The Green Sheet Online Edition
January 08, 2018 • Issue 18:01:01
Delivering more than payments amid disaster
2017 was a record year for natural disasters. Through chaos and hardship, ISOs, service providers and merchant level salespeople (MLSs) extended aid to numerous merchants in harm's way. The NOAA National Centers for Environmental Information (NCEI) recorded 15 extreme weather and climate events as of Oct. 6, including one drought, one freezing event, two floods, seven severe storms, three tropical cyclones and one wildfire. Previous studies by the government agency indicated the United States has weathered 218 disasters since 1980, at a cost of more than $1.2 trillion. The cost of hurricanes Harvey, Irma and Maria, as well as several firestorms that occurred after Oct. 6, are still being assessed.
Scott Teel, Senior Director of Communications at Agility Recovery Solutions Inc., observed it's not easy to get statistics from regional business failures while entities responsible for commercial studies are preoccupied with rescue efforts. "When you're involved in the greatest disaster of your life, it really doesn't matter what the overall statistics tell you," he said. "The biggest thing we hear from the hundreds of companies we work with, is 'I never thought it would happen.'"
Teel has seen disasters bring out the best in people, reminding everyone of what matters most. When lives, homes and communities are threatened, people take risks to help others. The quest for survival can spawn innovation and creativity, as people look for new ways to use old tools. Following are stories and recommendations from payments industry leaders, private companies and business recovery specialists who have helped rescue merchants from worst-case scenarios.
Businesses, lives interrupted
Ferhan Patel, co-founder and Chief Product Officer at Payment Rails Inc., said people take services for granted until they're not there. "In times of disaster, normal conveniences we are accustomed to generally go out the window," he said. "Going to a bank can become an ordeal or take time one does not have. Getting a check in the mail can take too long, and you may not even be present at that location during that time. Payments need to flow naturally and, most importantly, in a way convenient for the recipients."
Teel concurred, saying people need to return to work, get their children to school, and buy gas and groceries. When employees have trouble getting to the office, nine out of 10 will not be paid for the time they missed. This puts them in a compromised position, he said, adding they may have to change jobs, relocate or move in with family, which can have a domino effect on communities.
Contrary to popular belief, 40 percent of disasters have nothing to do with weather, Teel noted. He has helped large and small companies restore services following traffic accidents, burst pipes, power failures and other business disruptions. Whether weather-related or man-made, disasters cause private business failures and hurt U.S. taxpayers, he said.
Cory Capoccia, President at Womply Inc., a software-as-a-service provider, said disasters come in all forms and sizes. "In the physical world, there are weather events, burglary and theft; in the digital world, negative online reviews can be business-ending blows," he stated. "On a relative scale, one in 10 merchants will be burglarized; one in 20 will experience a fire or water event and one in two will fall prey to cybercrime. Merchants have to decide where to spend their resources to prevent business-ending blows."
In a survey of 2,261 small business owners in 50 states, Womply found most respondents returned to normal levels one week after a hurricane. Capoccia attributed the fast recovery to resilience, strong vendor relationships, business-continuity planning and cash reserves. "Most small and midsize merchants aren't sitting on a war chest of cash, but they need cash reserves for business interruptions or periods of unemployment," he said. "One in five merchants surveyed said they would survive a month without revenue; three in four said they would last six months. Millions of small businesses are one disaster away from shutting down forever."
Acquirers' revenue depends on merchants continuing to transact, Capoccia noted. Keeping them viable reduces churn and the likelihood of their going out of business, and ISOs and MLSs need to assess where they can add value, how they can help merchants prevent risk and consider what tools they can use to stop threats before they come into play, he added. He further suggested the most effective continuity plans encompass available resources, technologies and each merchant's unique requirements.
"The digital side can help you rebound quickly," Capoccia said. "Merchants with an ecommerce presence and digital storefront are less prone to physical threats. Having a digital footprint enables them to communicate with customers when they are shut down. It's a connective tissue they can use to update hours, post announcements, interact and build community."
Mobile office space and temporary relocation services can likewise help brick-and-mortar merchants, Teel said. Requirements are assessed at times of interruption to determine the best approach. Merchants, employees and customers may utilize site location and transportation services or less formal arrangements. "Shared branching," popular with banks, is a way for companies to share infrastructure with adjacent business owners, competitors and colleagues.
