As any seasoned treasury or finance practitioner knows from experience, organizations dealing with numerous banking partners must account for a broad and constantly shifting range of protocols when it comes to processing payments. For instance, if a business has relationships with six or seven banks spread across the globe, it could easily be looking at 25-plus variants of payment formats. 

In a recent PaymentsJournal podcast, Jon Paquette, Executive Vice President of Solutions and Product Strategy at TIS (Treasury Intelligence Solutions), and Albert Bodine, Director of Commercial and Enterprise Payments at Javelin Strategy & Research, discuss the best practices for dealing with multi-bank connectivity and payment processes.

The Challenges of Automation

Given the variances that occur across different banks and regions for financial messaging formats, remittance data fields, regulatory reporting standards, etc., dealing with multiple banks can become very complex for organizations to manage. And it’s not just the bank connections themselves that need to be managed, but also the systems that leverage those connections. According to Paquette, operators of ATMs or payroll systems up to TMS and ERP users would all benefit from using an efficient model that allows those systems to tap into a unified connectivity structure that enables straight-through process automation.

Of course, it will never be feasible for an organization to use just a single bank relationship globally. One reason (out of many) is for insuring against bank failures. “Corporates that have relationships with non-globally systemic important banks are multiplying their number of bank relationships for fear that their deposits may not be insured beyond the $250,000 level,” Bodine said. But as the number of bank partners and underlying accounts rises, “the ability to manage all these different portals, protocols, and interfaces becomes a major obstacle.” 

Bank connectivity drives a great deal of process automation within finance. Payments are a critical piece of the puzzle, but organizations also use inbound bank reporting to automate financial records and accounting entries. Treasury, for one, relies substantially on bank data as fuel for its cash forecasting and cash positioning functions. And without a unified connectivity strategy, it can be difficult to maintain visibility across each regional finance center or shared service center, as well as across various entities, business units, and bank groups. 

Breaking Down the Silos

Paquette points out that it’s difficult to maintain consistent controls without straight-through processing in place, to make sure that all the subsidiaries are executing payments in the same way. A lack of standardization can introduce extra risk to the payment process, which becomes a significant issue for some organizations as data management strategies take on greater importance. Without a holistic bank connectivity solution, banks often end up operating in data silos.

“If you have a multi-ERP technology structure, for instance, you’re likely using different systems in different regions, and you’re connecting your banks to those localized systems,” Paquette said. “You end up with data trapped inside localized silos that are driven by the systems in use across those regions. Having a more comprehensive connectivity strategy (i.e. all banks or ERPs feeding into or connected by a central system) helps to break down those data silos.” 

As companies are growing, trying to implement automated processes can result in extra confusion, a lack of control, and a lack of visibility. It can also become chaotic for finance to manage rapid growth as things change within the business – such as what is caused by multiple acquisitions of companies each with their own preexisting set of bank relationships and back-office systems. And without a definitive strategy in place, many companies focus on the big targets – such as the main cash management banks – but tend to overlook the outliers because they add too much complexity. 

“As a result,” Paquette said, “these partial implementations don’t serve the organization the way that they were intended to.” The end result is even more siloes and continued inconsistency with reporting and visibility.

Weighing In-House Solutions

When it comes to solving the above issues, some organizations focus on developing strong in-house resources to unify their banking landscape. If a company has a large and experienced IT team with ample bandwidth, this can definitely be accomplished. But there’s always a bit of a balancing act: Is it really worth IT’s time and effort to manage a project of this magnitude in-house, or is it more cost-and-time effective to hire an external resource and focus on something else internally? Often, internal strategies appear to be the better solution early on, but end up incurring huge IT maintenance costs – not just for initial development, but also for ongoing upkeep. Accounting for those internal costs makes the business case stronger for adopting a specialized, externally managed solution. 

“If you’re working with five to seven banks, there’s already enough complexity to start thinking about hiring a specialized provider for your connectivity strategy,” Paquette said. “It allows you to put in place a centralized connectivity hub where the provider is connecting your different bank relationships in a multi-protocol fashion.” That way, as your company expands to encompass potentially dozens of banks and hundreds or thousands of accounts, a strategy and solution is already in place to accommodate the growth.

“If you have a mix of protocols like API and host connections, all those can connect into that centralized hub,” Paquette continues. “That gives your business just one point of entry into their bank relationships. If you’re connecting ERP systems, payroll systems, and a TMS, one connection to that hub can give you access to your entire bank portfolio within each system, versus thinking about each individual connection and managing those back and forth. We find this to be a really effective strategy.” 

With a decentralized finance structure and regional shared service centers that operate autonomously, getting visibility into those processes can also be a challenge.

“The example I like to use is with the ISO 20022 protocol,” Bodine said. “There are now 60 different implementations of this so-called standard. That’s just one example of why you would not want to manage this in-house. Organizations simply don’t have the bandwidth to do this, in my estimation. You would want to partner with an organization like TIS that really knows what they’re doing here.”

