Drawing new boundaries for processing, payouts

With strongholds in six of seven continents (absent only from Antarctica), M2 Global Ltd. has a broad geographical presence and wide-ranging influence. It is also positioned as a go-to source for assistance among merchants and ISOs who are looking to expand beyond their countries of origin.

"We have cardholders in 130 countries around the world, and we have significant global reach for a merchant as well - particularly a merchant who wants to grow his or her business internationally," said Craig Taylor, Chief Marketing Officer, M2 Global. "We're ideally suited to be able to service and support that merchant, and we've got experience, capability and relationships around the globe."

M2 Global's Merchant Services division falls under M2 Financial, one of three subsidiaries that make up M2 Global (the other two are M2 Systems and M2 Labs). M2 Financial has offices in Antigua (West Indies), Costa Rica and Florida; it is the processing arm of M2 Global.

A different option for processing

In particular, M2 Financial specializes in offshore payment processing, a service for merchants whose businesses are, for one reason or another, ill-suited to the American banking system.

"The key items are high-volume merchant accounts that are not sitting comfortably within the U.S.," Taylor said. "That is typically who we work with. ... What we want to do is enable merchants to go offshore as far as setting up their processing accounts, meaning outside the United States."

Taylor has found that merchants move offshore for a number of reasons, among which are more lenient banking regulations, the ability to process more accounts and higher chargeback thresholds.

"The risk level we're prepared to take is higher," Taylor said. "We'll take a merchant that has a slightly higher risk level than most U.S.-based banks. So if somebody has more chargebacks than the allowable for a more conservative domestic bank or they're maybe considered a slightly higher risk business, like a travel or medical or pharmaceutical client, some of those clients would prefer to process offshore."

However, Rosalind Clark, Project Manager for M2, stressed that approval to process overseas is far from automatic. "They do have a process they go through, so we're very diligent as far as reviewing their application thoroughly," she said.

Taylor added that the reasons "larger" companies tend to move offshore more than smaller ones relate to the cost of relocating and the fact that offshore banks generally won't work with clients who have low transaction volumes.

"Frankly, small merchants, if they're not transacting at least $100,000 a month, it's just not worth our time as a major processor to work with them," he said.

The company's processing center is located on the island of Antigua, which is where U.S. merchants who "don't sit comfortably" in the United States move their processing when they commission the services of M2 Financial.

"What we do is we have the merchant actually incorporate in the jurisdiction of the sponsoring bank," Clark said. "So for instance, although they may be located in California, they will still need to open a corporation over in Antigua." She added that such a corporation can be a "virtual corporation" and that establishing a physical presence on the island isn't necessary.

Taylor said those clients are predominantly multilevel-marketing firms (companies whose clients, in turn, become vendors), and that they generally deal in one of a handful of trades - among them, telemarketing, magazine sales, customer service centers and the import/export business. He said such businesses are particularly difficult to run under the U.S. banking system.

"[Many] have been asked by their domestic banks to basically move their processing away," Taylor said.

Other opportunities

In addition, relocating sometimes will alert a merchant to other global opportunities, Taylor pointed out, adding that M2 Global offers a number of programs to help businesses expand or otherwise facilitate their global platforms.

Among those offerings is Globe Wallet, a prepaid global "payout card" intended primarily for use by companies whose employees are spread across the world. The card is similar to a payroll card, but with some unique qualities. Like payroll cards, payout cards are devices for paying company employees without checks.

"With a payout card you can pay freelancers or agents or independent salespeople or pay commissions or payout rewards and bonuses and all kinds of things, whereas a payroll card gets a little more restrictive," Taylor said. The service works with both unbanked and banked employees, he added.

"Basically we are a technology provider - a processor - for a range of different banks that provide prepaid card products," said Sean Forward, Managing Director for M2's Merchant Services. "This could be Visa or MasterCard, and basically the banks use our system in order to process those transactions."

M2's Globe Wallet card also has some less common features not built in to the typical prepaid mechanism, Taylor said. One of those, of course, is that it is global, meaning employees from any number of countries or regions can use it, even if the company they work for is stationed somewhere far away.

"They can load those cards with the appropriate amount of commissions anywhere in the world," Taylor said. "And that money is instantly then transferred from their account on our system with our bank to anybody in South Africa or New Zealand or Japan, or wherever they happen to be working."

The card also operates in real time - meaning transferred money can be accessed instantaneously - and has a text messaging feature to alert the recipient of his or her latest money injection.

