Growing Older Helps Mentor Software Firm Gain Traction
Clients now ready for online authentication product
CardinalCommerce Corp.’s technology no longer is too new for its customer
The Mentor company’s revenue multiplied many times over the past two years, and now CardinalCommerce is in the midst of its biggest quarter since it started selling online transaction authentication software four years ago, said co-founder Tim Sherwin.
It’s a welcome change from the company’s first few years on the market, when it seemed like retailers weren’t ready for the company’s Cardinal Centinel software, said Mr. Sherwin, who also is executive vice president.
“We are accelerating in every aspect,” he said. “We’re starting to finally move up that curve.”
CardinalCommerce last month began serving its biggest customer, GSI Commerce Inc. of suburban Philadelphia, and it is about to begin authenticating online credit card transactions for three foreign airlines.
Signing GSI, which creates and runs retail web sites for other businesses, should increase CardinalCommerce’s 2008 revenue by about 30%, Mr. Sherwin said. He declined to disclose revenue figures for CardinalCommerce, which has about 55 employees.
The increase is based on the number of online transactions GSI expects to handle this year for its 80-plus customers, which include Toys “R” Us Inc., Levi Strauss & Co. and Dick’s Sporting Goods Inc.
CardinalCommerce next month will begin processing online transactions for WestJet Airlines of Calgary, Alberta, as well as flythomascook.com, which sells discount seats for Thomas Cook Airlines of Britain, and Bmibaby, a discount airline of British Midland plc. Those customers are expected to boost 2008 revenue by another 20%, Mr. Sherwin said.
CardinalCommerce landed those customers through a partnership with a large U.S. company that provides several airlines with accounting, reservation and ticketing services, Mr. Sherwin said. He would not identify the company, but did say the partnership could help CardinalCommerce sign another 10 airlines this year.
Mr. Sherwin would not say how many transactions are processed by CardinalCommerce, which makes a few cents for each one. However, the company in April 2006 said it was processing about 2 million per month, and since then that figure has grown many times over, not including the GSI and airline deals.
“Each of those (new deals) will add a million or more to those numbers,” Mr. Sherwin said.
A pal in PayPal
CardinalCommerce’s main product, Cardinal Centinel, allows retailers to offer alternative payment methods such as PayPal, Google Checkout and Bill Me Later through their web sites without installing those programs individually. Instead, the sites access Cardinal Centinel over the Internet during purchases, allowing customers to use those payment methods.
Cardinal Centinel also allows retailers to offer Verified by Visa and MasterCard Secure Code, programs designed to prevent identity theft by requiring customers to enter passwords before using credit cards online.
The company was growing even without GSI and the newly signed airlines, Mr. Sherwin said. Its revenue so far this year is up 140% over 2007, excluding those large deals. The increase is largely becauseof the growing popularity of PayPal and other alternative payment methods as well as Verified by Visa and MasterCard Secure Code.
PayPal, easily the most popular of the alternative payment methods, routed $21 billion in online transactions in 2007, up from $2.7 billion in 2002, according to statistics from Needham, Mass.-based TowerGroup Inc., a research and advisory firm for the finance industry.
That number should continue to grow, as will the overall amount of money spent online, said Jennifer Roth, senior analyst in TowerGroup’s global payments group. She did not have figures for growth of Verified by Visa and MasterCard Secure Code.
A growing number of referrals also has helped CardinalCommerce.
GSI is working with CardinalCommerce because its product provides real-time data about transactions being processed, and because it watches for system failures to ensure they are fixed quickly, said Mark Walick, senior business operations manager for GSI.
“They gave us a lot more visibility into our daily transactions,” Mr. Walick said.