Distributed service models
The decentralized architecture of mobile and blockchain technologies makes them ideally suited for remote regions that lack traditional infrastructure. Experts expect further advancements in the Internet of Things will enhance disaster relief as individual devices become more intelligent and autonomous.
David A. Cohen, founder and CEO of Dcntral.ai and an adviser at Hashgraph, said the machine economy will facilitate faster recovery times with new, intelligent, decentralized electrical grids based on blockchain architecture. Cohen created GridAgents in 2003, a solution that enables the grid to fix itself, using independent software agents. Breaking the grid into smaller pieces makes it more resilient, he noted. He described his new project at Dcentral.ai as GridAgents 3.0.
Recalling a power failure in 2003 that knocked out power in the Northeastern United States for 12 hours, Cohen said decentralized architecture would have enabled hospitals to separate from a disabled power grid and run themselves. "Blockchain is the secret sauce that makes different nodes trust each other on the Internet," he said. "A distributed system has no left or right or green or red. This may threaten centralized power authorities but when they realize what blockchain enables, in supply chain, renewable energy systems and cybersecurity, and the economic benefits, they will implement it."
Ben Goretsky, CEO at gateway provider USAePay, recognized early on that payments is a technology business and made developing superior technology for USAePay gateway customers a priority. His company provides free and loaner mobile solutions during emergencies.
"Merchants who rely on phone lines and plug-in electricity for POS systems can use a communal laptop or log in remotely to a browser via cell phone or connected device," he said. "Instead of relying on a piece of software on a local device, they can securely access our gateway from any browser or Internet provider. We may provide satellite phones in some extreme cases. As long as they have some form of mobility, merchants can process and review transactions and close their batches."
Helping merchants open their doors and serve customers following a disaster is a crucial first step toward recovery, said Frank Bisignano, Chairman and CEO at First Data Corp., in a Sept. 2, 2017, statement. First Data provided a toll-free hotline, resources and free Clover Go mobile readers to business owners affected by Hurricane Harvey.
The company set up a temporary service center at a Houston area JW Marriott, where new merchants could receive free installation and discounted devices. "Whether a business needs to replace a payment device damaged in the storm, or set up shop in a temporary location with a mobile payment reader, we hope that our efforts can help impacted businesses get up and running quickly," Bisignano stated.
Steven Feldshuh, President, Merchants' Choice Payment Solutions East recalled that when Hurricane Sandy hit the tri-state area, entire neighborhoods were washed away. "Many businesses in New York regained electricity within a week or two, but most went without Internet services for months," he said. "This required us to install wireless terminals, particularly in the financial district in lower Manhattan."
Feldshuh's agents installed wireless terminals and offered extended terms to merchants who were short on cash. In some cases, the processor delayed billing for POS devices for up to a year as merchants recovered. "We also replaced dozens of landline terminals that got fried or soaked," he added. "Delayed billing and free terminals helped our merchants stay up and running."
Low-cost working capital
When a hurricane ravaged West Virginia, a Thai restaurant owner immediately notified Excel Capital Management Inc., her merchant cash advance provider. The long-term Excel client had just moved to a larger location. "I have good news and bad news," she told Chad Otar, Excel founder and CEO. "I got flooded and I need to rebuild 60 percent of my restaurant. I'll need new floors, new restaurant equipment and a new POS system."
She suggested paying $100 a day with a credit card until she got back on her feet, but Otar told her he didn't want her to do that. He extended her terms and gave her a free POS system. "She was open and didn't hide and worked with us as she made all the repairs," he said. "She used FaceTime to show me the daily progress and rebuilding. If I didn't pick up, she'd text me pictures." Small and midsize business owners that carry business continuity insurance can file a claim for disaster assistance, Capoccia noted. "Business insurance is intended as a fallback option, but not every upfront investment will protect a merchant or bridge the gap by producing revenue so they can survive."
Teel said business continuity insurance, such as added expense coverage, replaces revenue but is typically limited to financial assistance. "The insurance company will write a check, but experienced recovery specialists can get a business up and running in hours versus days," he noted. "Business owners may also be eligible for low-interest disaster loans offered by the Small Business Administration. The SBA noticed a higher-than-average default rate on these loans and is working directly with recovery specialists to ensure borrowers use funds efficiently."
