Payment Gateways play an integral role in e-commerce and SAAS applications. Hear from Jeff Knowles-the inventor about the challenges and struggles of creating the first Payment Gateway.

1. The History of
Payment Gateways
Q & A with Jeff Knowles

2. Payment Gateways
Payment Gateways play an integral role in facilitating ecommerce. Without the creation
of a secure method for moving sensitive data the ability to conduct non face to face
commerce could not have happened. Today there are many gateway providers serving
up diverse solutions. But before 1996 there was no option. We wanted to understand
the history and genesis of the payment gateway. For that there was only one person we
could turn to: Jeff Knowles – the guy who invented the Payment Gateway.

3. Where it All Began
Agile:
“Can you tell us what you were doing
professionally at the time you came up
with the idea of a payment gateway?”
Jeff:
“I was originally an engineer at
WordPerfect and had just left there to
start a sales agent office for an ISO, in
1995, while finishing my business
schooling. “

4. The Idea
Jeff:
“The idea for Authorize.Net came from the strong demand from my
non-retail clients wanting a PC-Based processing solution, instead of a
Zon-Jr or Trans 330 terminal and printer. In early 1996, I had only 2
choices: sell my clients IC-Verify or PC-Authorize (both poor products
for PC), or sell them CyberCash (also very poor product for internet
use). Having a software engineering background, I started exploring
ways to process payments as a service for my clients, which saved
them huge upfront expense of buying outdated terminal equipment.
Bear in mind that Netscape was still the predominant browser and ISPs
were cropping up all over the country offering dial up internet, beside
AOL and others. It was really the dawn of ecommerce that year.”
Agile:
“Can you walk us through the emergence of the gateway idea? Was there anything that
specifically triggered the idea?”

5. Challenges
Agile:
“We assume there were some logistical challenges and resistance from the
powers that be at the time you started laying out the technical roadmap for the
project. Can you tell us about some of those challenges? “
Jeff:
“While initially exploring ways to create a “processing service”, there was little to
go on. Netscape had a beta “Live-Payment” application, and CyberCash had
major design flaws. There was nothing offered by Visa/MC at all. I cold contacted
First Data and obtained their leased-line spec for sending payment data, the same
spec used by many POS systems at the time for use when connected via hard
data line…(Cont.)

6. They sent me the spec with no questions asked, and I doubt they even wrote my name down.
Using the spec, and our hard line to First Data which we immediately ordered and was
provisioned by a network company called TNS, we were connected to First Data and began
testing messages over the line. During our initial development phase, while forming the
company Authorize.Net Corp and hiring additional software engineers, I began to offer
“gateway” services via a very rudimentary method of gathering transaction details from
merchants via email and fax and then parsing the information and processing it through PC
based third party software on their behalf! The response time was hours, ha ha ha. This was fine
at first until we had so many clients that we couldn’t keep up with the manual steps involved.”
Challenges (Cont.)

7. Agile:
“How did you piece together the technical capabilities and
resources to tackle the project? The payment gateway project
began at a time where PCI compliance wasn’t even a blip on the
radar. What security and fraud concerns did you have initially and
did those concerns evolve before launch?”
Jeff:
“Within only a few weeks we had tested and certified our ability to send transactions over the leased
line to First Data. This wasn’t that difficult, although their spec at the time left much to be desired. The
next step was to design the merchant interface and an API and encryption method for merchants to
send us their transactions via the internet, using standard http calls (the early SaaS). This we offered in
early 1997 after only a couple of months of engineering under our brand Authorize.Net, and merchants
could connect to us via https using standard SSL encryption, and either use our API from their own
pages, or simply login to our “Virtual Terminal”. No software download required. We believe that our
use of the term “payment gateway” was the first in the industry at that time. As far as security, SSL was
trusted by banks and was easy to implement, as opposed to CyberCash which required software to be
installed on a merchant’s server to work along with their proprietary encryption (this was their fatal
flaw in their design in my opinion).”
Concerns

8. Development
Agile:
“Can you walk us through the development of the project in terms of
a time line? For example, idea stage date, research start, idea
validation, funding requirements, VISA MC cooperation, code
development, infrastructure, beta, stable. “
Jeff:
“We started designing the first version of Authorize.Net in late 1996 and it was first available in April of 1997,
approximately 6 months later. We introduced many updates and new versions over the next 24 months, and
worked under a rapid development paradigm, with only 2-3 engineers actually writing code. Our deployment
was always stable, although we had a few minor instances of down time as we learned along the way how to
grow quickly and manage backups and redundancy. Our system was never breached by hackers. As for funding,
the original concept of the payment gateway, as we had designed it, was first rejected by our own ISO, who
lacked the vision to see what was surely coming. Instead of accepting our offer to invest with much needed
capital, we were turned down as a “bad idea”. Subsequently, my own friends and family invested about
$100,000.00 to get things started. Authorize.Net was profitable almost immediately. “

9. Initial Marketing
Agile:
“What was the initial plan to market the project
and was the plan successful or did you have to
change course?”
Jeff:
“Authorize.Net grew extremely fast, as we offered our services through many
existing merchant account sales agents all of whom were hungry for an
ecommerce product to offer their clients (just as I was doing as a sales agent).
Each sales agent could login to our system themselves and setup clients
immediately, and they participated in the revenue stream with us. This plan was
never changed due to its success. Later versions of the system included
processing of ACH payments, and support for all the major processors, and
within 2 years the company had been sold to Go2Net Inc, who continued the
marketing strategy as well.”

10. Thank You Jeff
Agile:
“Really an amazing story. You saw a need that
demanded a ground-up build out and you succeeded.
We are now almost 20 years from your invention.
Payment Gateways have evolved and are known as an
integral part of almost every payment offering. Anyone
in the payments space owes a debt of gratitude to Jeff
Knowles. Thanks Jeff.”

11. About Jeff Knowles
Jeff Knowles was born in California and resides in Orem, Utah, where he is
currently the CEO of Vision Bankcard, Inc., an innovative bankcard
technology company, which he founded in 2001, and the CEO of Vision
Capital Group, Inc. a financial services and investment company, founded
in 2008. Prior to Vision Bankcard, Jeff founded Authorize.Net Corporation
in 1996, a credit card processing gateway company which pioneered the
secure processing of internet credit card transactions. In 1999,
Authorize.Net returned 90 million dollars to its shareholders when it was
sold to Go2Net, Inc. Today, Authorize.Net is owned by Visa and boasts one
of the world’s most popular payment gateways.
Jeff studied computer science and business at Brigham Young University and University of Phoenix and
received extensive technical training at WordPerfect and Novell. Jeff is also active in humanitarian efforts,
and is the trustee of the W Jeffrey Knowles Family Foundation, which has been involved locally in drug
rehabilitation, domestic violence counseling, and education for the underprivileged, along with micro-credit
and economic development in Africa. Jeff is a regular philanthropist, having made substantial donations to
Brigham Young University and Utah Valley University, and numerous other charities.

12. About Agile Payments
Agile Payments is the #1
Partner for SAAS Recurring
Payment Needs | Helping
SAAS providers grow via
strategic payment gateway
integration.
www.agilepayments.com