Payment card acquiring is now emerging as a potentially high revenue stream for those players that fully understand the business model.
During the 1990s all activity appeared to be focused on card issuing. However, as we entered the 21st century, the development and introduction of EMV standards (Chip and PIN) and the emergence of the internet led to a renewed level of interest in the potential for card acquiring.
Acquiring Strategy
The payment card directives within the Single Euro Payments Area (SEPA) cards framework are now removing the historic barriers to the development of a truly pan-European business. Driving international growth and securing new international revenue from a previously domestic-only acquiring business requires a thorough understanding of how the value chain operates today in your own market and then re-building the model for each of your target market(s).
How can Accourt help?
At Accourt, we help to ensure that you fully understand the various components of the acquiring value chain, how they interact, what costs are attributed to each and which revenue streams can be taken to your P&L.
Acquirers
Acquirers are issued with a scheme licence giving them the ability to contract directly with merchants. Historically, the international card scheme licences operated on a per-country basis, which saw the development of domestic-only players within each market. Under pressure from the airline sector, licences were amended to allow international acquisition. This led to the introduction of multi-currency processing. Within the European Union licences were further amended to allow the holder of any individual EU country licence to effectively operate in any member state. The Single Euro Payments Area (SEPA) payment card directives are also removing a number of historic barriers to establishing a truly pan-European acquiring business.
These changes represent business expansion opportunities.
How can Accourt help?
Whilst having a licence to operate in Europe enables an acquirer to sign cross-border merchants, successful achievement of international growth objectives requires a detailed understanding of the target markets and how the various components of the value chain will be delivered in each (intermediaries, processing, acquiring). Only this will ensure that any proposition is market-enabled, attractive and able to meet the required revenue growth. At Accourt, we will work with you to help identify your acquiring opportunities - and the strategies for achieving them.
Intermediaries
Card data capture or transaction processing has moved on significantly from the days of multi-part paper, or voucher, processing. Since the introduction of electronic authorisation and data capture terminals in the early 1980s the technology has continued to evolve, adding new parties and revenue streams to the value chain, including polling bureaux, terminal suppliers, retailer-owned integrated PoS systems, bank-owned terminal estates and mail order software.
The emergence of the internet has also seen the introduction of a whole new segment: Payment Services Providers (PSPs), 3-D Secure vendors and specialist Cardholder Not Present (CNP) fraud screening providers.
What is an intermediary?
An intermediary is any component that captures transaction data for which either a service fee or individual transaction fee is paid (or bundled) within a separate Merchant Service Charge (MSC). A number of banks wholly own intermediaries, while others rely on the independent sector to deliver these services in partnership with the bank, or simply to act as a certified vendor.
Intermediaries can also facilitate access to alternative payment methods in addition to Visa and MasterCard - for example ELV in Germany and IDEAL in the Netherlands. When combined, these can make a complete proposition.
How can Accourt help?
At Accourt, we will work with you to develop your optimum intermediary strategy. We will identify the most appropriate partners for you, facilitate introductions at a senior level and help build the proposition that best suits your needs, either using your own brands (under a white-label arrangement) or by deploying a preferred or independent partner policy.
Processors
Once card data has been captured it needs to be submitted to the primary international card scheme networks. The data must be successfully converted from whatever domestic (country-specific) terminal or card-capture protocol has been used to the Visa and MasterCard ISO 8583 message standards. Interchange reimbursement flags must be applied and the data integrity validated, ensuring that all mandatory, conditional and optional fields are correctly completed.
Maintaining full compliance with Visa and MasterCard processing requirements is a significant investment - twice-yearly mandatory card scheme releases have to be planned for and implemented. A number of processors operate multi-currency processing platforms. Some processors are also able to offer multi-language statementing.
How can Accourt help?
A large number of bank acquirers no longer operate their own in-house processing platform. Some contract the service from third party processors, others create new commercial entities or joint ventures with processors to run their acquiring business. There are advantages and disadvantages in each of these models. Certainly within Europe it is always important to understand the local requirements of a market. Debit card processing also differs significantly from credit card processing given the number of dependencies in running a current account. At Accourt, we will work with you to develop an optimum processing strategy for your business, either in-house or delivered via third parties.
DCC/CPC
Dynamic Currency Conversion (or Cardholder Preferred Currency) is the process by which a cardholder can sign against a total amount displayed in their domestic currency when purchasing goods or services overseas. The exchange rate calculation and foreign exchange charge is applied by the acquirer (or their designated service partner) prior to being submitted to the issuer.
Traditionally the transaction would be passed on by the acquirer still in the original currency, and it was the issuer that would convert such 'foreign' or non-domestic currency transactions before posting them to the cardholder's account. Therefore, the issuer would benefit financially by applying a forex and/or conversion charge. Under DCC/CPC the forex and/or conversion fees become revenue for the acquirer.
When initially introduced a number of questionable practices developed in the marketplace owing to the lack of card scheme operating regulations. Most notably these included the forcing of DCC/CPC transactions without customer choice, and the non-disclosure of the forex conversion rate and any mark-up applied.
Following extensive consultation DCC/CPC is now heavily regulated by the international card schemes, and the proposition - when processed correctly - is viewed as a valuable service by the majority of cardholders, especially those managing against a budget. Certainly from an acquiring perspective the DCC/CPC proposition can provide a completely new revenue line if effectively deployed into known, high volume, non-domestic merchants, such as hotels, restaurants and tourist locations.
As an issuer existing revenue lines and cardholder charges may need to be reviewed and updated to mitigate the loss of any forex revenue; equally, new charges may need to be introduced to reflect the value proposition correctly.
How can Accourt help?
At Accourt, we have extensive knowledge of how to operate effective DCC/CPC propositions. We will work with you to define the opportunities and/or threats that the service presents. We can ensure that the correct level of analysis is undertaken and then used to identify the required currencies and map them against the most appropriate existing locations and/or potential new business segments. Even if you are not operating with a multi-currency capability today, we will identify potential partners, facilitate high-level introductions and assist in building the solution, from terminal provision through to card scheme submission and settlement.