Starting Over Can Be Fun

S ecure Payment Systems is no start-up. It was born in the mind of Linden "Lin" Fellerman five years ago, shortly after leaving his 20-year tenure and 10-year stint as the President of Equifax Check Services (formerly Telecredit Check Services) and moving back home to Southern California.

Lin began in 1975, while still in college, working part-time as a voice- authorization clerk, a role lower than working in the mailroom of then Los Angeles-based Telecredit Inc., the nation's largest check guarantee company. Lin found that he had a passion for the check business and took to it like a duck to water.

As the company progressed, Lin did, too, and he eventually was promoted to President shortly before his 30th birthday in 1986. In 1991, Equifax, the nationwide credit-reporting agency, purchased the company. Lin had accomplished what few only dream.

Even before he left in 1996, Lin had a vision. He saw that working for a large corporation had its advantages but also some major shortfalls. Plus, he found that the fun was gone. So Lin set out to build a company that could be different in many ways but still deliver a superior product and re- instill the passion that got him into this business in the first place.

Lin believed that his background in the business gave him the insight to develop a privately held company that could offer some major differences to his customer base and create a successful enterprise:

+ He could create a more sophisticated, efficient and cost-effective risk- management engine given his operating expertise at Telecredit/Equifax, where he was instrumental in creating many risk-management innovations.

+ He could target the small- to medium-size merchant sector with a low- cost, high-personal-service operating structure and thus keep customer attrition at a fraction of the competition's rate.

+ Given personal care and low attrition, he could create a check services company that ISOs could trust with their credit card customers.

+ He could rapidly develop a suite of transaction-processing services to stay competitive in the ever expanding payments business.

+ He could create a company that was lean, flexible, swift and devoid of paralysis by committee.

Lin proposed that no matter what size SPS grew to over time, he would at all times behave as a small company to avoid the bureaucratic trappings that hinder a company's flexibility and interaction with its customers. If SPS was going to be successful, it was going to be hands-on and customer- focused.

As a matter of fact, before he even opened his doors, Lin performed a marketing study to determine what the average small to midsize merchant loathed in the check companies operating at the time. With that data and a couple of bucks from his retirement account, SPS was born in San Diego with a skeleton crew and a song in his heart.

Given technological advances, his understanding of risk algorithms and the programming connections he made during his career, Lin believes he has satisfied his primary goal - and the core of SPS - by building a superior risk management and analytics engine.

Lin went with what he knows and first hired direct-sales people. While that was moderately successful, the company's real success story has been through its growing base of independent sales organizations. And that was put together mostly through the efforts of Lin, his reputation and word of mouth.

In April, SPS will celebrate its fifth year in business. SPS has experienced a great deal of success and continues to grow at a pace of 40 percent per year. It has accomplished a remarkable feat in the check world in that it has kept attrition below 6 percent when the industry average probably hovers around 20 percent. And . ISOs trust SPS. Just ask Lynda Neuman, CFO of United Merchant Services, based in Glendale, Calif., who says:

"Secure Payment Systems is a dream come true. In the three short years we have been associated with Lin's team, we can think of no other guarantee company that even comes close by comparison. And we have used all the big- name companies over the last 10 years.

"In fact, prior to using Lin's company, we were terminating the relationship with our prior service provider and never going to offer check services again because of the incessant complaints from our merchants. Claims were not being paid timely, if at all; customer service was poor; fees were being raised; and authorization controls were being changed at will.

"Because of Lin's prior background and commitment to personal service, we decided to give Secure Payment Systems the opportunity. We could not be happier because the silence is deafening! We have not had one merchant complaint in three years! I invite all other ISOs to try to make the same claim with their service provider!"

All of this has not sidetracked Lin from continuing to focus on his vision. He still believes in being hands-on. Ask the people at SPS headquarters in San Diego, and they will tell you that Lin trained them in each one of their jobs. Not only that, they will tell you that Lin outpaces everyone there and still provides as-needed assistance with their respective roles. It is not unusual for Lin to take a customer-service call, download a terminal, visit an ISO across the country, or go cold-calling with one of his salespeople!

Last year, Lin discovered that he has only two hands and finally conceded that his hands-on approach was limited by the number of hours in a day. Lin has been deliberate in hiring a team of key people who believe in the same philosophy, the same customer-driven desire to be fast, flexible and reliable - but also to have a little bit of fun along the way.

He is now announcing a major selling program for the ISO market because he believes he has found the right person to whom he can hand the ISO ball. Lin never advertised, believing it was far wiser to fly under the radar, stealthily capturing share while making sure that all the operating pieces were in place for an all-out assault.

SPS has stayed ahead of the competition by continuing to offer more enhancements to its check services. Early this year, SPS rolled out its check conversion program. Even though Lin believes that check conversion has many issues associated with it, "it is a program that ISOs believe in and want to sell." Therefore, Lin set out to have the best program available and offers conversion with guarantee that deposits funds within 24 to 48 hours in the merchant's account and keeps merchants whole throughout the process, even if the ACH fails to post.

"It's all about how you manage the risk," Lin says when you ask him about all the different companies out there that offer conversion. "If you think that you are going to make any money in the conversion guarantee business, you had better understand the inherent risks associated with each class of merchant. . For example, simple authorization logic found in most vanilla verification systems will not win the day in a conversion guarantee program for high-risk sectors such as jewelry, audio/video, computers or leather goods."

Lin has stayed focused on offering a broad array of payments products and has just rolled out its own proprietary terminal and PC-based Gift Card Program. Integrated with or apart from electronic check conversion, this program offers merchants of even the smallest-size store the opportunity to take part in a low-cost electronic gift card process.

Whether the merchant is interested in the generic card types already offered by SPS or custom artwork, SPS takes the merchant full circle in issuing the cards, installing the terminal software and processing the transactions. SPS even has entered into a strategic partnership with another California-based company for a patent-pending mini CD-based gift card with magnetic strip! This CD gift card offers incredible potential for associations, franchise organizations or large retailers interested in using the multimedia opportunity.

With a base of thousands of locations and adding hundreds of merchants each month, SPS serves customers and ISOs nationwide from its California headquarters. With 24-hour technical support, voice authorizations and customer service, SPS also supports the spectrum of nationally recognized POS devices (Hypercom, Nurit, Verifone, Thales) and check scanners (IVI/Checkmate, Magtek, Verifone and RDM imager). What many check authorization firms charge merchants extra for, SPS does as part of its standard program, which is already priced competitively.

"I would rather take a lower margin and have our merchants believe that we are priced fairly to begin with," says Lin. "I believe that fair pricing and attention to unusual 'personal' customer service is what it takes to ensure that ISOs and merchants alike trust in the commitments we make. Every guaranteed check, every voice authorization, every technical-support call is an individual commitment."

All in all, Lin has accomplished most of what he set out to do. The company continues to grow at a dramatic pace, attrition remains remarkably low, new services and products continue to be developed, but, most of all, he will tell you that he is having fun.