recent MBA grad might see increasing compliance requirements and the growing trend of consolidation as a big, red stoplight to starting up a new business in the payments industry. But John V. Priore, President and Chief Executive Officer of Priority Payment Systems LLC, and his management team saw it as a bright green light.

Priore's belief that sweeping consolidation can be detrimental to third-party relationships spurred him to take action. "ISOs and agents and MLSs [merchant level salespeople] and even merchants often find they are no longer being serviced as well," he said.

"We saw an opportunity there. And we were confident that we could fill a niche, even if not everyone recognized that the niche existed. I think the growth we're experiencing proves we were right."

Priority, a provider of payment processing products and services, reached its first anniversary in May 2006. The company spent its inaugural months going through due diligence for its processing platforms and becoming Payment Card Industry (PCI) Data Security Standard compliant.

But this infant business feels more like a wise-elder enterprise. Just past the one-year mark, it has relationships going back 12 to 15 years.

Tight teamwork

"This company is built on our core management team," Priore said. "Our experience level is our strongest attribute. We've seen the ups and downs of this industry. Virtually every scenario that can arise, one or more of us has been through before."

In addition to Priore, the management team consists of Richard J. Harris, Chief Operating Officer; Sean Kiewiet, Chief Information Officer; Sheila Hernandez, Vice President of Sales Support; and Duayne L. Haskett, Vice President of Account Implementation.

These executives have done stints at many of the industry's leading companies, including Ingenico, NOVA Information Systems, Cardservice International, First Data Corp., Cornerstone Payment Systems (a division of Verus Financial Management Inc.), National Bancard Corp., Hypercom Corp., SouthTrust Corp., PMT Services, Network 1 Financial, and Providian Financial Corp.

"We've assembled an elite team of executives, management and representatives," Priore said. "Together we've got over 100 years' experience. I'm pretty proud of that."

Team members have worked with everything from independent operators to startups to large corporations. And they have mastered the challenges of acquisitions and compliance. "A startup in this industry right now could find these things pretty daunting without that experience," Priore said. This extensive industry know-how has helped Priority avoid the casting-about-for-vision stage that some new companies face. "We feed off each other's strengths, and we bolster each other's weaknesses," Priore said. "Most importantly, we have a collective goal and vision on what we want to accomplish, and on the traits we want our company to embody - things like integrity, responsiveness and professionalism."

Victor F. Gerber, CEO of Atlas Merchant Services Inc., said the experience level of Priority's managers was a key component in his choice to work with them. "I've known the owners for a good number of years, and they have tremendous credibility in the industry," Gerber said. "Sheila Hernandez, for example, understands interchange. She really knows how it works. And understanding is at least half of any sale."

Gerber also thinks Priority successfully exhibits the traits it wants to embody. "It's been wonderful working with them," he said. "If I need something taken care of, it's taken care of ... in an hour, not in three or four days like other processors I've seen. That's what you need in a processor."

Groovy growth

Priority balances fairly aggressive expansion goals with the desire to stay small enough to remain approachable from the top down, and to provide the level of service necessary to help its agents progress.

"We've seen what can happen when a company outgrows itself," Priore said. "We're proud of our responsiveness. For example, we've all seen companies that grew larger and larger, or were acquired, and suddenly are no longer responsive to the people that helped them grow. We won't grow ahead of ourselves."

Still, Priore acknowledged that his company is in a strong, organic growth mode now. "We're growing each month and continuing our standard of excellence with client and customer support," he said. Priority also plans to acquire several small or mid-sized ISO or community-bank portfolios in the fourth quarter of 2006 and the first quarter of 2007.

In the meantime, Priority is aggressively courting new agents. It has over 50 agents enrolled, but plans call for about 150 more. "We don't want to overpopulate our portfolio of agents, but we do want a strong national base," Priore said.

According to Priore, key attributes his company offers agents are intangible traits like honesty, integrity, commitment and professionalism.

"Everyone says they have integrity and experience," he said. "It's all just words until you deal with a company that doesn't have the same commitment level. Then it seems pretty important. You shouldn't have to say that you pay residuals on time and accurately, for example. That seems pretty obvious. But it's not necessarily a given in this industry."