"A person's reloadable card has an extra 500 bucks on it as soon as you hit send," Taylor said. "And you can get an SMS [simple message service] message on your phone that says, 'Oh by the way, Craig just sent you $500, and your new balance is 957 bucks.'"

Different cards for differently sized payouts

Globe Wallet is one of two payout cards offered by M2. The other, iKobo, also works on a global platform but is intended for far fewer recipients. Whereas Taylor said Globe Wallet has been used to send remittances to as many as "literally, 10,000 to 100,000 employees," iKobo has traditionally been "more of a one-on-one product" used, for example, by parents sending money to their sons or daughters overseas.

"Let's say I'm sending my mum some money in the U.K.," Forward said. "I would go onto [the iKobo Web site], fill out the form, and iKobo sends the card to my mum and then loads the card. She can then go to the ATM and pull money out or spend the money wherever Visa's accepted."

In July 2009, M2 Global announced an expansion of the iKobo card program to include business-to-employee transfers for small to medium-sized businesses with global workforces.

Meanwhile, big businesses continue to use Globe Wallet. Taylor said that between the two cards, "we're now the largest card-based global remittance product" - with recipients in over 130 countries.

Both the Globe Wallet and iKobo cards can be downloaded onto Web-enabled cell phones or used as conventional payment cards.

Taylor said money transfers to either Globe Wallet or iKobo (which is derived from the Kobo, a traditional West African coin) can be done with a cell phone; with Globe Wallet transfers can be made, via phone, from one of the prepaid cards to another.

'BIN scrubbing' to prevent fraud

While M2 Global is in most respects helping to facilitate globalization, the company is also taking judicious measures to curb its spread in certain places.

Most notable is a program that Forward called "BIN scrubbing," which can flag or block payments coming in from specified regions or countries of the world - particularly places where fraud is rampant, like Nigeria.

According to Taylor, the scrubbing program can trace the origin of a credit card payment one of two ways: through the Internet Protocol (IP) address of the computer on which it's used or through the card's BIN number, which corresponds to the bank from which it was issued.

Taylor said transactions can either be flagged or blocked outright, depending on the merchant's preference. When transactions are flagged, M2 will often cross-check the card information with separate databases in search of red flags, like a criminal record linked to the cardholder.

The databases that are scanned can include things like the FBI's criminal database and the United States Terror Watch List, he added.

Taylor said it is fitting that M2 is making good use of mapping and geography-related technology, like the geographic filters, because "geo-location technology" is one of the company's hallmarks.

"The geo-location technology on the Internet you use to find the local pizza shop, and which is pretty ubiquitous, we actually own the patent to that technology," Taylor said. "For example, the online Yellow Pages - we own the patent to the back-end of that stuff."

Taylor added that the company plans to use that same geo-location technology as a way to filter credit card payments.

"We're working on, and will be rolling out shortly, technology that enables you to pinpoint where a card can be used, and can't be used, by either geography or location," Taylor said.

"So I've got a daughter that's going off to college in the fall, and I can set her card not to be able to be used in the liquor store, for example, based on IP address. Or I can say the card is only good in this ZIP code."

M2 global was founded over 22 years ago. Taylor noted that among the company's major clients are Blue Cross BlueShield, for whom M2 accepts and processes medical claims; Alliance Data Systems Inc., Citibank N.A., Delta Airlines Inc. and Tesco PLC (the "Wal-Mart of Europe").

The future - dynamic data

Taylor also mentioned one more project in the works - and which he called another very significant piece of M2's future.

The project, called SAFE (Secure Access for E-commerce), aims to provide an extra layer of protection for online purchases.

It involves making a credit card's cardholder verification value (CVV) number - the three digit number on the back of the card required by online and phone transactions - a "dynamic number, where you can change it for every single transaction."

The service will require consumers to send out a text message to the M2 server to get a new CVV number, which will show up in the reply. After each transaction, the existing CVV number is voided, and another text exchange is needed to obtain another number.

"If anybody steals your card [data], it's worthless," Taylor said. The product seems to tie into a general theme of the M2 mission: mobility.

"Where we see the future is helping not only online but mobile technology, so our approach is to move everything we can into a mobile environment," Taylor said. "In effect it would become bank beyond bank. ... People may not need a bank in the future; they might just need an account somewhere and a phone to move things around."

Mirroring M2's other products and the migration of the company itself, SAFE changes the payment game by redefining its parameters. One way to see it is that the numbers become programmed to transcend the physical enclosure of a credit card, within which the data traditionally remains confined - and static.

M2's plan, conversely, is to remove data from within the card and insert new data from outside it, an approach that oversteps long-standing borders.

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