Once a company has a connectivity hub in place, major simplifications can ensue. With a single payment instruction format sent into that hub, the software can conduct the transformations into the ISO variants and pick up all the geographic nuances. It also alleviates any strain on internal IT teams to constantly maintain and update those variants in-house.

Key Questions

Treasury, finance, and IT teams aiming to take their organization through a global payments transformation or banking process overhaul should ask themselves a few questions: 

• Is there a global process owner for payments? Today, many organizations are seeing their treasury teams serve as the global business owner of the payments process, driving how the business will make payments and putting scalable models in place to fuel growth. If no “global owner” exists, aligning on who the owner should be will help establish responsibility for creating a standardized and unified strategy to orchestrate them over time.

• Do you understand all the ways that your business makes payments? “Map all the different ways your business is making payments across treasury, AP, expense reimbursements, payroll tax payments, etc.,” Paquette said. “It needs to be a full mapping of how those payments are made, what systems are involved, what geographies are encompassed, and what existing controls are in place.” 

• Do you have consistent payment guidelines? If not, using an approval process that’s dictated down from the treasury level that can then be adopted within the business is a great strategy. This pays dividends when the organization can bring in standardized approval processes via automated workflows through a payment hub.

• Are there gaps in your visibility? “We speak with many businesses where treasury wants to achieve a greater view of what’s happening for control purposes or even just for cash management purposes,” Paquette said, “just to know what’s happening on a day-to-day basis.” Often, one of the best places to start is by examining bank connections.

The post Managing Multiple Bank Connections: A Primer for Payment Processors appeared first on PaymentsJournal.

As the U.S. banking industry moves toward embracing real-time payment systems, a recent survey underscores the importance of strategic planning, the challenges faced by legacy systems, and how collaborating with trusted partners can help organizations navigate this transformative journey.

This fourth annual survey from the U.S. Faster Payments Council, Glenbrook and Volante, a cloud payments modernization partner to financial businesses, asked the opinions of 427 market participants, 60% of whom work for a financial institution or a facilitator. This year’s survey recorded the highest level of satisfaction with the industry’s progress toward the adoption of faster payments. Across the industry, 51% of respondents—including 61% of financial institutions—say they are satisfied.

Implementing RTP^® and FedNow^®

The most significant development in real-time payments has been the introduction of FedNow in July 2023. That followed the launch of Nacha’s Same Day ACH in 2016 and The Clearing House RTP Network in 2017.

Among financial institutions, plans for these services are robust, with 88% of the survey respondents saying that they will implement FedNow and/or RTP within the next two years. RTP has been implemented more, with 61% of FIs saying that process is underway or complete. FedNow, less than a year old, has been or soon will be implemented by 44% of respondents. Only 12% of the FIs say they plan to wait more than three years to implement these payment services—or won’t implement them at all.

The survey also asked about future deployment strategies. For FedNow, 44% said they will support send and receive services initially, with 48% planning to add send services eventually. Only 8% said they will remain a receive-only organization. The figures are similar for RTP: 50% say they will support send and receive services initially, with another 34% adding send eventually. This leaves only 16% expecting to be a receive-only organization long term.

Reaching for Outside Help

For companies planning to use RTP and FedNow, 46% say they will connect to both via a third-party provider, compared with 32% who say they will connect to each system directly. The preference for working with third-party providers is understandable, as the integration and operations of these systems can be resource-intensive.

To help ease the barriers to adoption, many FIs have been turning to technology providers that focus on simplifying deployment and operations. Outsourcing the entire operation can also reduce overhead, allowing institutions to focus on innovation and opportunities to monetize faster payments. Other important considerations that respondents mentioned included software-as-a-service business models, providing scalability without extensive hardware upgrades and resilient disaster recovery services.

In addition to a faster time to market and lower operating costs, the survey respondents noted that they were interested in many of the value-added services that third-party providers can offer. Among them:

• Enabling proxy/alias (e.g., phone number) for payment initiation
• Confirmations sent to sender and receiver
• Enabling a QR code
• Recurring/automatic payments
• Appending additional remittance data

Changes Over Time

Over the four years the survey has been conducted, the top challenges with faster payments has changed little in the rankings. This year’s survey found that interoperability is considered to be “very important” by 71% and “somewhat important” by 21% of those surveyed. That total of 92% has been largely consistent over the four annual surveys.

On the other side of the coin, lack of ubiquity/interoperability continues to be the most common concern. Roughly 57% of financial institutions and business respondents mentioned it as an issue.

This is the only concern that earned such a strong consensus among these two groups. On other topics, the two groups had some severe disagreements. High upfront implementation costs were the second most common concern among bankers (59%), whereas only 33% of business respondents saw this as a top challenge. Similarly, 40% of financial institutions see “insufficient readiness to manage risks in a real-time environment” as a top concern, compared with only 10% of businesspeople.