David J. McCarthy, President of DMS Inc., agreed that integrity is an important attribute. "I decided to work with Priority Payment because I trust John Priore ... without any reservations," McCarthy said.

"John is and has always been a stand-up guy. He is well-schooled in business in general and bankcard in particular. John commands a great deal of respect from his peers in the industry, and his relationships are endless."

McCarthy said Priority's high ethical standards allow it to focus on the tasks that will move the business forward for itself and its partners. "I believe, as they do, that when you have a clean portfolio less time, effort and money has to be spent on fraud detection and prosecution," McCarthy said. "This saved time, energy and money can then be focused on programs geared towards profitability."

Tough technology

While intangible attributes are extremely important, Priority also emphasizes technology. "Demonstrating our technology is vital," Priore said. "It really differentiates us from our competitors."

Priority's Merchant Exchange (MX) software is an example of the company's transparency. MX is a proprietary Web-based system that gives agents 24/7 access to their customers' information "right down to the interchange level and each transaction's card type," Priore said.

The software also allows agents to enter new merchant applications and track their status; enter requests for additional products or services; make changes to merchant information; view merchant demographic information, daily activity and profitability; receive commission reporting; and structure residual payments in real time.

"We get a lot of compliments about the reporting capabilities," Priore said. "You can back into - to the penny - what you should be paid. So it's not just Priority telling you that your residuals payments are accurate. You know they are."

The objective of the system's architecture is to allow employees and sales reps to access everything needed to submit merchant applications, view underwriting information (including interactive notes between sales and the underwriters), and view merchant transaction activity and full details on commission allocation.

The system is also customizable so individual sales partners can do things like define multiple pricing parameters and create subcommission plans enabling full commissioning to the subsales channel.

"We have constructed a company and developed a middleware technology that provides exceptional service and support," Priore said. "But no matter how great the technology is, the need for solid servicing, support and ongoing relationships hasn't changed. It never will."

Secure solutions

Priore sees security as one of the biggest challenges facing the industry. Led by Chief Information Officer Sean Kiewiet, Priority approaches security issues aggressively.

Priority maintains an off-site hosting facility certified by the Statement on Auditing Standards No. 70, Service Organizations. It is a widely accepted auditing standard developed by the American Institute of Certified Public Accountants.

The company's in-house security measures also include a battery and 120-day diesel generator; a fully redundant network meshed with eight unique Internet service providers; dust, climate and access controls; 24/7 on-site monitoring; and access to 20 remote facilities nationwide, including mobile work areas. In addition, Priority's production systems are protected by a three-factor security access system, which incorporates biometrics.

Priority also employs video surveillance at all locations and work areas; two-factor security at all employee processing areas (access to paper files, for example); separation of duties at all operational levels; mandatory background checks on all employees; code review and secure code-components structure; daily, weekly and monthly security audits; and surprise inspections.

Priority is PCI-certified and Equifax-compliant. "Security is a big issue facing the industry," Priore said. "But we're very conscious of it here, right down to what documents might be sitting in the printer tray."

Galactic goals

Keeping up with future changes in security measures and technology is paramount at Priority because it has big plans for the future. And those plans, according to McCarthy, are rock solid.

"This was a well-thought-out business plan set in stages that have attainable goals," he said. "The future is bright at Priority, and I am glad to be a part of that future."

In its first year Priority achieved PCI certification; designed and implemented its MX software; and leveraged relationships with core First Data processing platforms including FDR Omaha, FDMS Nashville, CardNet and Concord EFS/Buypass.

It also established itself as an ISO and member service provider (MSP) sponsored by BancorpSouth of Tupelo, Miss., offering a full array of payment processing services including credit card, online debit, check processing, gift card processing and check collections.

In its second year Priority plans to build on its base as a full-service ISO and MSP focused on the third-party community. It also intends to add strong new agents to its portfolio and move into acquisition mode.

Five years from now, its goal is to be one of the top 25 processors and acquirers in this field.

"I believe we have the strength, the personnel, the expertise and the relationships to do just that," Priore said.