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WHITE PAPER
Digital Merchant Acquiringfuturistic digital payment solution
Executive summary
How a traditional process poses problems
Smart solution and business flow
Benefits
EVRY’s offerings
Introducing a rapid evolution to payments
Adoption of QR codes for transactions
Simpler way to transfer funds
Card Interchange Network v/s Digital Interchange Network
Traditional landscape and digital landscape
Conclusion
About EVRY and EVRY’s BFS offerings
Table of Contents
DIGITAL MERCHANT ACQUIRING - WHITE PAPER
Over the past few decades, plastic money has been facilitating business between merchants and customers. The collaboration between card organizations and terminal operators is enabling transaction acquiring to develop into a prominent business among the financial institutions acting as merchant banks (acquirers) and customer banks (issuers).
In this equation, to exchange the card information among various financial stakeholders, issuers and acquirers have to share reasona-ble revenue with card organizations in conducting this business. Card organizations charge a certain percentage of amount for every transaction. These factors have made card organizations a monopolized segment today.
In addition to these overheads, neither the acquirer nor the merchant is benefiting, owing to huge maintenance costs within the transaction processing landscape. It further leads to delayed financial settlements with merchants. All these factors result in high transaction fees for merchants.
The present day’s digital world brings across various smart transa-ction acquiring solutions like NFC payments, fingerprint payments, mobile payments, etc. Moreover, these smart solutions are challenged in addressing revenue sharing among various financial stakeholders.
With an aim to generate measurable business impact, Digital Acquiring using digital QR code interchange network can make a substantial difference. It can reduce the number of stakeholders in the business chain, which in-turn generates big revenue. The digital acquiring solution also features new techniques that help in achieving direct business transaction between merchants and customers. Also, the digital QR code interchange network contributes towards saving the environment by reducing the use of plastic in cards.
Card holder
Merchant Acquirer
Card networkIssuer
Executive Summary
How does a traditional merchant acquiring process pose problems Smart Solution
Revenue sharing: Acquirers have to share revenues with card organizations and terminal operators, resulting in losses in the process.
Maintenance: Acquirers are required to maintain a high cost landscape and physically connect with all the card organizations through its technical landscape.
Delays in settlement process: Amount due to the merchants will be settled only after two days or more, followed by the transaction.
Merchant overhead charges: The fee charged from merchants is usually more.
The digital issuing bank provides customers with a QR code scanner mobile app linked to customers’ bank accounts on behalf of the digital interchange networks.
Digital merchant uses smartphone with a dynamic QR code generator mobile app pro-vided by the acquirer to authorize as well as transfer funds to the merchant.
The digital acquiring bank processes these QR code payments through the digital inter-change network on behalf of a merchant, in association with issuing banks.
Business Flow
Scan barcode / QR code
Generate master barcode
Push money to merchant
Enter amount related details
User App
Merchant App
Retrieve product
information
Scan barcode / QR code
Validate master barcode
DIGITAL MERCHANT ACQUIRING - WHITE PAPER
No revenue sharing: Acquirers need not share profits with card organizations nor share the revenue with terminal operators.
Low maintenance: Acquirers need not maintain high cost landscape. They can maintain the existing core banking landscape.
Reducing dependencies: There is no requirement for acquirers to communicate with card organization networks through its technical landscape.
No investment: Merchants need not invest in terminal operators. Instead, they can use their own multipurpose mobile phone.
Faster settlement: The amount due to the merchants from customers will be transferred immediately.
Low overhead costs: Merchants will be charged with lesser fee.
Freedom: Merchants can carry out business with any issuing bank customer.
Benefits
EVRY’s Offerings - Digital Merchant Acquiring (Using Digital Interchange Network)
EVRY can assist banks by introducing digital acquiring and prevent the use of plastic cards. We can help banks increase their revenue by avoiding revenue sharing with card organizations, terminals & terminal operators. EVRY can aid in building a separate technical landscape for processing card payments using ISO 8583 clearing & settlement gateway.
• Building their own mobile bank QR code generator / scanner applications.
• Generating QR code by using ISO/IEC 18004 standards & digital tokenization concept.
• Using digital interchange network to ensure QR code authorization between customers, issuing banks, acquiring banks and merchants.
• Ensuring DSS compliance in maintaining QR code server information.
• Migration of merchants from old ISO 8583 clearing gateway to ISO 20022 / SWIFT message gateway.
• Providing strategic solutions & services to handle various merchant-specific requirements.
We extend our support to banks in:
DIGITAL MERCHANT ACQUIRING - WHITE PAPER
Introducing a Rapid Solution for Payments
Merchant AcquiringCard holders swipe their cards to pay for the services or items purchased. The payment details (transaction) are sent to the acqui-ring bank, which processes plastic card payments on behalf of the merchant. If the card issuer bank is different, then the transaction details are sent to the issuing bank for authorization and approval. Eventually, the acquiring bank credits the amount to merchant’s account.
Digital Merchant AcquiringDigital acquiring bank (or digital acquirer) is a bank or a financial institution that processes QR code-generated payments on behalf of a merchant. “Digital acquirer” is a new term and concept. The innovative process involves generation of QR code payments for merchants through an association with issuing banks.