Only 27% of respondents say they see an increase in fraud related to their faster-payments operations. Although that’s not a large number, it’s important to note that it has doubled from 13% in 2020.

There is overwhelming support for including dispute resolution as an inherent feature of faster payment systems (81%), similar to what’s done by credit card networks. This support has increased by 10 percentage points over the four years of the survey.

The survey also asked about cross-border payments. With regards to the RTP Network, 39% of the respondents say they are either using or plan to use its cross-border payment capabilities. Some 50% said they are unsure if they will use it, and only 11% said they will not use the feature. With FedNow, 77% said the system should offer cross-border faster payments.

Conclusions

The survey portrays an industry in the early stages of transitioning to a real-time operating environment, particularly for FedNow.

Real-time payments are quickly becoming a necessity for financial institutions to offer so they remain competitive.

The industry needs the freedom to evolve its existing systems and operations through innovation that can complete the transition to a new level of service and a new way of imagining the payments business. Along the way, trusted partners can provide the support and insights to clarify strategy and support complex transitions.

Download Volante’s U.S. Faster Payments: The state of the nation report to learn more about the evolving landscape of faster payments.

The post Payments Processing Survey Shows Progress for  FedNow, RTP appeared first on PaymentsJournal.

Bank connectivity and payment processes are critical operations for any business. With the introduction of multiple banking relationships, payment processes have become increasingly complex, requiring more internal knowledge and even external expertise.

In a recent PaymentsJournal webinar, Jonathan Paquette, Senior Vice President of Solutions in the Americas at TIS (Treasury Intelligence Solutions), and Albert Bodine, Director of Commercial and Enterprise Payments at Javelin Strategy & Research, delve into the most common hindrances to bank connectivity and payment strategies, the consequences of not optimizing bank connectivity and payment management on a global scale, and key strategies in implementing bank connectivity and payments effectively.

Common Challenges to the Implementation of Efficient Bank Connectivity and Payment Strategies

According to Paquette, companies typically have multiple bank relationships. Each bank has its own protocols, payment methods, and formats. Bringing all of these elements together under one single and unified connectivity strategy poses a significant challenge. To address these connectivity protocols, organizations have resorted to using outside resources or relying on their internal knowledge base to manage all of these elements.

Another issue is the complexity of systems. The implementation of global bank connectivity and payment processes requires them to be integrated into a back-end system.

“A lot of companies are multi-ERP,” Paquette said. “I think at the minimum a company is going to have an ERP system, likely a TMS. Also, a payroll application, and each one of those systems is going to need to leverage that communication to the bank or have their own independent communication channel to the bank, too. So that’s a big consideration for a lot of companies.”

Paquette added that a designated person who is well-versed in these matters will be best suited to put connectivity strategies into place.

Lack of internal knowledge is another issue organizations face. It becomes increasingly complex to maintain different formats and the various connectivity protocols among the vast number of banking relationships. The revolving door of banking relationships and the IT bandwidth required to support those changes add more complexity to the process.

“And I’ve been very outspoken with our large corporate clients about the need to have external expertise because I’m finding that even some of the largest corporations in the world don’t have the resources to do this type of thing,” Bodine said. “And it is just a bear to manage all this.”

The Consequences of Not Implementing Connectivity Processes Fully

It is not recommended that organizations attempt to implement connectivity processes in a partial or fragmented way. Doing so could lead to a host of problems. Paquette has seen this firsthand, revealing that route inevitably leads to a partial automation of the process. Cash management banks might process 60% to 70% of their transactions via bank connectivity and payments and decide that this requires a tremendous amount of work, thereby ending it there. However, the remaining 30% to 40% still needs to be processed manually. This introduces the possibility of human error as well as security risks.

There is also the question of data aggregation and analysis. Many times, the data is siloed into different sources.

“If some things are flowing from the ERP straight through processing and others are going through an e-banking portal or some other system, right then you’re suddenly finding yourself with all these sort of data silos,” Paquette said. “No way to bring all these data points together for analysis purposes and to make your business better.

“So, all the usual ones, excessive costs, the maintenance and the upkeep of multiple different processes come into the fold as well.”

Said Bodine: “I was writing recently about the costs and the downsides associated with halfway strategies, as I like to call them, and people sort of do the bare minimum and then they forget about it. But they’re not focused on continuous improvement like a full API first strategy or ISO standards to the extent that they are standards, but those are super important.”

Key Strategies for Optimizing Connectivity

The solutions to enhancing the implementation of connectivity will greatly depend on the level of complexity within the business. For example, if it is a treasury operation with one or two banking relationships, then one or two systems would be recommended to connect with. It can potentially be managed in-house as well.

“If you do have resources that are really knowledgeable about this or maybe just the opportunity to bring in some process redesign consultants or bank connectivity experts who can help you get everything connected up through whatever method you might have,” Paquette said.

