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Table of Contents

Lead Story

The legal blitz: Time to regroup


Industry Update

Payment trends for 2009

Rainy day ISOs

Panini gives back

Red Flag mayday

Goliath beaten with gavel


Q&A with the ETA


Be a payment security architect

Scott Henry

Give ACH a chance

Biff Matthews
Cardware International


Street SmartsSM:
A closer you'll become

Jason Felts
Advanced Merchant Services

Avoid those third-party blues

Ken Musante
Humboldt Merchant Services

Spot-on PCI programs

Tim Cranny
Panoptic Security Inc.


Jeff Fortney
Clearent LLC

Ten keys to superior employee selection

Curt Hensley
CSH Consulting

Get rewarded with loyalty

Christian Murray
Global eTelecom Inc.

Company Profile

Vision Payment Solutions LLC

New Products

Simply dynamic POS software

Company: 1stTransaction Corp.

No-cost processing for government agencies

Federal Payments
ACH Direct Inc.


United we stand



Resource Guide


A Bigger Thing

The Green Sheet Online Edition

November 10, 2008  •  Issue 08:11:01

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Avoid those third-party blues

By Ken Musante

A major processor was taken offline recently because of the actions of a contracted security guard. In a second incident, merchants were unable to receive authorizations due to problems caused by a processor's telecom provider.

And third, Humboldt Merchant Services' former parent banking organization was taken over by the Federal Deposit Insurance Corp., and HMS is now being acquired by Moneris US. While our situation has not impacted our sales partners and merchants, HMS staff have been adjusting to accommodate this change.

Three cautionary cases

These cases are similar because, in all three examples, there was negative impact caused by a third party. A contracted security guard kicked the plug from the wall, shutting down the processor's ability to serve its clients. I would estimate the number of merchants impacted was over 1 million.

It's incredible to think that one contracted individual could shut down a major processor, adversely affecting a huge number of merchants, the processor's clients, cardholders and the processor itself.

In the second example, a long distance provider temporarily failed, interrupting a processor's ability to provide authorizations to its merchants. This occurred during the peak Friday night dinner hour for East Coast merchants.

The slight increase in monthly or transactional fees for having a ready and available backup would seem an incredible bargain to an upscale merchant who is unable to process transactions during a Friday evening dinner hour.

From the HMS example, I can relate that having a backup sponsor readily available would have lessened the impact on our staff when our parent banking organization was taken over.

No weak links

Regardless of how well-run any organization is, we are only as strong as our partners and vendors. We can spend all the time and money we wish to board and sell new merchants, yet if our service vendor is performing poorly, those merchants will move to another provider.

We can partner with the least expensive processor available, but if that processor does not have backup or has an inordinate amount of outages, what good is the savings? Even when we have a rock-solid partner, if that partner is providing a critical service, it's best to develop a backup provider. It's impossible to thoroughly inspect and audit all of your existing partners or vendors, but there are easy checks to use going forward.

Seven questions

Following are time-tested inquiries to aid in assessing potential partners. These should augment financial, legal and association compliance reviews:

  1. Has the representative marketing the company's services been with the organization for two or more years? An inadequate provider will not be able to retain reps for a significant time. If the rep is new, how long was the rep's predecessor in the position?

  2. Does the provider have ready referrals that are gushingly positive? Any provider can come up with referrals. If they are less than glowing, suspect something.

  3. Does the provider share your firm's core values? Whether they be lowest cost, personal service, most offerings, most educational opportunities or highest security, the provider's values must match yours or you will not be satisfied long-term.

  4. Does your business matter to the provider? If your business is too small to count from the provider's standpoint, you likely will not receive the services you need.

  5. Is the provider profitable and large enough to weather a downturn? If not, the provider may not be able to serve you over the long haul.

  6. Is the company's shareholder or principal actively involved in the business? If not, how effectively is the company's mission being carried out, and by whom?

  7. How well is the internal communication with the provider's staff? Problems in this area are likely to negatively affect your customers.

Finally, talk to your network and listen to your gut. The above questions will likely reinforce the decision that you have already reached. Following these steps - while also ensuring you have a backup for critical services - will protect the value of your hard-earned investment.

Ken Musante is President of Humboldt Merchant Services. Contact him by e-mail at or by phone at 707-269-3200.

Notice to readers: These are archived articles. Contact names or information may be out of date. We regret any inconvenience.

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