he Internet is a powerful sales and distribution channel. According to the U.S. Census Bureau, online retail sales accounted for $15.5 billion in sales during the first quarter of 2004, a 28% increase from the previous year.

If merchants want to tap into that opportunity, they must be prepared for the fraud risks presented by the Web.

According to the National Fraud Information Center, 29% of criminals commit Internet fraud with a credit card.

Additionally, while many people believe most fraud is related to phishing or money order scams, general merchandise transactions account for 19% of online fraud, more than phishing and fake money orders combined.

Research and analysis firm Gartner Group reported in 2000 that Internet transactions experience 12 times more fraud than traditional retail transactions. The company preCharge Risk Management Solutions, based in New York City, understands the risks inherent to Internet commerce.

Retail fraud is approximately 0.05%, whereas e-commerce fraud is 0.5% to 1%, up to 20 times greater, said Alex Corral, Director of Technology for preCharge.

The company understands the challenges that e-commerce merchants face, and it has a realistic view of business. With its solution, preCharge helps merchants minimize risk, no matter what type of credit card consumers use or where in the world they are located.

How? Simply put, preCharge allows merchants to screen and identify card-not-present transactions from anywhere in the world. The company provides the only global, fully automated, guaranteed fraud screening solution.

Yes, you read that correctly, guaranteed. "We said there's nothing we can do about fraud, so our formula is to limit the liability aspect of fraud ... we aren't guaranteeing zero fraud, we are guaranteeing it is not going to hinder your business," Corral said.

"Our goal is to be second to none. It is our social responsibility to ensure that the lives of those we touch are made better."

Realistic Fraud Screening

While a guarantee might sound na‹ve to some, preCharge isn't wearing rose colored glasses. The company knows that fraud happens and understands that no one solution can prevent all fraud.

That's why preCharge doesn't stop at helping merchants limit fraud; it also helps merchants when they experience fraud. The company's Certified Payments Service ensures that when merchants receive a chargeback, they are reimbursed for 100% of the chargeback amount.

"Each transaction processed under the preCharge Certified Payments program comes backed by a 100% guarantee, ensuring every transaction is paid," Corral said. "Each claim is paid out within seven to 14 days."

PreCharge's solution works worldwide, no matter where the merchant or consumer is located. The solution allows merchants to process and guarantee transactions in more than 160 countries with more than 180 currencies.

Additionally, preCharge is compatible with any global merchant account, gateway and payment processor.

The company must be doing something right. Its growth since inception in 2003 has been tremendous. Corral reports that preCharge doubles its staff every two months and increases sales volume by 100% to 250% each month. Currently preCharge employs more than 50 employees and 20 consultants in its three worldwide locations.

In the past six months, the company has signed agreements with a variety of leading technology firms, including Microsoft Corp.; IBM; Intuit Inc.; Research In Motion's BlackBerry; Hypercom Corp.; VeriFone Inc.; and Sprint.

In addition, Supremacy Financial Corp., preCharge's parent company, filed its initial public offering, which is scheduled for the first quarter of 2006.

Why the Company Is Different Something that makes preCharge unique is that it limits fraud and risk by restricting user input. The company acknowledges that other systems fail because they allow user input.

"Why are we coming out with technology that we know is vulnerable?" Corral said. "Where our solution is valuable is because others have consumer input."

Other factors that make preCharge valuable: it is affordable, compatible and universal. "No one provides something like this," Corral said. "Ours is [the] only solution that's tried to be inclusive." Following are some of the main selling points for preCharge's solution:

Compatible

Since preCharge is a fully intercompatible application service provider solution, merchants choose whether or not to use the preCharge gateway, software and support. ISOs/MLSs can present preCharge to their existing client base as an add-on service. They can add the service to any merchant contract, payment technology solution, processor or gateway.

Salespeople can also approach any merchant type, including high risk merchant accounts, such as adult, casino, pharmaceuticals, travel, and online products and services. Nothing is off limits.

Universal

With its solution, PreCharge allows merchants to conduct business with any credit card type, in more than 160 countries worldwide. This flexibility gives ISOs/MLSs the ability to grow their merchants' business and earn more revenue.

Affordable

The solution is attractive to merchants, and easy for salespeople to sell, because it is a one-of-a-kind solution that is still affordable. The company assesses each transaction a 2% discount rate, but if preCharge declines the transaction the merchant pays nothing.

Furthermore, when merchants receive chargebacks, preCharge reimburses 100% of the chargeback within 14 days.

The preCharge solution is also an attractive product for ISOs/MLSs because all merchants receive toll free, 24/7 technical support every day of the year.

"Merchant satisfaction is our number one goal," Corral said. "Our core liability is to the merchant, not to banks or ISOs, but to the merchant because they are the ones that are affected."

The company's philosophy works because preCharge has agreements with leading merchant service providers worldwide. The partnerships include:

Cardservice International Inc.; CrossCheck Inc.; First American Payment Systems LP; First Data Corp.; IRN Payment Systems Inc.; North American Bancard; NOVA Information Systems; Total Merchant Solutions; and United Bank Card Inc.

ISO/MLS Opportunities

PreCharge does not employ any in-house sales representatives. All sales are completed through ISO/MLS providers, technology providers and channel partners. ISOs/MLSs do not compete with in-house staff.

The company has created a comprehensive reseller package, and Corral said those who take advantage of it "make more than we do."

ISOs/MLSs are free to set their own pricing. They can choose whether to charge transaction fees, set up fees or monthly minimums.

"It's a dynamic program," Corral said. "They can make a lot of money."

Retail buy rates start at 35 basis points, and MO/TO rates start at 38 basis points. E-commerce starts at 48 basis points, and ISOs/MLSs receive 100% above all buy rates.

ISOs also receive a $25 sign-on bonus for each new merchant and 100% of the setup fee. They can charge the merchant any price for preCharge and earn 100% of the markup over the buy rate on every single transaction.

PreCharge understands the frustrations merchants experience. The company's staff consists of people who have been in the industry and recognize the risks faced by small and mid-sized merchants.

"We understand the actual process. We have first-hand experience as to what happens when funds are held. We really have tried to take that out of the equation," Corral said.

"With all the reasons you can go out of business, this should not be one of them."