“Maybe your ERP has a connector and can centralize all this information in.”

For companies that have more than 100 bank relationships worldwide, outsourcing is recommended for this task. With that many banking relationships, it’s inevitable that inconsistencies will be high. Maintaining different formats daily to execute transactions will be a daunting task. Many of these strategies can be reined in by using a connectivity hub where most tasks would be managed by a specialist in a unified place.

TIS Helps Companies Understand Their Payments Process

Paquette noted  that it’s vital for companies to understand the way they make payments. It is important that organizations get familiar with how their ERPs send files to the banks, know the inventory of all the e-banking portals available, and be familiar with the manual payment processes that are occurring.

One recommendation he makes to clients is to map out all of these variables. Businesses must process payments in an efficient, secure, and cost-effective manner. Finally, once all of these details are mapped out, organizations must determine what knowledge base they possess internally. If they are missing elements of that knowledge base, the next step is to seek external expertise.

The post Bank Connectivity and Payment Processes Must Follow Best Practice Protocols appeared first on PaymentsJournal.

Despite technology’s move to the cloud over the past decade, many payment processors still use old, outdated platforms that are inflexible and costly. 

Payment processing companies such as PayiQ, a division of Quisitive, are creating new payment processing platforms that use cloud technology. These systems provide everything traditional payment services do but also leverage cloud-based architetcture to make transactions faster, more secure, and automated.  

During a recent PaymentsJournal podcast, Dan Devlin, Senior Vice President of Solutions & Strategy at PayiQ, Tom Byrnes, Senior Vice President of Marketing at PayiQ, and Daniel Keyes, Senior Analyst of Merchant Services at Javelin Strategy & Research, discussed the many benefits of cloud-enabled payments processing and how it better positions specific industries, including retail and food service, amid economic and demographic headwinds. 

What is Cloud-Enabled Payments Processing? 

Cloud-enabled payment processing has two main components. The first is processing payments quickly and reliably. Cloud technology helps with this by spreading servers out across multiple locations, so if there’s an issue in one geographic area, the system can still work without disruption. This also helps with response time because there are multiple routes that can be optimized in real time for the transaction data to travel.  

Cloud architecture is designed with the latest security protocols in mind, which help protect it from threats such as hacking and data breaches. In PayiQ’s architecture, its cloud-enabled platform also acts as an integrated order processor in addition to handling payments. This means the platform allows merchants to consolidate both payment and order information in one place, creating a single lens into both transaction and individual order data that makes it easier and more efficient for them to run their businesses. 

“In the past, if a merchant wanted a report of their transactions, it would be a time-consuming and custom project,” Devlin said. “Traditional payment processors had to create a special report to get access to that data, and downloading those reports was a difficult, frustrating, and often expensive process for merchants.”  

With modern cloud-enabled technology, accessing and downloading such reports is both much easier and faster. This is especially true for public clouds such as Azure, which can enable merchants to get reports far more quickly and efficiently. 

Using Data as a Value-Added Product 

Payment processing technology is generally based on pre-Internet technology stacks that are just starting to move into the information age. This can be seen most clearly in the operations of independent sales organizations (ISOs), which are specialized third-party companies that partner with credit card processors and acquiring banks to sell payment processing services to merchants.  

ISOs have been slow to adopt new technologies—the industry has traditionally relied on paper-based processes, such as filling out applications and contracts, and using Excel spreadsheets for record-keeping.  

PayiQ recently commissioned an independent national survey of ISOs and found that the process of getting new merchants on board—vital for this sector—is slow and expensive, often requiring a lot of people. 

“For most ISOs, the average onboarding process alone takes three people, as much as three to 11 days, and anywhere from hundreds to thousands in overhead,” Byrnes said. “While every account is different, the longer boarding times can be attributed to incomplete applications, higher risk profiles, or issues that emerge during the underwriting process.”

To help improve this situation, PayiQ has designed a platform that can support a suite of automated tools that make the onboarding process, chargebacks, and residual management fully digital, faster, and less expensive. What’s more important, the platform allows merchants to see the behaviors and product preferences of every customer that pays with a card across all channels, including in-store transactions. This data can help merchants personalize their communication with customers to better align with their business goals and objectives. 

“Because we sit in the payment flow, when somebody pays for something, our platform sees whether that card has ever been presented in our system before,” Byrnes said. ‘If not, we grab it, do a mathematically secure one-way hash (cryptographic encryption), secure the card as an identifier in a cloud, and then pin all the transaction and order data to that card to create an individual-yet-anonymous profile for each customer.”  

Value-Added Products in Payments Processing 

The phrase “omnichannel payments” has become a buzzword, but most of the companies claiming to do it are not living up to the hype. 

What helps PayiQ be omnichannel, as opposed to other payments processors, is that it tracks payments and orders not just in digital or mobile channels but also across brick-and-mortar locations. The company provides real-time tracking of behaviors and purchase preferences of all card-paying customers across every channel, including online and offline, even for orders that are placed online but are for in-store pickup.  

