Spreedly is launching a vaulting service that allows e-commerce merchants to manage payments without using a third-party gateway provider to authorize online transactions or handle related tasks such as data security.
Called Payment Method Distribution, the service allows online merchants to create and manage their own payment endpoints. It can integrate with payment systems used by other merchants and can vault card data without increasing the merchant's burden under the Payment Card Industry (PCI) data security standard.
"For merchants, creating their own vault can be six to nine months of work. We want to get them up in a couple of weeks," says Justin Benson, CEO of Spreedly. Spreedly charges users for Payment Method Distribution on a volume basis, a pricing model that reduces the upfront costs for merchants building their own payments endpoints, he says.
While building internal vaulting capabilities can be expensive for smaller merchants, there are also challenges for larger merchants, Benson says.
"Even if you have deep pockets to handle your own card vaulting, it's hard to move the needle in time to become PCI compliant quickly," Benson says.
Spreedly provides an independent credit card vault that can work with more than 60 payment gateways in more than 70 countries. Spreedly's new service is designed is for customers who need to work with multiple merchants who each have their own gateways, such as SaaS billing platforms or financial technology companies, or e-commerce merchants trying to do business in multiple countries.
"Basically, anyone who needs to work with multiple gateways over time or simultaneously could benefit from Spreedly," Benson says. "The business may be processing payments in more than one country, and may want to process in that country rather than using a global gateway, which can result in more expensive processing rates."
Spreedly is currently piloting the technology, and anticipates demand from industries such as ticketing and travel, where there many merchants host price-comparison sites using information from the companies that are actually selling the tickets. One of Spreedly's early adopters, SeatGeek, uses the technology to store consumer card data and shorten the time necessary to add ticketing providers.
Previously, a consumer would search for tickets to a hockey game on SeatGeek's site, and view prices from sources such as Stubhub or the hockey team, Benson says. Once the consumer choses to buy a ticket, he or she would be redirected to the ticket broker or the team to buy the ticket.
"The ticket site [SeatGeek] loses control of the transaction in that case, having to cross their fingers and hope the user experience for payments is good on the other site," Benson says. "We want [SeatGeek] to allow the user to enter their purchase information once, and SeatGeek can execute the purchase for the consumer."
Many payment gateways provide vaults that enable merchants to store card information for subsequent purchases. But there is an argument for merchants to provide their own vault.
"If you store the data with your payment gateway, then you are essentially committed to doing business over the long term with that gateway," says Rick Oglesby, a senior analyst and consultant at Double Diamond Payments Research. "If you leave a gateway and they have your customer data, then some gateways may not give it to you, or at the very least it makes changing to a new gateway much more complex."
If the customer data is stored at a neutral third party that is not the gateway, the merchant can switch providers or work with multiple payment providers without that added complexity. "Also, if you need the data for things other than or broader than payments, then having the data outside of the gateway could be helpful," Oglesby says.
There's an increasing push toward increased data security, and that brings about security specialization, Oglesby says. "That usually means storing customer and payment data at a third party, which obviously brings up a bunch of data control issues, and this is an example of that playing out," he says.