hat do you do if you're a savvy professional in the payment-processing industry and you recognize that the needs of experienced high-volume users who have outgrown first-generation gateway technology aren't being served? Why, you start your own company, of course. And that is exactly what the founders of Ezic, Inc. did.

"We figured back then that if we start now developing the kinds of tools the payment-processing industry needs, we'll be ready when they are ready," says CEO Locke Walsh. "That's still our goal. We target experienced, high-volume and sophisticated merchants who four years ago didn't know the potential of their business enhanced by digital payment processing. Now they are successful, and they realize their needs are not being met. But they can be met with our sophisticated tools and products we developed because we forecasted and planned for this."

That keen insight was first realized when co-founders Fredrik Sjoholm and Bob Cappel first went into developmental mode in 1999. Ezic expanded to a full-scale operation in July 2000 when Walsh joined the team by way of Ernst & Young, now Cap Gemini Ernst & Young (CGE&Y). Ezic had participated in an Ernst & Young e-commerce accelerated lab project. E&Y selected it as the company most likely to succeed, and Ezic won a $500,000 consulting project. But rather than take a fee, E&Y took stock.

Smart move. Walsh was brought in at that time. Ernst & Young recognized not only that Ezic was right on target but that Walsh was the type of leader to guarantee a successful relationship; he had specialized in retail technology-based portfolio management for more than 10 years.

Today, CGE&Y remains one of Ezic's investors. What also remains is the same business philosophy that was initiated in 1999.

"We continue to provide market-driven capability to the digital payment-processing industry," Walsh says. "Our differentiator is that we turned profitable in our first two quarters and have been profitable for the last six quarters. We survived the big shakeout of e-commerce companies."

According to Walsh, what also sets Ezic apart is that it has been successful in attracting ISOs and merchants with unique, high performance requirements. Its business plan has clicked at a time when stiff competition can cause major disconnects.

"There are lots of gateways out there, but we offer much more than digital payment processing," says Walsh. "The breadth and depth of our capabilities are far more advanced."

Ezic's products might not be appropriate for the small merchant who processes a couple of thousand transactions per month and requires only simple online reporting. Ezic's services provide sophisticated solutions for customers with aggressive business goals.

Those solutions can be found in a technology platform that allows Ezic to respond quickly to market-driven requirements. As merchants become more successful, they often discover their platform needs become more specialized, such as reporting and billing variables. An ISO's Web site might need to support multiple merchant accounts. Hand in hand with increased revenue comes increased risk.

"The high-volume merchants who started four or five years ago now know what they want their platform to do," says Walsh. "They know the kind of risk-management tools they've got to have. Our services build their business and manage their needs, for both merchant and reseller."

Latest Releases

Ezic's hottest product is Fraud Barricade, a new and configurable anti-fraud toolset that protects merchants from all types of Internet fraud.

Fraud Barricade includes three areas of protection: Identity Authentication Controls reject transactions from customers using false or hidden identities; Order Integrity Controls prevent hackers from falsifying order details; and Velocity Controls stop fraudsters. Fraud Barricade doesn't hide behind obscure and arbitrary scoring systems. Merchants choose which fraud controls best fit their unique risk-management needs.

Ezic Master Agents can set the fraud parameters for its agents and subagents and, like third-party processors, can control the fraud parameters for all merchants to enforce merchant acquirer policies and decrease portfolio attrition.

"Using Fraud Barricade saves high-volume and high-risk merchants significant amounts of money," said Kristy Kunert, Ezic's Chief Financial Officer. "By stopping transactions before they reach the bank authorization network, merchants will avoid both transaction fees and bank authorization network fees."

Ezic offers the only Master Agent System, a proprietary solution that provides its resellers with the technology to control comprehensive processes involved in building and managing a sales organization, including merchant account and sales force management, commissions, invoicing and advanced reporting.

Simply put, this product promises unprecedented management of and access to merchant accounts. Catering to the merchant services industry as well as turn-key services providers such as developers, Web designers, ISPs and Web hosting companies, this Web-based solution offers increased volume, reduced operations costs and enhanced revenue potential.