“Despite the rush to online buying that we all made during the pandemic, roughly 86% of all goods and services are still sold in a brick-and-mortar location,” Byrnes said. “That is a massive blind spot for the current crop of “omnichannel” tracking systems that really only focus on digital transactions. With PayiQ, you can see online and offline in real time, even if an order comes in online for pickup, which is increasingly common now.” 

Data Security is Critical

In today’s economy, processing payments is table stakes and PayiQ believes that innovation comes from  creating value-added products that harness the data from those transactions and makes it actionable. 

While the company offers data capture and analytics as a value-added product by providing a single view of the behavior of previously anonymous customerss across online and offline channels, security features are just as important. 

Cloud-enabled processing is secure because the system is designed to allow access only through payment transactions with specific credentials. At PayiQ, the sensitive payment data is instantly tokenized, or encrypted, to make it unusable to hackers. Merchants can access the data in a secure-but-anonymous form that doesn’t reveal sensitive customer or payment information.

“Handling changes in regulations is extremely important because they’re changing so rapidly,” Keyes said. “Data needs to be taken care of very carefully, and it’s difficult for merchants to do because they’re busy selling stuff. Having support with handling regulations can really help businesses thrive.” 

Value-Added Benefits for Merchants 

Having a cloud-enabled payments processor also carries additional industry-specific benefits, particularly for the retail and restaurant sectors. To understand these benefits, it’s first important to know that these industries are going through two seismic shifts.

The first is that the pandemic has changed how consumers shop. Many have turned to digital channels for their everyday needs, making it hard for businesses to make personal connections with their customers.  

“What I’ve seen is an explosion of what is known as the unattended space,” Byrnes said. “On a recent trip to Southern California, I saw automated kiosks selling sandwiches at the airport and a toiletries kiosk at my hotel. Also, the third-party delivery services for meals or shopping that have become so common keep the personal customer data and order information. That’s a domain that has always been with the merchant.” 

In both cases Byrnes cited, the customer is at an extra level of removal from the merchant. “That impacts their ability to engage and develop a meaningful, long-term relationship with that customer,” Byrnes said. “In the case of even a delivery system, the delivery company keeps the personal data, the order data, (and) not the restaurant—and that’s a huge problem for them because it reduces the frequency of direct touches or engagement with a brand that is critical to providing the kind of customer experience that builds lasting loyalty.” 

The second big shift lies in demographics. In the 2020s, the population movement will be profound. Baby Boomers are a large generation that is now retiring from the workforce in huge numbers.  It is being replaced by smaller generations, and that’s resulting in fewer workers to go around, according to Byrnes. What’s more, Millennials are not like their parents were. They are more technologically sophisticated, educated, and brand-centric, plus they are aware of the value of their personal information “All of a sudden, you’ve got merchants struggling to find employees and new ways of connecting with their customers to deliver a consistent brand experience. To fill the that gap, they are starting to put more technology between them and their customers,” he said. 

Ultimately, merchants are trying to navigate these changes while maintaining a strong connection with their customers. As demographic trends continue to change, new technologies  will likely be doing the same amount of work with fewer people. An advanced cloud-enabled payment processor designed to deliver customer insights with advanced security can help merchants move in that direction. 

The post Cloud-Enabled Payments Processing Helps with Demographic Headwinds  appeared first on PaymentsJournal.

Every business has a certain number of necessary friction points—such as requesting billing and shipping details—when it comes to payments. But too much friction can drive even the most patient customers away.

In its “Friction – Friend or Foe?” ebook, Ekata looks at how merchants can optimize the friction they apply in their payment processing and strike the right balance between preventing fraud and valuing the customer experience.

Types of Friction

Friction is essential in the customer experience journey. It slows down the process, helping merchants ensure that a transaction is safe and secure. Deciding on a friction strategy is equal parts science and art. Friction can be introduced anywhere in the transaction process—during the account sign-ups, when a credit card is added, or when the customer selects a shipping address. But according to Ekata, “the strategic differentiator when it comes to preventing fraud without creating undue friction is identity verification.”

Whenever possible, companies have customers set up an account so their identity can be verified. This can involve strong authentication measures, such as multifactor authentication, which requires customers to provide multiple pieces of evidence to verify their identity, including a password and a one-time code sent to their phone. Strong authentication can help reduce fraud by making it more difficult for hackers to gain access to accounts or steal sensitive information.

Identity verification doesn’t need to be the same for all customers. In fact, according to Ekata, “the merchant who rises to the challenge—protecting themselves and their consumer, whilst ensuring a fast and easy transaction—is the merchant who deploys a comprehensive, layered identity verification solution; one that boasts an array of dynamic, intelligent ‘step up’ escalation methods. By applying the ‘right friction’ when needed, faster payments can be facilitated while fraud is deterred.”

