By Ken Musante
Eureka Payments LLC
Kevin Smith became Chief Executive Officer of LiteBox Merchant Services in November 2011. A division of LiteBox Group, LiteBox Merchant Services develops software and solutions to help nonprofit businesses increase donor contributions through marketing and donor information management.
A. I got started in the payments industry from an advertisement in my local newspaper. The ad was for data entry for Bancard Systems, an ISO owned by Steve Dunn and Mike McCormack. I did this so I could continue my computer science degree at National University in Orange County at night while I worked during the day.
I worked for Bancard Systems for eight years until they were acquired by PMT in 1998. At that time, I was the Operations Director. I resigned in order to accept a position with Concord EFS, in the Buypass division. The job was a client relations type job, and I was instrumental in starting and building their ISO channel. ... At the time of my departure, I was Senior Vice President of the ISO channel. I was also the General Manager for Concord Payment Systems, which comprised the underwriting, risk, customer service and operations divisions for the ISO business.
We built the ISO business from scratch and added to it operationally with the acquisition of Larry Stone's business, Card Payment Systems. This was a very fast-moving, innovative business and is the type of project I enjoy and thrive in.
Q. What is the goal of LiteBox Merchant Services?
A. Our goal is to increase the likelihood of repetitive donations with outbound, proactive marketing strategies formulized with customized donor-specific data. LiteBox Merchant Services is being built to provide merchant services to those entities serviced by LiteBox Group. Current LiteBox customers include the U.S. Chamber of Commerce, National Republican Senatorial Campaign Committee, Magic Johnson Foundation and the Latino Coalition.
The reason I accepted this job is that I am very challenged by the opportunity to build organizations from the ground up, and this also afforded the opportunity to work again with Steve Dunn, whom I hold in high regard. This is a great opportunity because LiteBox Group is not currently providing payments to their clients, and the nonprofit sector remains wide open.
Q. What's it like to lead a public company as opposed to a private company?
A. In May of 2004, when I arrived at Pipeline Data, it was a fantastic time to work for a public company because we had ample access to capital, allowing us to grow exponentially through acquisitions. The flip side is our numbers were heavily scrutinized (and publicly available) because we were required to publish our results quarterly.
When you are public, your performance is questioned by investors every quarter. Once we started our prolific growth, we were expected (by investors) to maintain it. In 2008, when the economy slowed, we were unable to maintain our growth through acquisition due to the restriction of available capital resulting from the economic downturn. This forced a transition to an organic growth strategy, which was facilitated by an investment and acquisition in February of 2009 by the Comvest Group.
This was effectively a complete recapitalization of the company. I was asked to stay on as Chief Operating Officer. Eight months later we acquired Cynergy Data out of bankruptcy. At that time I was tasked with integration of Cynergy Data and Pipeline and handled both the Chief Operating Officer and Executive Vice President of Sales positions throughout the integration.
When the integration was complete in March of 2010, I surrendered the operations role so I could concentrate on building sales. I continued there until the second quarter of 2011. During that time frame we grew sales over 160 percent and reinstalled the Cynergy brand as a leader in the ISO community.
Q. How is your company owned today?
A. LiteBox Merchant Services is a private company owned by six individuals. Although the headquarters for our parent organization is in Los Angeles, LiteBox Merchant Services will build our operations center in Alpharetta, Ga., as costs are lower and we have access to talent within the acquiring space.
Q. What is the most difficult aspect or threat to your business and our industry?
A. LiteBox works with some major nonprofit organizations, and it is critical to me that implementing payment processing for these businesses is seamless, flawless and above expectation. We have to marry the right processor with the right bank and the right underwriting criteria. I believe the relationship between the acquirer and the ISO is the single most important relationship in our business. The acquiring organization can make or break any ISO.
The biggest threat to the industry is the increased interference of the federal government and increased regulations. I feel we are just now seeing the tip of the iceberg. We have seen governmental meddling without an understanding of our business, and that is having severe ramifications. It's not that regulation is always bad, but it is not being thought out correctly.
Q. What is your company's greatest competitive advantage and why?
A. LiteBox Merchant Services' greatest advantage is our technology within the nonprofit space, along with customized statements, billing, convenience fees and integration that will allow us to differentiate from competitors. We want to leverage our large clients and build our own processing platform over time for specific and large niche markets within the nonprofit space.
Q. What is your biggest failure and what did you learn from it?
A. My first risk loss was not my biggest failure but it was the most memorable. I lost $1,500 at Bancard Systems from a merchant who processed decreasing authorizations until they obtained an authorization that was approved. From that I learned the extent individuals would go to manipulate systems in order to defraud us. I've carried that lesson with me ever since.
Q. How will the Durbin Amendment impact your company and our industry?
A. It is still too early to tell. We are still learning ramifications and are implementing based on what we are looking at. The impact on operations and costs is still being estimated, so folks are still now processing data. It will change sales strategies for the good and bad. There will always be folks over-representing the benefits, but it will allow people other ways to represent their product.
I first met Kevin while he was at Pipeline Data Inc., before the recapitalization. I was fascinated to learn the details and journey his career has taken. I admire how he made his positions more than they were initially and how he climbed the ranks within the industry.
I especially appreciated his perspective on the differences between working for a publicly owned and privately owned company, as well his view on the threats to our industry.
Ken Musante is President of Eureka Payments LLC. Contact him by phone at 707-476-0573 or by email at kenm@eurekapayments.com. For more information, visit www.eurekapayments.com.
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