Acquiring Industry Debates Need For Another Cleaning

By Jeffrey Green (@epaymentsguy) 

When low-cost countertop payment terminals became readily available in the 1980s, a new frontier emerged with vast potential for entrepreneurs to make millions. And over time, various ones did, some multiple times, by feeding the demand among millions of merchants for a cheaper means to accept cards electronically instead of having to use paper-based, time-consuming “knuckle-busters.”

But, the opportunity to get rich also brought in a negative element, as “frontiers” tend to do, where unscrupulous tactics and ethics among some aimed at securing terminal and merchant-processing sales contracts began to give the acquiring industry a black eye.

Concerned about the long-term impact having questionable leaders in the space could have on the industry as a whole, various participants got together to form an organization whose task would be to develop standards and best practices to help differentiate the good from the bad. That organization, initially dubbed the Bankcard Services Organization, later became the Electronic Transactions Association (ETA).

The ETA’s creation did help resolve many of the problematic issues, at least on the surface and from a public-relations standpoint, and its annual meetings do provide members of the industry the chance to meet and do, what else?-sell.

But, the issue of ethics within the acquiring industry reared its ahead again last month, when Bob Carr, CEO of Heartland Payment Systems and one of the veterans who helped form the ETA, issued an “open letter” to the industry, “to ask for your help once and for all in lifting the veil of dishonest practices that have tarnished our great industry for decades.”  

Carr contends there are “criminal practices currently taking place in our industry that are duplicitous and designed to prey upon merchant customers, and which I feel must change.” Among Carr’s allegations include tactics used by some ISOs and others in the acquiring industry to deliberately falsify interchange, misrepresent merchant category codes and use extortion and intimidation to enhance merchant retention. He also called for collaboration with the Federal Trade Commission to “stop these criminal practices.”

Interestingly, in his own written response to Carr’s Oct. 23 letter, Jason Oxman, CEO of the ETA, asserted Carr was essentially wrong, “that such behavior is not common in our industry in 2013.”  

Oxman went on to say the payments industry, through the ETA, “is doing what is necessary to ensure best practices and professionalism are the hallmarks of the services our member companies provide to their merchant customers.”

Any industry has its bad apples, so it was interesting that two leaders in the acquiring space had such differing views. It’s possible Carr was using identified criminal activity in the industry to try to portray Heartland as one of the good guys. He has a history of putting a good spin on bad situations, i.e. “Durbin Dollars,” which attempted to put Heartland’s not-uncommon pass-through interchange policy in a differential light.

Oxman, on the other hand, seemed to take Carr’s comments as an insult to the ETA, choosing to put his own spin by highlighting in his response to Carr’s letter “examples of how the ETA of 2013 is helping the industry grow and move forward to the future.”

Yep, both Carr and Oxman are salesmen, and they’re good at it. But it appears they have different views on what the ETA should represent.

It’s possible Carr’s comments came at a bad time for the ETA, which earlier this month formed its own political action committee and began seeking donations from ETA members to help in its push to represent the acquiring industry before Congress.

Oxman may have felt Carr’s apparent back-door slap at the ETA by asking for the FTC’s help could affect contributions.

Ultimately, the ETA appears to have taken a left turn toward advocacy at a time when Carr felt it should have stayed the course as chiefly being an organization tasked to clean up the acquiring industry.

Only time will tell whether the industry’s chief representative can succeed at both.