Right friction is arrived at by doing risk-based authentication, which adjusts the level of authentication required based on the perceived risk in the transaction. For example, if a customer is making a large or unusual purchase, the payment system may require additional authentication steps to ensure the legitimacy of the transaction. Customers who have shopped with a merchant before or are less risky based on their information may skate through with minimal friction, while riskier customers are asked to jump through more verification hoops.

Guest Checkout: A Necessary Risk

Customers who don’t want to go through the effort of signing up for an account with a merchant tend to go through the guest checkout process. Guest checkout, however, does come with its own risks. In fact, identity verification is not as easy, and chargebacks are more difficult to identify as fraudulent. According to Ekata, a retailer can ship a purchase to an address that was provided during guest checkout, then a few weeks later see a chargeback for that very purchase, with a consumer’s claim that nothing arrived. The merchant, in this case, loses revenue. Depending on the cost of the item—and the frequency with which this occurs—chargebacks from guest checkout purchases may end up being costly for merchants.

That said, there’s also a risk involved in not letting through customers who want to use guest checkout, along with the potential loss of revenue from declining those customers.

The best solution for guest checkout is verifying the customer’s information without concluding whether the information is actually associated with the customer, according to Ekata.

Eliminating Unnecessary Friction

While the above-mentioned types of friction are important in preventing fraud, other types are not. Some user interfaces are clunky, unclear, and frustrating to work with. Reducing such friction can involve designing a user-friendly interface, providing clear instructions, and minimizing the number of steps required to complete a payment. By streamlining the payments process, businesses can reduce customer frustration and increase the chances that a transaction will be completed.

Minimizing unnecessary friction can be as simple as identifying friction that isn’t absolutely necessary and removing it. An example might be double-checking an address and sending an email validation link.

It’s also helpful to invest in a faster processing bank or payments system, which automates authentication tools. According to Ekata, “this might be moving away from manual review processes for all transactions and adding faster, automated solutions that speed up good transactions and add friction to potentially bad ones.”

One last approach is giving customers who see their payments rejected a last chance. “This could mean training a team of skilled agents to make account remediation calls, allowing users to transact in a monitoring state that restricts their access to your product; or using third-party data providers for document verification, biometric analysis, or linkage-based data verification,” Ekata noted in its ebook.

Conclusion

There are several ways to maximize friction in payments to reduce fraud and optimize the customer experience. These include implementing strong authentication measures, using risk-based authentication, designing an easy-to-use payment process, and ensuring that payment systems are secure and up to date. Businesses can do this in-house, but it may be easier to farm such functions out to a third-party company.

Ekata’s Identity Engine can validate the legitimacy of customers’ information (name, email, phone, IP, physical address) and determine how those data points appear in other digital interactions. Using the Identity Engine, the Ekata Transaction Risk API generates validity markers and identity scores, which help merchants do risk-based authentication.

The post Too Much Payments Friction Can Lead to Customer Chafing appeared first on PaymentsJournal.

In a world of instant payments and high consumer expectations, businesses need to process and resolve payments as quickly as possible. That’s why Dojo, a UK-based payments technology provider that works with more than 50,000 businesses globally, sought to provide payments processing services to its business clients that would be faster than the existing industry average.

To do so, Dojo required a co-location and digital infrastructure platform partner that could provide the security and fast interconnection required for a scalable, high-performance, multi-cloud environment. This infrastructure would need to access services on Oracle Cloud, Amazon Web Services (AWS), and Google Cloud, and securely connect this physical infrastructure to Dojo’s cloud-based applications.

In this recently published case study, Dojo described the process of partnering with digital infrastructure company Equinix to connect with all these different platforms and create an infrastructure that enabled Dojo to deliver best-in-class payments processing speed to its business clients.

Creating a Multi-Cloud Strategy

In order to meet the increased demands of the businesses it works with, Dojo needed to create a multi-cloud strategy for its digital payments processing platform. This required both hosting physical, on-site entry points for various payment networks such as Visa and Mastercard, as well as point-to-point encryption devices and hardware security modules (HSM) for processing security operations based on digital payment regulations.

Dojo processes payments from a vast network of 70,000 card machines and, thus, required secure, instant communication between its hosted cloud providers and its on-site hardware. As such, the company contracted with Equinix to build a hybrid multicloud infrastructure. Dojo deployed systems in two Equinix data centers, where it could securely operate its physical devices and have speedy access to all the applications stored in the public cloud.

From there, Equinix’ Fabric software enabled Dojo to connect on-site applications to secure cloud on-ramps with high-speed, single-digit latency in order to accelerate customer payments processing. Equinix further provided direct, dedicated carrier-grade network links that connected the two data centers.

Dojo also used the Network Edge software service from Equinix so it could expedite the deployment of Cisco CSR 1000V virtual routers in both the London and Frankfurt data centers to speed and scale connectivity to the public clouds virtually and without additional hardware.

