OrbitalPay Cuts Middleman
"We've already had payment processors asking us, 'When is the other shoe going to drop?' and 'How can you do this?'" beams Steve Bryson, CEO of OrbitalPay. And according to Dan Steinberg, OrbitalPay's co-founder, the merchants are saying something quite different: "It's about time."
The cause of all this commotion is the revolutionary new business model that OrbitalPay brings to the payment-processing arena.
"We set up each individual merchant separately," explains Bryson, "and they can be of any size, $500 a month or $5 million a month. Volume doesn't matter. While merchants are set up individually, they still have their affiliate tracking programs and all the same features and benefits of an IPSP, with one distinct difference: Merchants own their own database in our model. They no longer get handcuffed, where they're unable to switch or have billing options due to their databases being owned by a third-party company.
"Equally significant is that each merchant receives daily settlements. Most billing companies hold the transactions for a week or two when a merchant first signs with them, and they'll begin to settle either weekly, monthly or bimonthly. They never settle daily. That allows those processors to collect all the money for the ISOs from the member banks, then distribute the funds from their own checking account. In this way, the processor has possession not only of the merchant's database, but of the merchant's money, as well. In our system, we don't touch their money, which goes from a federally insured institution directly into their bank account.
"We also manage their site, if they request it. We provide all the tracking and all the other bells and whistles that the third-party firms offer."
In simple terms, OrbitalPay is eliminating the middleman. The IPSP model, according to Steinberg, was originally a way for the credit card associations to shift liability to the payment processors. Those processors have become middlemen in a system that Steinberg believes is not merchant-friendly.
"The IPSP is a proven model and an established solution," he adds, "but merchants are handcuffed in that model, because their recurring billing database is the property of the IPSP. It's very difficult for them to move. Secondly, the IPSPs have such a large negative database to scrub against that it's likely good transactions are being scrubbed out, based on overkill or the operational flaws of another adult merchant."
One of the main reasons why OrbitalPay can provide these hybridized benefits to merchants lies in their state-of-the-art gateway technology, about which Bryson and Steinberg are understandably close-mouthed. The technology is not new, however. In fact, it's been serving adult merchants for more than a decade.
"It's a very robust, experienced, award-winning technology that was privately used in Europe before we acquired it," Steinberg said. "We think our merchants will realize quickly that their conversions are better with our gateway, while maintaining the same level of chargebacks, and possibly even lower than what they've experienced with the IPSPs. It's a wonderful piece of technology that supports adult merchants very well. It's excellent for subscription-category merchants, recurring-billing merchants, and it's also good for one-off sales. It has excellent reporting tools, and it gives adult merchants a nice alternative to an IPSP while still enjoying the same features, such as live 24/7 billing support and affiliate-management tools. And we wanted to do it for lower rates."
And there sits the rabbit in the hat. The payment processors can't understand how OrbitalPay can be profitable while charging merchants only 8.95 percent. According to Bryson, it's not magic at all.
"Most competitors in this arena are at 11 to 14 percent," he says. "We can charge much less, because as a division of the credit card processing firm, Global Electronic Technology [GET], we own our own bank ID numbers. We issue the merchant ID numbers here at GET, which in turn provide OrbitalPay with the risk analysis, the underwriting, the deployment, the technical support and everything needed from the merchant account aspect. OrbitalPay then enrolls the merchants with all the same features and benefits as GET. As Dan and I own OrbitalPay and I own GET, it's all in the family."
Bryson and Steinberg obviously aren't new guys on the block in payment processing. They've been in that business for a combined 30 years, Bryson as founder of GET and Steinberg as a former exec at Epoch. Together, they've processed for thousands of merchants over the past 15 years.
"GET is a billion-dollar-per- year processing company," Bryson says. "We're building OrbitalPay on the back of an enterprise system that's fairly robust, as GET is by no means new. We have interchange pricing, so we don't have to have all the marbles. We don't have to do research and development costs, because GET is established with a staff of about 50 people who are experienced in this business. Thanks to our affiliation with GET, we own the actual merchant account and the merchant ID numbers, which cuts out all the middlemen. That's why we believe that in the not-too-distant future, we'll have a significant market share."
In his 10 years at the helm of GET, Bryson is most proud of the fact that his firm never has had a merchant on either of the credit card associations' fraud-monitoring programs. This is important in keeping his company's banking partner, the U.S.-based Merrick Bank, very happy.
"We stay out of trouble," Bryson says.
As OrbitalPay is the first IPSP hybrid in the marketplace, just about everyone in the adult online business is monitoring the experiment. Thus far, the feedback has been encouraging, to say the least.
"The merchants have been uniformly positive about OrbitalPay," Steinberg says.
And Bryson is even more optimistic about his new firm.
"We think this will dramatically change the industry," he says. "I believe we're going to change the whole landscape in payment processing in the adult business."