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  1. #1
    Join Date
    Mar 2001
    Location
    Spain
    Posts
    56

    Question building a 3rd party processor company

    Hi,

    I'm curious about what is needed to create a 3rd party processor company like 2checkout or paysystems, in the States or Europe, what is involved? How much could be the investing?

    There are "wholesale" processors companies to stablish partnerships?

    Regards,
    Jose

  2. #2
    Join Date
    Jul 2003
    Location
    Castle Pines, CO
    Posts
    7,189
    You would need bank to sponsor you. We put somewhere about $500,000 to $1 milllion into that development of a third party processor. It was mainly for the healthcare industry. Visa/Mastercard frown heavily on third party processors. You need great credit, great financial backing. Being a third party processor is not all what it is cracked up to be.

  3. #3
    Join Date
    Apr 2004
    Location
    Moscow & Amsterdam
    Posts
    26
    3rd Party simply does not worth it.
    The thing itself is almost over.

  4. #4
    3rd Party is alive and well and will continue to grow.

    There any many new rules and regulations the processors have to abide by but true merchant accounts are not a viable option for many ecommerce businesses.

    So "TheScar" whats your company all about then? Are you a PAGO reseller? I Also see on the site the IMA wording (I always though paysystems hijacked that term ).

    Just being curious as everyone here is always looking out for new options.

    Thanks

    G

  5. #5
    Join Date
    Apr 2004
    Location
    Moscow & Amsterdam
    Posts
    26
    Er...last time I said "we do" on somebody's else question if we support "that and that" in one other thread I immediately got notice on email on "self promotion".

    I'd be happy to put everything we do here but something tells me it's gonna be my last post.


    As for Your questions:

    1. As far as I know IMA was a term invented by IBill. In fact I think by their VP of Sales Cathy Josey. Although she might have taken it from somewhere else. Ask her: [email protected] I have no idea.
    She used to work for us a bit after Ibill and still does some consulting for us.

    2. PAGO was our first acquiring solution in EU. We now have 6 solutions I think as total and working on more all in offshore or EU jurisdictions. A few working with us only or people You definetely dont know.

    Good question is why so many, answer is that when You combine several processors capabilites in the end merchant can do cool things , like simultaneous processing of SWITCH,SOLO and at the same time legitimate processing of Cirrus-Maestro and VISA Electron (Yes You can if You really want ). Of course with standart cards along as well.

    Another thing is industries and different advantages over different acquirers. I'd say that in this way, there are some things which are better placed in Germany (say a pharmacy site or a travel site) and some things (really low risk and good turnover) I'd better place in Latvia (better rates, holdbacks, much quicker payouts) or in Switzerland. Even better as I said in both places with a few Merchant IDs at the same time, to get all possible payment options and to have back up channels for major cards.

    3. I have no idea why true merchant accounts are not a viable option for many ecommerce businesses.

    Please explain.

    And mind You I dont want to put any shadow on any reputable company over there doing third party. In fact I think that when the time comes and it's gonna be completely forbidden MOST of those companies will simply migrate to real PSP mode with real accounts and arrange a safe transfer of their clientelle.

    The whole stuff with third party is not just against the rules - it's against common sense simply.

    What is rules? I really dont share this attitude of holier than though to be honest , I mean most of us break dozens of rules in our offline life daily and guess what no one gets hurt. It's all about common sense.

    But leaving the rules alone the banking system in the world relies on common sense in the world. When You put Your funds somewhere to keep them You entrust that company generally cause it has a word BANK in it as an addition to its name. Because a certain Government of a certain place has issued a license for that company to deal with third party money and getting that license is SO hard that loosing it will cost You anyways more than You will get by abusing it.

    However it is also the government which makes detailed laws in relation to what the bank can do and what it cant do and thus if anything goes wrong there are people You can complain to (Government) and people You can try to remove (reelect) if it turns out they have not included some important details in their banking laws.

    In case of third party biller its not clear who is responcible if the merchant does something wrong because in between the merchant and the party which has legal rights to keep his funds (Bank) and to know him with a detailed law about what to know about him (Banking Secrecy laws) there is a middle man.

    So if something goes wrong, whom do we get to blame?

    As far as I know with the exception of high risk business (and even there there are a lot of exceptions) there is no problem for any business to get a direct merchant ID. And the costs involved are quite low I think.

  6. #6
    Join Date
    Aug 2003
    Location
    Chesapeake, VA
    Posts
    3,379
    Trying to become a third party processor at this "stage in the game", so to speak, would be a very non-trivial task. As Corey and TheScar have made mention of - you'd have to have a LOT of capital in place and find a bank willing to underwrite you.

    You'd also have to have a very good rapport with Visa and MasterCard in most cases and some very good connections... and that's just a starting point.

    The list of operational requirements to -successfully- operate a 3PP could probably take up a document the size of a novel.
    CDGcommerce.com - Trusted Merchant Account Solutions since 1998
    Many thousands of successful, growing businesses benefit from our expertise every day. You can, too!
    We help merchants to eliminate gateway costs, reduce & mitigate fraud and achieve streamlined PCI compliance.
    Learn more today at http://www.cdgcommerce.com - we look forward to helping your business grow!

  7. #7
    Join Date
    Apr 2004
    Location
    Moscow & Amsterdam
    Posts
    26
    Well, I saw that list once, it basicly takes around 15 pages or so.
    I wasnt suppose to see it so I wont say where from.


    From our experience I can say capital doesnt matter much. Your credentials as well. It's just that VISA/MC rules forbid it , everyone understands why, and it seems quite reasonable, so why do it?

  8. #8
    Join Date
    Aug 2003
    Location
    Chesapeake, VA
    Posts
    3,379
    I think it is the allure of "easy profits" that attract businesses towards that business model. Unfortunately, it isn't as easy nor as profitable as one might think and it poses significant risks.
    CDGcommerce.com - Trusted Merchant Account Solutions since 1998
    Many thousands of successful, growing businesses benefit from our expertise every day. You can, too!
    We help merchants to eliminate gateway costs, reduce & mitigate fraud and achieve streamlined PCI compliance.
    Learn more today at http://www.cdgcommerce.com - we look forward to helping your business grow!

  9. #9
    Join Date
    Jul 2003
    Location
    Castle Pines, CO
    Posts
    7,189
    Yes. And the only way to reduce the risks is to cater to a certain clientelle. It is way too complicated to open up something like this to the "general public".

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