Dojo’s front-end credit card payment services then became accessible to customers via AWS and Google Cloud, which connect to the company’s payment network switch and clearing processes on Oracle Cloud via Equinix Fabric with Oracle Cloud Infrastructure (OCI) FastConnect.

Faster, More Reliable Payment Service Delivery

Dojo’s partnership with Equinix enabled the company to deliver faster, more reliable, and more secure payments processing capabilities to its customers. By creating a high-performance, scalable digital infrastructure, Dojo was able to attract larger business clients, including those that process tens of thousands of payments daily. Dojo was able to serve these new clients without any lag in speed or performance, providing them with a seamless payments processing experience. Such scalability is vital for Dojo to expand its client base.

Furthermore, Dojo can scale its services as needed due to the high-speed connection between the Equinix data centers in London and Frankfurt and Oracle Cloud, AWS, and Google Cloud. This enables Dojo to conceivably serve any business of any size – no matter how large – effectively with quick payment processing services. This infrastructure also can power Dojo’s expansion globally and serve businesses in any number of geographies, since Equinix operates data centers in more than 240 locations around the globe.

As an environmentally conscious company, Dojo also prioritizes sustainability and renewable energy sources. Equinix also shares the same commitment and uses 100% clean and renewable energy to power its global platform, making it not only an optimal strategic business partner to Dojo, but a partner that shares the same ideals as well.

“Equinix is the Rolls-Royce of data centers and digital infrastructure platforms. It provides our customers and us with the reliability, security, and performance we require to accelerate and scale our payment services internationally to stay ahead of the competition,” explained Nick Fryer, Chief Technology Officer at Dojo. ““The connectivity between Oracle Cloud, AWS, and Google Cloud is crazy fast.”

Equinix (Nasdaq: EQIX)  is the world’s digital infrastructure company™. Digital leaders harness Equinix’s trusted platform to bring together and interconnect foundational infrastructure at software speed. Equinix enables organizations to access all the right places, partners and possibilities to scale with agility, speed the launch of digital services, deliver world-class experiences and multiply their value, while supporting their sustainability goals.

The post Equinix Helps UK-Based Payments Provider Enable Faster, More Reliable Payments Processing appeared first on PaymentsJournal.

Mobile payments are becoming increasingly popular on college campuses. Not only do they offer a convenient way to order food and pay for delivery, but they can also be used to make dining hall reservations and take advantage of loyalty and rewards programs. In addition, mobile payments can help to reduce the risk of fraud and theft. When used properly, mobile payments can provide a secure and convenient way to make purchases on campus. Where does Hangry come in?

Transact Campus acquired Canadian startup Hangry in a move to strengthen their portfolio of services providing transactional services in campus environments. The acquisition brings Hangry’s services already provided through a partnership in-house as detailed in the news release:

“The Hangry platform is built to serve the specific needs of the campus ecosystem and is fully integrated with the Transact platform. To date, Transact has processed 24 million mobile order transactions totaling over $200 million using the Hangry solution. The mobile-first platform delivers a robust application that is custom-branded for schools.”

Hangry brings additional services such as loyalty and rewards as well as other advances that Transact can add into their student-focused portfolio that seeks to take advantage of technology that students are accustomed to using:

“’We are excited to welcome the talented Hangry team and to combine their innovative R&D culture with the continued successes of our Campus Commerce solutions at Transact,” said Nancy Langer, CEO at Transact. “The acquisition will enable us to build on Hangry features and functionality as well as incorporating them into the wide array of Transact solutions that already provide a leading mobile-centric experience for millions of students.’”

Hangry’s services have been offered through partnership to Transact customers, which provides the opportunity to integrate those services into Transact’s permanent portfolio in an accelerated fashion and for those already working through the partnership to continue utilization without interruption.

Overview by Jordan Hirschfield, Director, Prepaid Advisory Service at Mercator Advisory Group

The post Transact Campus Acquires Canadian Startup Hangry appeared first on PaymentsJournal.

Payment processing is an essential part of any business. Forward-thinking merchants are pursuing omnichannel experiences that will yield the highest number of conversions in the most efficient way. However, many merchants still rely on legacy payment processors. Software developers need to create the next generation of modern and agile payments processing technology to help merchants achieve their goals. 

To learn more about why choosing an agile fintech payment processing partner is good for both merchants and software integrators, PaymentsJournal sat down with John Buchanan, Senior Vice President of Sales at AFS, and Don Apgar, Director of Merchant Services Advisory Practice at Mercator Advisory Group. 

Modern software is difficult to integrate with legacy processing 

One problem with legacy payment processors is their incompatibility with modern technology. “Legacy systems are often built with the original concept of payment processing in mind,” explained Buchanan. “We’re talking about any industry that has been around since the ‘60s and ‘70s.” Legacy platforms are often disjointed and extremely limited. Even with the onset of EMV chips, legacy platforms still relied on “dumb” terminals – plastic machines with rubber keys. 

