From ISO to full-fledged acquirer

Payroc LLC, which began as a traditional ISO, is transforming to function as a full-service acquirer, according to Payroc Chief Executive Officer James Oberman. To achieve that goal, the company has acquired its own gateway, developed proprietary mobile payment capability, mastered the intricacies of integrated-payment technology and established itself as a payment facilitator, or payfac, he said.

"We view the payfac business model as similar to a full-service acquiring model," Oberman noted. Payment facilitators aggregate sub-merchants under one or just a few merchant identification numbers and assume the risk for client malfeasance. Sub-merchants have a relationship with the payfac only, as opposed to relationships with the ISO, processor, bank and gateway. Payment facilitation is becoming more widespread because it promotes integrating payments with other business functions, such as scheduling and inventory control.

The payfac model is working well for Payroc partly because key executives at the company are experienced at managing risk, Oberman said. He served as Chief Risk Officer for Vantiv Inc. and helped that company start its payfac program. Before that, he handled risk for National Processing Co. Payroc's Chief Operating Officer oversaw risk underwriting for NPC for more than a decade. The General Manager of Payroc's payfac division ran transaction risk monitoring for both Vantiv and NPC.

Relationships with ISVs

Payroc recently introduced a new application programming interface designed to link easily with the systems of independent software vendors (ISVs) that have developed broad-based services for specialized customers, such as property managers or churches. "We're able to go to ISVs and say, 'Look, let us worry about payments for you," Oberman said.

That type of technology provides a path to the future, but it's meaningless without the backing of a great sales organization to promote it, Oberman emphasized. "We want to give businesses the best of both worlds," he said. That means continuing to operate as a traditional sales-oriented ISO that nurtures relationships while also embracing the new technology that's making payments a feature instead of a product, he added. The market for the latter is becoming increasingly important because ISVs are discovering they need help with payments since they don't know how to underwrite risk, move funds, make settlements or handle billing, Oberman noted. "So Payroc is presenting itself to that community as a partner," he said.

Standards for sales

Payroc doesn't refer to its independent salespeople as agents or merchant level salespeople, Oberman noted. Instead, the company calls them payment professionals and requires that they earn the Certified Payments Professional certification offered by the Electronic Transactions Association. The company urges salespeople to reinvent themselves as consultants with proficiency in interchange and technical matters.

It's a new approach for a well-established firm. Payroc traces its roots to two companies: The iTransact Group LLC, which began more than 20 years ago as a gateway, later added ISO functions and still operates from headquarters in Farmington, Utah. And Retriever of Chicago, which was formed about 14 years ago in Tinley Park, Ill., as one of the Retriever Merchant Solutions brands by Oberman's sons, Nicholas and Adam, and his nephew Ryan Hallett.

Two years ago, Oberman joined his relatives at Retriever of Chicago, and a year ago they acquired iTransact, which still uses that brand name. Retriever of Chicago's name was changed to Payroc, which incorporates its original initials and suggests the Rock of Gibraltar.

Accounting firms and other sources refer clients to Payroc for payment services, and it now processes more than $4 billion in transactions annually for 10,000 merchants and 6,000 sub-merchants, Oberman said. It has 12 inside salespeople and 50 active outside salespeople, while six developers write code for the company's system.

Payroc's website lists the company's five core values: pricing clarity, exceptional service, trusted advice, personal relationships and integrity. Oberman described Payroc as being based on family and faith. "That's who we are and what we believe," he said. "It transcends everything."

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