In this webinar, ROI Payments provides details on end-to-end transaction flows of major electronic payment types including Credit/Debit Cards, Real-time and Delayed Bank Payments, Digital Wallets, and Closed Loop Systems.
Topics include how each transaction network works, features and limitations of each payment type and which providers play key roles in each payment type. Coupled with the terminology and vendor ecosystem details learned in Boot Camp #1, ROI Payments will increase your Payments IQ with the business benefits and technical capabilities of each payment method.
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Payments IQ Bootcamp #2 - Mechanics of an Electronic Payment
1. Brion Bonkowski
Managing Director
June 6, 2013
Boot Camp Week 2
Improve your Payment IQ
Mechanics of an Electronic
Payment - “Go with the
(Transaction) Flow”
2. Notable Trends
What’s Next?
Wrap-up / Q&A
Introduction
Who is Interested in Payments?
Ecosystem Recap w/ Terms &
Terminology
Electronic Payments Market Share
Electronic Transaction Types
Deep Dive of Transaction Flows
Credit and Debit Cards - 4 Party
Credit and Debit Cards - 3 Party
Bank Payments (Non Real-time)
Bank Payments (Real-time)
Closed Loop & Digital Wallets (Point
systems too)
Agenda
3. My Story – Moving into the Payment Space
Who is ROI Payments?
Why a Boot Camp Series?
Introduction
4. Who?
Roles including Finance, IT, Sales, Marketing, and Treasury are all involved in the payment
chain at some point
It is rare when someone is specifically assigned to payments, as such many people find
themselves unprepared to navigate the payment ecosystem
ROI Payment Webinars attract
A cross section of industries, including state/local government, non-profit organizations,
eCommerce, SaaS and payment industry insiders
Senior Finance folks (CFOs, controllers, etc), technology execs, operations managers and
sales/marketing team members
Why?
People become involved in payment projects and need a holistic overview of the industry
so that they can dive deep into their project, work, etc.
Wikipedia and Google searches don’t provide a comprehensive understanding
Result?
Everybody can benefit from an increased “Payment IQ”
Comprehensive understanding helps in today’s environment (rapidly evolving)
Who is Interested in Payments
5. Recap of Five Major Categories from Boot Camp 1:
Schemes
Issuers
Acquirers
Processors
Technology
Authorization
Process for reserving funds on a card holder’s account
(reduces available balance)
Merchants use a gateway or terminal to perform
authorizations against a “front end” network and receive
auth code
No money changes hands during an authorization
Merchants ~30 days to capture the authorization
Capture / Settlement
Merchant uses an authorization code to complete a
transaction
Merchants generally close a daily batch containing
multiple auths
Amount captured can be lower than original auth
Terms & Terminology
Void
Removal of an authorization from the network
Some networks do this realtime, others do not
Refund
Used to reverse a capture transaction
References an original authorization code
Funding
Process whereby merchant receives funds from
captured transactions
10. Most typical electronic transaction
Merchant Accounting System usually managed by Processor
Credit & Debit Cards: 4 Party System
1 2
34
11. Much simpler as less parties involved
Better management of risk (chargebacks, etc) due to visibility
of both issuing and acquiring history
Credit & Debit Cards: 3 Party System
1
2
3
Note that the
issuer and
acquirer are the
same party
12. Originating/Receiving Depository Financial Institution
No authorization or guaranteed funds
Costs less than cards due to lack of interchange
Bank Payments (Non Real Time)
Merchants
Originating Bank
Customers
Bank
13. In several markets, banks or groups of banks have teamed up
to provide Real-Time Bank Transfers.
Real-time bank transfers give an immediate online
authorization/confirmation of funds availability.
Quick settlement (usually next-day), security for the merchant
as payments are guaranteed (no chargeback)
Security for the consumer (consumer interacts with their own
online bank application)
Often more cost-effective for higher value transactions,
combining the benefits of a card-based transaction with the
benefits of a bank-based payment.
Bank Payments (Real Time)
14. Closed Loop system doesn’t need to contact a 3rd party
network for auth, settlement, etc - it is all Internal.
Best known example is a merchant gift card – with the
most popular being Starbucks card
Digital wallets such as PayPal, Facebook Credits, etc
are emerging
Decidedly simpler than open-looped systems (aka multi-
party networks) because the network, issuance and
acquiring is all the same company
These payment schemes generally come about in
verticals or controlled markets (Starbucks, Playspan,
etc)
Closed Loop & Digital Wallets
SBUX Card is a gift
card morphing into
a payment network
15. Innovation in payment networks being born from competing agendas:
Google, ISIS, Amazon, etc
Mobile Payments: Lot’s of buzz but no real winner yet as there has been
very little consumer benefit
New Business Models – LevelUp and Google are willing to give away
processing in return for advertising opportunities and data
eWallets and Closed Loop networks will lead innovation vs multi-party
networks
What’s Next and Should we Plan for Changes?
16. Relevant Acquisitions
American Express:
Payfone for mobile payments
Sometrics as a virtual currency and offers platform
eBay/PayPal:
FigCard- mobile payments
Zong- enabling phone bill billing for ecommerce
Gifts Project- enabling group buying
Google:
Lending Club- a peer to peer lending platform
TxVia- a prepaid processing platform
Zave- digital coupons and loyalty
Google:
Lending Club- a peer to peer lending platform
TxVia- a prepaid processing platform
Zave- digital coupons and loyalty
MasterCard:
Linkable- turns ads into linkable offers tied to
credit cards
Truaxis- a merchant funded offers network
Visa:
Playspan – Game specific closed loop network
and players card
Fundama – Mobile based prepaid platform for
unbanked consumers
Square – App and Hardware for in person
payments