Despite the increasingly tight credit market, growth capital is out there for ISOs and processors looking to expand or improve operations, but procuring it isn’t for the weak hearted.

“Arranging for growth capital is a long, sometimes frustrating, process, but can be a worthwhile endeavor for those ISOs that are ready to get to the next level” in terms of their scope of services, products, and the like, says Kevin Kidd, an attorney in the Nashville-based law firm Waller Lansden Dortch & Davis LLP.

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Bill Nelson walks through the parking garage to his car after a long meeting. He takes his smartphone from his pocket and searches for Chinese restaurants within 12 blocks that offer takeout. He finds three, and one of them offers a 10 percent off coupon good for the next hour. He enters the address in his GPS and drives off. Four minutes later, he pulls up to the takeout window and hands the phone to the employee so that she can quickly pass it by a scanner to register the coupon and pick up his credit card number from the radio-frequency signal emitted by the chip-embedded sticker he has attached to the phone. Then she hands him his phone and sack of food and he drives away. Nelson is riding the wave of revolutionary change in alternative commerce.

But for the Chinese restaurant, one more credit card transaction has been rung up in its five-year-old POS system,
aided by year-old readers for the coupon and chip. And the ISO that has helped the restaurant accept card payments for 12 years earns a few pennies of revenue.

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You have no doubt heard about the Credit Card Accountability, Responsibility, and Disclosure (CARD) Act of 2009. In response to a perceived outcry from its constituency, Congress has extended government involvement to yet another aspect of the financial industry. President Obama signed the CARD Act on May 22, 2009, and it becomes effective Feb. 22, 2010.

However, a couple of provisions from the Act became effective on Aug. 20, 2009. Issuers now must give cardholders at least 45 days’ notice before raising their interest rates (the old notice period was 15 days), and statements must be mailed to cardholders at least 21 days prior to the due date.

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As a means for facilitating online information sharing and collaboration, the second generation of Web development—or Web 2.0—is creating new and lasting opportunities in the payments market, as well as some competitive barriers.

In one twist on this trend, the technology facilitating Web 2.0 initiatives has enabled ISOs to create payment models in which consumers interact and share payment information directly with merchants. Merchant Warehouse, for example, recently launched MerchantWARE Mobile, a next-generation mobile application for BlackBerry smartphones. With the software in place, merchants can process payments via several BlackBerry mobile devices and e-mail receipts to customers. Credit card information, however, is stored on Merchant Warehouse’s servers, not the mobile devices.

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