Payments' perfect storm

The elements under which Brian Crozier and Joseph Iuso co-founded Toronto-based UseMyBank Services Inc., a firm that facilitates real-time debit transactions through online bank accounts, came together in the proverbial perfect storm. Iuso, a 20-year veteran of the self-service banking industry, was looking for a way to offer merchants, billers and consumers the ability to make online purchases without using credit cards.

"The Internet has traditionally been very credit card oriented, but what we found is that when online merchants offer the same payment options that are available at brick-and-mortar stores they increase their sales by 30 to 40 percent," Crozier said. "Can you imagine walking into a store where the merchant only accepted credit cards as payment?

"It wouldn't happen, but when you look at many major Web sites today they only offer credit card options for purchase.

"However, credit cards don't give consumers the ability to push that purchase through using their checking or savings account. And because UseMyBank can wrap that whole online banking experience into a three-click online bank payment for consumers without any sensitive customer data being shared or stored, we've developed a 99.999999 percent good funds rate.

"This not only eliminates chargebacks, but considerably reduces the exposure and risk usually associated with credit card and automated clearing house payments online," Crozier added.

Point of no return

Crozier was working for a company that specialized in processing online gambling payments when he met Iuso, an information technology specialist working in the Canadian and international banking sector. Iuso spent years developing proprietary payment and management products to enhance POS devices and ATMs; however, his dream was to leverage online banking for all payment types on an international basis.

Fate, it seemed, intervened to bring the two together. Both companies Iuso and Crozier worked for went out of business during the dot.com blowout of 2000.

"When I met Joseph, I'd already been in the payments industry at the Internet's onset, and the online gambling industry and the merchants who serviced those players were the forerunners of e-commerce," Crozier said.

"They had a huge hunger for online payments, but realized they had to offer more payment options."

Though unable to amass enough capital to start their new business - alternative online payment platforms were considered risky ventures - Crozier and Iuso were undaunted. Crozier wanted to leverage more payment methods under his own company's brand and not limit himself to reselling credit card processing.

When he heard about Iuso's idea of linking online banking payments to a merchant's Web site, he knew the technology would take online payments to the next level. UseMyBank was founded in December 2002.

The halo effect

"The companies that considered investing in our business model went down with all the other Monsters of the Midway, so Joseph and I broke off and decided, no matter what, that building UseMyBank was worth it," Crozier said. "So we went down that road of no return, mortgaged our lives and put everything into this company.

"Fortunately, we were able to gain some traction shortly after we launched the company and earn enough to sustain us and allow organic growth. Joseph built the technology component for everything we do, while my focus is building the business side and fostering relationships with processors." Crozier said that UseMyBank has been able to land some of the biggest companies in that vertical using what he calls the "halo effect" to push their payment option, which means that it operates under the "halo" of companies that have good reputations and trusted brand recognition.

"And our thinking was that if we could totally dominate one vertical, we could be successful in other markets using the same approach," he added.

"What UseMyBank has done is give our merchants a bridge so that their customers can buy things online using the same payment method they do to make a bill payment," Crozier said. "UseMyBank gives online bill payers an additional purchase function, the power to make real-time online bank payments and in another dimension outside of paying bills."

Eye of the hurricane

One element in the "perfect storm" that has enabled UseMyBank's success in online gambling payment processing was the discovery of the company's Global Merchant Sales Director, Melody Wigdahl.

Wigdahl was working in the Nevada hotel industry 20 years ago when she was introduced to the world of payment processing and online gambling. Crozier sought her out in 2003 when he caught word of her reputation as a leading expert in online payment processing.

"Melody had been developing a number of different payment platforms over the years and she had a lot of connections in that merchant space," Crozier said. "And she was able to go to the very top executives in the online gambling industry and offer them UseMyBank, which is a solution they desperately wanted and needed." For Wigdahl, it was simply a matter of matching UseMyBank's "extraordinary" technology with the right client.

"The merchant has specific needs and requirements, so what I do is get that backside [software] polished up and then take it out to business owners," Wigdahl said. "I've got credibility and a reputation within certain verticals which allows me to get new technology tested by a real live merchant and get it implemented with merchants that run a good, stable operation. This is critical because you don't want to put the processor at risk."

UseMyBank offers its service as a value-add through its ISO reseller channel in the United States and internationally. Additionally, the company's portfolio has grown as a direct result of the credit card crunch. Card issuers are tightening up, offering less credit, issuing fewer cards, and coming down on what they consider high-risk industries like online travel and gambling - all of which UseMyBank has used to its advantage.

"There's a lot of credit card fraud - as well as friendly fraud and chargebacks - in the travel and airline industries in particular," Wigdahl said. "They're really getting hit hard right now. Rates were being raised as fuel prices skyrocketed. Well, guess what? With a direct debit processor like UseMyBank, we have a near perfect good funds rate. And because of this, we're attracting a lot more businesses looking for non credit card-based payment solutions."

Fresh air world

UseMyBank's central focus moving forward is to expand its vertical markets and geographic reach; the company is in the process of adding several European, Asian and Australian online banks to its portfolio. It is also looking to expand its services into mobile payments by developing Web 2.0 widgets and other alternative payment platforms. "We're definitely expanding outside of the online gambling vertical, starting to show traction in the fresh air world of the airline and travel industries," Crozier said.

"These are industries that have matured to the very highest degree of online penetration. Outside the Internet, travel is infinitely more expensive, so now everyone in both those industries has rolled over there to buy their tickets and trips.

"All we're doing is joining all of the major online banks in the world into one network for our client base. So, as a merchant, when you sign on with UseMyBank, we're going to give you access to over 45 banks with over a billion people that can make an online bank payment to the merchant from anywhere on the planet. I think that's why we're friendlier to the merchants.

"We're here to make our product available to everyone without gouging clients on rates. And really, it should be all about options and ease of use when it comes to making an online payment, regardless of the method," Crozier added.

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