Jaime González Gasque
Agility will be key for acquirers as they meet merchants needs for new instruments
New payment methods mean a new way of thinking for acquirers. It’s time for a stepwise approach to meet merchant requirements.
The importance of account-to-account (A2A) payments is growing. Request-to-Pay (R2P) and real-time payments are a great asset for e-commerce transactions. New wallets are constantly being developed – including card-based wallets. Acting quickly to develop and deliver new capabilities to merchants will give you a competitive advantage – but your existing systems must be up to it.
The need for flexibility
Merchants should be equipped to handle all payment methods – which requires integrations with different APIs across a complex network. Simplicity for merchants has to be key, i.e., handling everything for them except the end payment step. Those banks that provide a one-stop solution will be the number one choice of merchants. For acquirers it means being adaptive to the future payment methods – a flexible payment platform is imperative.
Multiple payment methods
As we know, today, many customers still pay with cards. Tomorrow, the same customers may want to pay with Apple Pay, Garmin Pay and a card, or another wallet, such as Swish, Vipps or any other payment method, based on cards or instant payments. Not surprisingly, this can be confusing for merchants. As an acquirer, it’s vital to provide a multitude of payments in a straightforward way so that merchants can service their customers. This means providing easy integration and holistic views of merchant transactions, among other things.
From what we have seen so far, we expect that most merchants will want a stepwise rollout of alternative payment methods – rather than pushing out all the potential capabilities at once. So, what might a flexible service platform look like that could support this through the addition of new payment schemes over time?
We believe a hybrid model at the core would be the ideal option. It would be a single platform with dual rails, i.e., account-based and card-based payments. This would enable a system to be built that could support instant payments as an extra layer to the cards platform.
What does this mean for an acquirer?
To take full advantage of this you need to think about building new products on a new platform. Essentially, transitioning stepwise from an existing cards platform to a modern ‘all payment’ platform. And, when you do this, it’s best to choose a vendor that has extensive experience and a modular platform solution. Of course, transitioning to a modern platform offers many additional benefits, such as lower maintenance requirements, a modern product offering, automated reporting tools, advanced fraud management, and effective settlement.
There are however a number of key considerations that should be taken into when processing account-based payments:
Certain fees can be calculated and passed on to merchants. Typically, merchant service charges tend to be based on turnover and include services such as sending messages, among other things.
Even though account-based payments could be based on instant payment rails, meaning merchants’ accounts should be instantly credited, this is not always the case. In some instances, i.e., for high risks merchants, a bank may want to do a risk assessment before transactions are credited.
It may even be necessary to keep a deposit from a merchant as collateral. This amount could change based on the actual turnover of the merchant – similar to the way it’s done with cards.
Not all the merchants will be willing to accept every transaction being credited separately to an account – particularly large merchants with thousands of transactions per day. One solution would be for an acquirer to accumulate transactions and credit a merchant’s account in bulk amounts with detailed reporting. Obviously, the frequency of payments would have to be agreed upon with the merchant.
Risk and fraud monitoring. This should not be limited to the moment when funds are received but also be done when merchants generate, for example, an RtP message. This would mean checking that amounts are in line with a merchant’s business.
We believe that a stepwise approach is the best way forward for acquirers. By that, we mean old services can be kept on an older platform initially, while new solutions should be built on a new platform. These can run in parallel until the time is right to transition all services to the new platform and retire the old one.
It’s also important to consider that there are multiple similarities between account-based payments processing and card transactions. Therefore, working with a vendor who has vast experience in both of these areas, will mean you can take advantage of this expertise.
Toms Jansons Lead Payments Offering Manager