Finding new ways to use old tools is a common theme among disaster survivors, who are forced to "make do" with items at hand. Merchants typically don't think about POS technology until something breaks, but in some cases, the POS is one of the few things left standing after a catastrophic event. A battery-powered mobile device may be the only light in a room. A social media platform or call tracking service may be the only available avenue for communication.
Capoccia has seen some of Womply's merchants repurpose their online reviews during extreme conditions. "These merchants had formerly used online reviews as a marketing tool to get more customers and generate revenue," he said. "But when the power went out, they rapidly transformed [review sites] into public message boards, leveraging available tools to survive these situations." Merchants used the online review space to update their hours, connect customers with friends and families, and interact with their communities.
Chris Harper is Vice President of Communications at The Arbor Co., a senior living company that operates 32 communities in 10 states. The company uses CallRail, a call service and advanced analytics platform. "CallRail gives us a feel for incoming traffic and knowledge of where calls originate," he said. "Beyond that, we use robo calling and call recording services, with the usual disclaimer that a call may be recorded for training purposes."
When Hurricane Harvey hit an Arbor community in a Houston suburb, local authorities and FEMA routed residents and staff in different directions. Harper needed to stay connected with residents and their families. Using a robo-call service, he sent a prerecorded message to everyone on the company's call list. He also set up a hotline on CallRail to keep staff and residents informed.
"On the day of evacuation, we updated our message hourly, and when Hurricane Irma hit our communities in Florida, it was 'rinse and repeat,'" Harper said. "We proactively set up a hurricane hotline for each community and published information for families. We had four communities evacuated at different times in Jacksonville and Southern Florida." Madelyn Newman, Product Marketing Manager at CallRail, said, "What's interesting about Chris's example is that CallRail doesn't replace existing phone service but sits on top of it, which makes it so valuable in situations like this."
Taking care of our own
Petaluma, Calif.-based CrossCheck Inc. employees participated in Hurricane Harvey relief efforts in September 2017. The following month, when the Tubbs Fire devastated Sonoma County, their company came to their aid with a crowdfunding campaign for staffers who lost their homes. It also paid time off for those who missed work. "Our staff is always quick to help others in need as they contribute to victims of natural disasters and causes such as the American Cancer Society or Salvation Army Angel Tree Program," said J. David Siembieda, CrossCheck President and CEO. "This time, the support will stay in house. All funding will be distributed directly to our affected employees."
Andie Kolb, Senior Vice President for Business Development at QubeChain LLC, lives near Baton Rouge, La., and was working for First Data Corp. in 2005, when Hurricane Katrina knocked out every cell tower and bank in her area. She said First Data absorbed many hurricane-related costs and worked around the clock to restore services to businesses, such as gas stations and building supply companies, that served on the front lines of the relief effort. "Everyone came together to do the right thing," she said. "It was about helping businesses reopen, and payments are a big part of that."
Kolb acknowledged hurricanes are part of life in Louisiana. In 2016, her small community received 33 inches of rain in 30 hours. "It just sat on top of us and never moved," Kolb said. "Ninety percent of the homes and businesses in our parish were flooded. We had to be rescued by boat."
One night she went to sleep in a comfortable home, and the next day she had only her children, dogs, rain boots and computer, Kolb recalled. "When you're in a disaster, you don't know what you need because you can't see past that hour or day," she said. "You may need blowers, dehumidifiers, mops and brooms, but when people ask, you don't always know what to say." After sheltering at a church that later became flooded, Kolb spent several days at a friend's house with 15 others, building a pump out of PVC pipe to keep the water out. "It's amazing what you can do with a little help from friends," she added.
Without Internet or cellular service, Kolb had no idea her payments industry friends were helping until Dee Karawadra's motorhome showed up at her house. Then her children saw a link to a crowdfunding campaign that raised enough money to rebuild her home. Kolb said Karawadra, President and CEO at Impact PaySystem LLC, and former payments industry executive Stephanie Wooten, who is now President of Script Central Pharmacy Group's Specialty Division, mobilized people from around the country.
"They figured out what I needed, shipped me supplies and even reserved a rental car for me at the airport," Kolb recalled. "This experience taught me I'm stronger than I knew, and my friends are bigger than I imagined. The people in this industry are my family. They stepped up and did what had to be done without even asking."
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