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Table of Contents

Lead Story

Will smart phones drive out plastic cards?

News

Industry Update

VeriFone expands mobile payment footprint

Is Cimbal's proximity payment network a game changer?

IDC's take on mobile payment schemes

Features

Eight payment companies listed on Inc. 500

Selling Prepaid

Prepaid in brief

Suit the gift card to the merchant

Thom Aldredge
World Gift Card

Views

Cash still standing its ground

Patti Murphy
The Takoma Group

Further fraud trends in 2010

Nicholas Cucci
Network Merchants Inc.

Education

Street SmartsSM:
Are mobile payments a threat to ISOs? - Part 1

Ken Musante
Eureka Payments LLC

The power of word of mouth

Nancy Drexler
Marketing Consultant

Who's your counterparty?

Barry Sloane
Newtek Business Services Inc.

Four things to know about security interests

Sarah Weston
Jaffe, Raitt, Heuer & Weiss PC

Command performance meetings

Dale S. Laszig
Castles Technology Co. Ltd.

Company Profile

Blackhawk Network

New Products

Easy inventory management

ePNInventory
eProcessing Network LLC

Inspiration

If you're in business, you need a plan

Departments

Forum

Resource Guide

Datebook

A Bigger Thing

The Green Sheet Online Edition

September 27, 2010  •  Issue 10:09:02

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Who's your counterparty?

By Barry Sloane

I have been in the workplace for more than 30 years and have been trained in three industries: consumer retail, financial services and electronic payment processing. All of my mentors have stressed counterparty risk.

Why is it that in the merchant processing world, few participants focus on counterparty risk until it's too late? It is great to submit deals, but if the counterparty you select cannot perform, the sales you have worked so hard to make will have disappearing residuals due to nonpayment by a weak or disingenuous counterparty.

Do you need your ISOs or processors to file for bankruptcy before you look at their financials? Do you need to have a fraud issue before you do an extensive background check on a potential business partner? Would you transmit all of your or your clients' sensitive information (birth dates, addresses, Social Security numbers, bank account information) via fax without knowing if the information was secure? If you are a merchant level salesperson (MLS), do you know if you are covered by your ISO for security breaches?

Do your due diligence

Often, merchants are giving out sensitive data without understanding where that information can and will be going. Their business cash flows may be running through entities they have zero financial information on.

MLSs depend on residuals from processors and ISOs, but they often cannot assess the likelihood of receipt; they just assume funds will show up in their accounts and that the long-term financial health of the processors and ISOs is destined to be positive.

Things to do to protect yourself and your customers:

Gathering this information will help you make informed decisions. Know your risks, and do business only with counterparties that are respectful of them. It's not just about price.

Barry Sloane is the President, Chairman and Chief Executive Officer of Newtek Business Services Inc., The Small Business Authority, a direct distributor of a range of business services and financial products to the small and midsize business market (www.newtekbusinessservices.com). Prior to joining Newtek, Sloane was a Managing Director of Smith Barney Inc. In addition, he was founder and President of Aegis Capital Markets, as well as Senior Vice President of Donaldson, Lufkin and Jenrette. He can be reached at 212-356-9550 or bsloane@newtekbusinessservices.com.

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

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