In Part 1 of this post I discussed some of the challenges program managers typically face when dealing with their processors. After going back and reading the post again, I think I may have been unfair to the hard working Third Party Processors out there. The purpose of the post was not to bash processors but to kick off a discussion on the options program managers have. At the end of the day, as the card business grows, a program manager is faced with a decision primarily revolving around natural progression. If the business executes well, it will outrun the processors ability to deliver acceptable results in terms of product development, delivery and support. The program manager worries about his business and a processor worries about 100 other businesses. What starts out as the ideal scenario on day 1 usually turns into a struggle to maintain momentum.
Does it make sense for every program manager to process their own transactions? Absolutely not. Implementing an issuing platform is a significant undertaking. The good news is no matter what anyone tells you, it is not overwhelmingly difficult. There is a clear and definite path to accomplish this and with the right team it could even be a breeze.
So lets get down to nut cracking. Once the decision to become a processor is made a few high level questions need to be answered.
- Will your current issuing bank support the initiative? I recently visited with one of the largest prepaid issuing banks in the country to assist a customer with bank coordination. It was clear the bank was not in support of the transition. Reason cited - "We've seen too many companies fail at this." Such a true statement. We've seen it too. What usually happens is the program manager will pick up a high priced platform and get locked up in implementation confusion. Part of getting your bank to buy in to the project is to build a strong case showing you not only have an executable plan, but a proven platform and an experienced team to back you.
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What issuing/authorization platform should you consider using? Think real hard on this one. It will to be the heart and soul of your business. Does the platform you're considering support the intricacies of prepaid issuance? Is it
PABP certified? (
My OLS colleague David Bergert has some great posts covering PABP on his blog) What type of support does the platform come with? Does the software vendor charge extra fees for Capacity Events? Can the platform run on commodity hardware? Be sure to consider
OLS.Switch in your review process. My OLS Colleague
Andy Orrock covers the
Buy vs. Build topic on his blog.
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Do you have the necessary in-house expertise to manage a payment switch? If you don't, hire someone our outsource this function to an experienced firm.
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Will you use a gateway processor to connect to the world or will you house the MIP/VAP in-house? I personally think having an endpoint in-house brings no extra value unless you plan to branch out and provide gateway processing services to other organizations . In fact, it will increase your fixed cost, compliance responsibilities and liability. Remember the word "liability" will make your issuing bank cringe. Contract with a gateway processor for a inbound authorizations at a few cents a transactions. You'll be glad you did.
- Will you perform a full BIN conversion or implement a soft transition strategy? I've been involved in two BIN conversion projects. I would wish this experience on no one. I don't think there is a processor out there that would make the conversion process a peaceful event for a program manager. After all, why would they make it easy for the competition? Notifying cardholders, printing new materials and the process of transferring account balances and pending authorizations is critical. If the ball is dropped you will lose cardholders. If the transition goes well, you'll lose less. Attrition due to change is unavoidable. In most cases, a soft transition is advisable. Simply stop issuing new cards on the old platform once you are ready to go live with your new system. Your portfolio will naturally transition over.
- What third party services will you need to integrate with?
- Gateway processor
- Card personalization and fulfillment
- OFAC/CIP
- IVR Systems
- Live Agent Support (if you choose to outsource)
- BiIlpay
- Money Transfer
- Other
Please keep in mind the questions listed above are from a 50,000 foot view. More questions will arise throughout each planning stage as you move towards implementation.
More questions and answers to follow in Part 2.1.
Peace.