HOLLAND — Integrated System Development Inc. has received an infusion of several million dollars from two venture capital firms to bolster expansion of sales, marketing and development of its core product, Message Sentry.
Message Sentry payment information management software enables retailers to process millions of credit cards, debit cards, gift cards, private label cards and checks daily through one central source.
Last month, Prism Opportunity Fund, a private equity fund headquartered in Chicago, and Odin Capital Group, a private equity investment firm based in Omaha, Neb., made a hefty investment in ISD to help the company expand into new markets.
Brad Jones, ISD’s vice president of sales and marketing, declined to give the exact amount of the investment, referring to it only as a “multi-million dollar” investment.
ISD introduced Message Sentry to the market in 1986 under another name and repackaged it a few years ago, Jones said.
One of ISD’s first customers for the software was Quality Farm and Fleet in Muskegon.
Today, ISD has more than 100 widely known customers across North America and its product is being used in more than 30,000 locations.
Ten years ago a retailer processing a credit card had to dial an 800 number to get approval on a card. Then came dial terminals that would dial the credit card processor directly. Those are still prevalent in smaller retail operations, Jones said.
The company’s Message Sentry software serves just about any business that accepts electronic transaction and needs centralized payment processing controls, he said, including wholesale, manufacturing, technology, nonprofit, insurance, media/publishing and government industries.
“Primarily, we play in the retail market space because that’s where 95 percent of the electronic transactions were five to 10 years ago,” he said.
“We’re most prevalent with customers like Eddie Bauer, The Limited, Michaels arts and crafts store, and Bed, Bath & Beyond. But we have a lot of customers that you would consider nontraditional, like Newark Electronics and Allied Waste.”
Jones said 10 years ago the only businesses that could afford payment information management software like Message Sentry were the J.C. Penney’s and the Wal-Marts. But the cost of networking has come down and the cost of the large computers that can handle this type of traffic has come down, so smaller and smaller tier merchants are now able to afford the technology.
Message Sentry integrates with all major payment processing systems and runs on IBM Midrange, and HP and Microsoft NT platforms.
According to ISD, the software improves the speed and reliability of electronic transactions and in streamlining the processes, reduces the costs of each transaction.
“There are a lot of things that add up to your credit card processing rate. The most expensive piece of the transaction is called interchange — the fee that’s paid between the acquiring institution and the issuing institution of your credit card,” Jones explained.
“There are software packages out there that can handle the transactions, but don’t always handle them effectively, thus raising your costs.”
Communications is another piece of the cost, he said, because for every transaction dialed there’s a cost.
A high-speed network replaced that transaction cost with a fixed fee, however.
“Whether you do one transaction or a million transactions, it’s still that fixed price. So merchants who have a lot of transaction activity can lower their costs.”
The next piece involves the dues, fees and assessments — the franchise fees the retailer pays to Visa or MasterCard associations. Those are fees that will never go away, Jones said, so there’s no getting around them.
“The next big fee we can do something about is the bank acquiring fee — the cost you pay to acquirers for processing the transaction.
“Software like ours is certified with any of those processors, and you can switch and go to a new processor if they come in and give you a better price. So you lower your cost again.”
The savings may be pennies, but on hundreds of thousands — or millions — of transactions, the pennies add up, he noted.
With its recent infusion of venture capital funds, ISD is expanding into the fuel market — the gas stations and convenience stores.
“That particular industry has been held very, very captive, and these kinds of open systems have not traditionally been available to them. Where a retailer may be paying 1.5 to 1.8 percent of the transaction, some fuel stations are paying as much as 3 percent per transaction because their systems aren’t flexible enough.
“We’ve been involved with them, we’re getting entrenched, we’re getting that process rolling, but now it really takes a little bit more capital to keep that going.”
Jones said ISD also plans to begin marketing Message Sentry’s suite of server applications to the restaurant business.