"Our Master Agent System is getting an exceptional amount of interest," says Walsh. "This is something people in the credit card industry have wanted for a long time, allowing acquiring or issuing banks in the distribution channel as well as MSPs, ISOs and agents to be managed all in one system. If you're a big ISO and you have subagents, you can provide them and their merchants access to the Ezic system without their seeing other merchant accounts. You can manage all steps of distribution, yet each step affords your agents and merchants complete individual access and monitoring."

"We chose Ezic specifically for its Master Agent System," said Stephen Ferrell, CEO of WebMenu, LLC, an application service company providing e-commerce solutions for the restaurant industry. "We can provide our clients with the technology they need to pursue their business goals while significantly contributing to our own financial goals."

In February 2003, Ezic plans to release Affiliate Stampede, an advanced management solution to streamline the comprehensive processes involved in building and managing large affiliate portfolios to drive traffic to merchant sites. Flexible Solution to Suit and Grow Merchants The number of high-volume merchants who take advantage of Ezic's solutions is in the thousands, according to Walsh, but Ezic also boasts a lot of small merchants on its roster.

"We have the capability to provide services for all sizes as well, but frankly there are simple gateways better suited for their needs," says Walsh, adding that Ezic has handled more than 25 million transactions, worth almost a billion dollars in revenue merchant sales, since July 2000.

Are the costs of Ezic's solutions as impressive as its transaction figures? "Our prices are very competitive in the industry," says Walsh. "We do have a great opportunity for resellers to upsell for additional services. In addition to the basic sale, we have advanced features for private label, enhanced revenue and other options."

Those other options include Fraud Barricade.

"Our system is highly scalable. For example, your merchant might not be in a high-risk industry. He may just be selling books, so he doesn't need to spend more on fraud control," says Walsh. "Whereas if you are selling long-distance phone cards, the nature of the business dictates that the services the ISO provides be very sophisticated.

"High-volume and high-risk merchants that manage multiple accounts rely on Ezic's solutions, including the Fallback Matrix that redirects transactions to a secondary processing network if the merchant's primary processing network slows down or fails."

Ezic is a fully global operation, present in six out of eight Visa regions throughout the world. According to Walsh, Ezic is the backbone of more than 2,700 banks in Europe alone.

What does this all mean to the American ISO? It means having the ability to provide advanced e-commerce technology to merchants who are desperate for increased sales.

"We think we have attractive programs and we have the ability to put multiple pricing plans together for different customers," says Walsh. "We are not like the bank who pays a residual rate. We give the ISO the tools to provide different pricing programs for different categories of merchants for their upsale. We pay promptly the 18th of every month the difference between what they buy it for from us and what they sell it for to their customers."

Seeking ISOs

Ezic works with 40 to 50 top ISOs and always is looking to expand that channel.

"We look for an ISO that has a specialized type of customer," says Walsh. "That merchant may not have started out as that type, but they now are. We look for established ISOs. Right now, we have a strong group."

Training may be the key to that strength. Ezic provides free training for all of its ISOs as well as access to its tech staff through teleconferencing, e-mail and the Ezic system. While Ezic welcomes onsite training, few find it necessary to travel to its corporate offices in Illinois. Ezic prides itself on its one-click setup policy that's easy to navigate, hassle free and quick. An ISO can have his merchant up and running within minutes.

Because of its low maintenance, Ezic doesn't require much Tier 1 customer support. It does, however, offer a Tier 2 Web-based 24/7 support service, live voice included.

"We can handle any type of backup support call from any of our resellers, whether it's simple or complex," says Walsh. "Most of the calls are more sophisticated. With Ezic's straightforward system and user tools, our ISOs can quickly provide customer service and answer merchant user questions."

Global Business Management Solutions

Ezic believes its state-of-the-art security systems are essential to its solutions' success.

"We have the most access-secure, next generation payment solution," says Walsh. "There are three components. We have triple credential requirements just to get in. Once you log in, the administrator of the account for the merchant can assign unique passwords to each subagent or individual who needs access to the system. They can even assign further authorizations in the Ezic system as to what actions can be performed in the system. We have a very sophisticated user-management system."

Ezic also implements two other security tools.