Payees(Merchants, MO/TO &
e-Commerce)
CardsAcquirer
Payees(Merchants, MO/TO &
e-Commerce)
QR codeAcquirer
Traditional Card Network
New Smart QR Code Network
Adoption of QR Codes for Transactions
Card Issuers (Issuer banks)In the current scenario, the issuing bank is also known as the credit or debit card company. The issuer acts as the middleman for the customer, card network and the acquiring bank by forming contracts with cardholders for the terms of repayment of transactions.
Digital Mobile Application IssuersThe digital issuing bank is a financial institution that issues QR code scanner mobile app (bank account-linked) to customers on behalf of the digital interchange networks. The issuing bank is also known as the digital QR code scanner company. The issuer acts as the middleman for the customer, digital interchange network and the digital acquiring bank. This is achieved through forming a contract with the QR code mobile app users for the terms of repayment of transactions.
A digital issuer provides customers with a QR code mobile app linked to their bank accounts to transmit this data to digital acquirers for authorization and finally to transfer funds to the acquirer.
DIGITAL MERCHANT ACQUIRING - WHITE PAPER
Simpler Way to Transfer Funds
Merchant Acquiring Equipment (POS terminal & terminal operators)A merchant is licensed to perform payment activities for Point-of-Sale (POS) terminals with the help of Payment Terminal Service Provider (PTSP) using various kinds of POS terminals like flex, tele & integrated terminals and NCR / Dankort, Verifone terminals, etc.
PTSP allows a merchant to insert, swipe or manually enter the required credit / debit card information to transmit this data to the merchant acquirer for authori-zation and further transfer funds to the merchant. Majority of the card terminals transmit data over a standard telephone line or a wired / wireless Internet connection.
Digital Merchant Acquiring Equipment (Smartphone & mobile app)
A digital merchant, having a smartphone with licensed QR code generator mobile app provided by the acquirer, will transmit the data to acquirers for authorization. Followed by this, the funds are transferred to the merchant.
Card Interchange Network (card organizations) v/s Digital Interchange Network
A card organization is a network of issuing banks and acquiring banks that processes payment cards of a specific brand. With the help of issuing bank’s orders, a card organization prepares plastic payment cards.
The Digital Interchange Network is a network of digital issuing banks and digital acquiring banks that process mobile app-generated QR code payments.
CardInterchange Network
Digital Interchange Network
DIGITAL MERCHANT ACQUIRING - WHITE PAPER
Card holder
IssuerISO8583
Acquirer
$
Processor
ISO 20022
Merchant
Terminal operator
Card network
Acquiring Card Platform / Traditional ISO 8583 Landscape
Acquirer
$
Processor
ISO 20022 network QR code network
Issuer QR code scanner mobile app
Merchant
Digital Acquiring Platform
DIGITAL MERCHANT ACQUIRING - WHITE PAPER
Conclusion
Rise in customer expectations and several new industry entrants are rapidly transforming the way today’s banking industry operates. Diminishing interaction with customers as well as maintaining long-stan-ding relationship with them have become huge challenges for banks. Implications of PSD2 compliances and open banking are creating a coarse situation for banking institutions.
Using digital merchant acquiring explores the incorporation of open APIs, which present new and strategic avenues. It helps banks offer engaging services that reach the market faster and in a cost efficient manner. Digital merchant acquirers aid banks to create and offer standalone services all by themselves. With this, banks can build unique roles & identities of their own and provide futuristic services.
It is important for banks to visualize their market position in the digital acquiring landscape of the future. Banks can formulate and implement digital acquiring strategies that are in sync with their visions. The efforts and endeavors of banks should completely focus on creating a clear, concise and organization-wide digital acquiring strategy.
About EVRY
EVRY is an established software services company offering comprehensive IT services and digital solutions. Our clients include Fortune 1000 enter-prises, software firms (ISVs) and tech start-ups. We have multiple offshore development centers in India (Bangalore and Chandigarh) that are certified for ISO 9001:2015 & ISO 27001:2013, certified for PCI-DSS compliance and appraised at CMMI Maturity Level 5 and PCMM Maturity Level 5. We have a global footprint with offices in the U.S., Singapore, India and group offices in Europe. EVRY is a Nordic IT services major with over 10,000 employees worldwide.
About EVRY’s BFS
EVRY offers a variety of banking and financial services flourishing in the era of digital disruptions. Implementing best practices helps us in exceeding the highest expectations of our customers. EVRY is the No.1 IT solutions provider in the banking and finance sector across the Nordic region. EVRY’s solutions, coupled with a comprehensive set of banking services, serve in excess of 12 million end customers.
Nishanth GarikipatiBusiness Analyst (cards & payments domain)
EVRY India [email protected]
Author
For more information about all our solutions and offerings, get in touch with:[email protected] or [email protected]
USA Headquarters:
EVRY USA Corporation1425 Greenway Drive, Suite 490Irving, Texas 75038, USAPhone: 972-514-1113 / 1-844-9-EVRY-USAFax: 972-514-1109www.evry.com/us
India Headquarters:
EVRY India Pvt. Ltd.Ground Floor, No. 42, 27th Cross Brigade Software Park 1, Building BBanashankari Stage 2, Bangalore – 560 070Karnataka, IndiaPhone: +91-80-67388000Fax:+91-80-40219632www.evry.in
Copyright © 2017 by EVRY India.All rights reserved. The contents of this document are protected by copyright law and international treaties. EVRY India acknowledges the proprietary rights of the trademarks and product names of other companies mentioned in this document. The reproduction or distribution of the document or any portion of it thereof, in any form or by any means without the prior written permission of EVRY India is prohibited.
