Also known as Segregated Payments, the IPSP uses a third-party auditor to monitor client payments, rather than the processor itself, and transactions are conducted directly between the bank and the sub merchant or webmaster.
Michael Sperber, sales director for SegPay, called the system a "whole new way for webmasters to view their payment security on the Internet," as opposed to the normal third-party processing model where the bank pays the processor and then the processor distributes funds to the webmasters.
In SegPay's case, the bank holds all money except fees due to SegPay, which vary depending on sales volume. Then the bank pays the webmaster directly through an auditor, in this case a Washington, D.C.-based company called Inteca, which will provide a full audit of client funds.
Inteca is more immediately known for acting as IPSP iBill's auditor, although Sperber confirmed there is no connection between the companies.
Sperber said that the segregation of funds between the bank and processor is standard in the financial services industry, as opposed to more traditional IPSP methods that often include suspension of funds for a period of time and enable the processor to determine the order in which payments are processed.
"In terms of taking the third-party processor out of the direct equation, they no longer have discretion on who is paid and who isn't depending on their funds," Sperber said. "This is the way it works in the normal financial world. The only reason why it's not working this way in ecommerce is because it has been an unknown area for banks and financial institutions. But this is the way it will work for everyone in the future."
Sperber pointed to the possibility of regulatory modifications coming soon that might eventually put a crimp in the way traditional IPSPs conduct business.
"It's difficult to become a third party processor in the United States right now," Sperber said. "It seems like a smarter, long-term decision to be based in the United Kingdom."
Sperber added that while SegPay is targeting all segments of online ecommerce, adult webmasters will be the company's primary target since they are the largest users of third-party processing companies.
SegPay provides real time credit card and check authorization services, automated password management systems, marketing tools, affiliate tracking, 24/7 real time sales reporting and an online web interface for account changes.