One is an audit trail that is important for financial purposes that require access to the complete financial activity of each account. It runs sequentially and is unalterable. That is of particular value for internal as well as external control.

The other tool is an event log that keeps an accurate record of each account's activity. As with the audit trail, the event log is ongoing and unalterable.

Working in conjunction with these components is Ezic's advanced real-time reporting service. Ezic recognizes that the more sophisticated the customer, the more information and speed the customer needs.

"The main benefit of our reporting capability is that it improves the operating efficiency of an ISO," says Walsh. Ezic offers one-click reporting whereby a customer can view merchant account activities at any time of the day or night. For even more sophisticated customers, Ezic provides a report generator that is accessible to all online users. All reports are exportable either as text, into accounting programs or Excel.

"Our setup process is faster and cheaper," says Walsh. "Resellers can start a merchant processing quickly via our backward compatibility and emulations modes. If you're switching your accounts from one processor to another, we do it instantly."

Speaking of processors, Ezic is certified with First Data (both Omaha and Nashville), NOVA, Vital Processing and a number of foreign banks. Would the average ISO find the foreign connection appealing? Walsh says yes.

"What's happening nationally is that a lot of ISOs with high-risk accounts have to find offshore accounts because there are some industries that some banks don't want to do a lot of business with," says Walsh. "More and more foreign banks are competing for high-volume and high-risk U.S. merchant accounts.

"You can get better high-risk rates with foreign banks as well as better reserves and requirements. We do not facilitate the bank end part of it. We just deal with resellers and want them to be aware that there are lots of variables that keep these high-volume accounts moving around."

Ezic picks its alliances, whether foreign or domestic, with a clear focus. According to Walsh, Ezic chooses partners who provide valuable data online for integration into its gateway and then on to its customers.

"When we partner with a First Data or a Vital or a foreign bank, it is a requirement that we have direct access to their online chargeback reporting so our merchants can manage their chargebacks," he says. "This is very important."

Forecast

Walsh also places great importance on the fact that Ezic's biggest accomplishment to date has been its ability to demonstrate that its technology can respond quickly to market-driven demands.

"We have a technology platform that was designed from the ground up that responds quickly and efficiently to what the market demands," says Walsh. "Digital and e-commerce is still rapidly evolving, and no one knows what the demands will be in the future. We have demonstrated that we can respond quickly to the demands of our resellers so they can not only attract but keep customers, increase their revenue, lower their operating cost and enhance their revenue with upsales."

Walsh continues, "We focus on what the ISO needs. That's been our largest success. We have conservatively managed our financials so we are profitable and not dependent on venture capital. We have an infinite future."

What challenges does Walsh see in Ezic's future? "Keeping up with the growth of our target market," says Walsh. "We are restrained in terms of finding qualified account execs and salespeople we can add to bring in more business."

Walsh also believes the payment-processing industry will be challenged in continuing to improve its chargeback issues. "Nobody wants chargebacks," says Walsh. "The banks don't. The merchants and the resellers certainly don't want them. Collectively, we all need to work closer with Visa and MasterCard to provide the kind of info to the merchant in order to better manage chargebacks."

Walsh sees the industry expanding beyond Internet sites with a lot of business integrating into call centers. Because of that vision, Ezic is happy to offer its resellers the opportunity to branch out into new markets such as MO/TO and call center access.

And as with any successful industry, Walsh is aware of the gobbling that could threaten Ezic.

"We don't fear acquisition," says Walsh. "We know it's happening all around us because we are being approached now. We don't really agree with their valuation at the moment. When you are profitable, you don't need venture capital. We are not ruling out acquisition or merger, but if and when you need the capital, you don't have to give up the ship to the venture guys.

"We intend on having many more discussions with strategic investors, bigger players that know they need this kind of engine both in the short term and the long term if they want to stay in the forefront of this industry."

Where does that position Ezic? "We will continue to aggressively respond to market-driven needs as they evolve," says Walsh. "We have the technology base and the human expertise to interpret it and do it. We have a top-tier group of resellers who give us valuable feedback that enables us to aggressively pursue new business. We have real rubber to the road here."