fraud, which includes many factors such as chargebacks, fees, manual review, and missing out on “good” orders. All merchants will experience fraud. When they have their fraud systems “too tight,” they give up good orders. If their fraud systems are “too loose,” their fraud rate and the cost of fraud skyrocket. What is 3-D Secure 2.0? How will 2.0, the next generation of authentication, affect the market acceptance? As in most technologies, previous versions of 3DS and 3DS 2.0 will co-exist in the marketplace. To understand this complexity, there are approximately 30 protocols today with the current version of 3DS. 3DS 2.0 will have at least that many, and likely more. So a merchant or bank will have the complexity more than doubled. 3DS 2.0 is designed for smaller devices and a friendly consumer experience. There will be far more data attributes built within the data field in order to eliminate steps, reduce latency and be able to grade, risk-assess and rate transactions. For example, the data message will carry a scoring mechanism based on the device initiating the transaction, the goods or services bought, and the risk tolerance of the issuing bank. The prime purpose of 2.0 is to improve the consumer experience, especially for the smaller devices. In order to achieve that objective, the complexity and sophistication will need to be absorbed or managed by those organizations responsible for processing transactions. Where do you see the largest opportunity for Cardinal over the next few years? Cardinal is uniquely positioned in the marketplace to provide authentication services, connections and transaction harmonization in a way no other provider can. Cardinal has a vast number of connections through the entire financial transaction ecosystem. These connections can be leveraged by merchants, banks, payment brands and service providers, to help them achieve their respective strategic objectives … today. For example, our connections to merchants and banks are capable of creating a “closed loop” within an open loop system. Banks or organizations that both acquire and issue for a given transaction would be able to assess, grade, add loyalty and rate that transaction, in proprietary way. Similarly, a bank and merchant processor could create a “community closed loop” approach for a series of banks, credit unions, regions or the like. Ultimately, this direct approach of having the consumer and issuer connected in real-time provides the best safety, security and order assurance. Issuers will have a higher authorization rate, merchants will have more orders, there will be less fraud and the consumer gets to buy what they want through virtually any distribution channel with a fast, simple and easy-to-use process. 36
CEO Interviews Michael Keresman, CardinalCommerce (cont.) What are the biggest challenges facing Cardinal today? The payments ecosystem moves quickly. We have a challenge to get to the right decision makers at the right time. Often the decisions for which way an organization sets a priority for new technology is at the “C” suite level. Cardinal has the technology platforms, innovations and know-how to address the strategic trends and needs of the market, and we are probably best suited for strategic relationships to be able to leverage all that we can do to support that relationship. Thank you, Mike. 37
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