These days, customers have variable preferences for how and where they want to pay: curbside, in-line, at the table, etc. “Today’s solution must be omnichannel,” Buchanan continued. “Software developers need to build technology that enables merchants to meet their consumers where they are ready to transact.”  

Unfortunately, the term “omnichannel” is sometimes misrepresented as simply having multiple payment processors. But if the various channels do not communicate with one another and consolidate payment data, those extra features will not add enough benefit to justify their inclusion. “You’ve got to make sure that it’s not just a legacy platform with a bunch of flashy collateral,” said Apgar. “It’s got to be built for a purpose.” 

How to determine if a software provider partnership will work 

For merchants hoping to partner with a new software provider, Buchanan listed several questions to ask to ensure an optimal choice: 

• What will the merchant’s experience look like? 
  • What is the onboarding process? 
  • Do you get instant API credentials? 
• Can you leverage existing hardware options to avoid PCI compliance issues? 
• What additional payments functionality will you get? 
  • Split payments? 
  • Recurring billing? 
  • Inventory management control? 
  • Profitability reporting? 
  • Mobile wallet acceptance? 
  • Tokenization? 
• Will the software link to a development portal with API documentation? 

No matter what, software developers will need a direct line of communication to work through all the needs of their customers and their software. “A hands-on approach from an implementation perspective is equally as important as making sure that you are leveraging the right functionality and that you are building it in the most efficient way,” explained Buchanan. 

Apgar further elaborated: “The biggest mistake that we’ve seen is that software developers will do a use-case analysis and say, ‘Okay, well, not everybody needs everything.’” Essentially, developers do not design their systems against potential future needs. “Even if you don’t need the feature, it’s important to make sure you connect to a platform that offers it, because you never know what tomorrow is going to bring,” Apgar continued. 

The possibilities of an agile fintech payments processing partner 

Payments processing is always going to be important, and upgrading payments processing systems is ultimately in any merchant’s best interest. Whether a merchant wants to monetize their payments or offer more pricing options, it is all about moving money. “It’s going to be inevitable that you’re going to have to ‘rip and replace’ a bit when considering the merchant’s perspective from the payment processing side,” noted Buchanan.  

Merchants may feel hesitant to make such a wholesale shift because of the friction it will temporarily cause. “There is never a good time to rip and replace,” Apgar clarified. “But the longer you wait, the harder it gets, and at some point, you have no choice but to throw in the towel and start over because you just can’t iterate your platform anymore to add new features.” 

Fortunately, specialized payments partners like Agile Financial Systems (AFS) can help. “Agility is the cornerstone of everything that we do [at AFS],” said Buchanan. “We built the APEX platform with an emphasis on our ability to remain agile, creating custom solutions for merchants across a multitude of demographics.” The APEX platform offers innovative financial solutions that fit the payments landscape of today and tomorrow, providing efficiency and improved payments experience across the board. 

“Customers are shopping in more ways than they ever have before,” Buchanan concluded. “It is critical that merchants are meeting their customers at their preferred point of purchase, without sacrificing efficiencies, customer experience, customer conversion rates, or other merchant processes in general. When customers are ready to buy, our merchants need to be there to meet them.” 

The post Why Partnering with an Agile Payment Processor Is the Smart Move  appeared first on PaymentsJournal.

There are many different card processors out there, each competing for merchants’ business. While it’s important to consider things like fees and transaction rates, it’s also important to choose a provider that offers excellent customer service. After all, if something goes wrong with a transaction, you’ll want to be able to talk to someone who can help you resolve the issue quickly and efficiently. And if you ever have any questions about how to use the system, you’ll want a customer service representative who is patient and knowledgeable.

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Data for today’s episode is provided by Mercator Advisory Group’s Report: Smart Point-of-Sale Terminals: A Rapid Transformation of Payments Acceptance

Reasons U.S. Small Businesses Choose Primary Card Processors

• 39% of companies chose a primary card processing provider because of lower total cost.
• 31% of companies chose a primary card processing provider because of superior customer service.
• 30% of companies chose a primary card processing provider because of better reporting systems.
• 28% of companies chose a primary card processing provider because of the ease of setting up the processing service.
• 27% of companies chose a primary card processing provider because of the speed of setting up the processing service.

About Report

Mercator Advisory Group’s most recent report, Smart Point-of-Sale Terminals: A Rapid Transformation of Payments Acceptance provides insight into this exciting new technology, and what every merchant needs to know about it.

‘Smart terminals’ is a relatively new term in the payments lexicon, but one that is becoming more widely discussed among merchants of all sizes, types, and categories. The strategy that drives orchestration is nothing less than a paradigm shift in the way that merchants view payment service providers. Rather than conduct due diligence to select a “best-of-breed” service provider for each functional area within payments, orchestration allows merchants of all sizes and scales to offer their customers a smooth shopping experience, be it digital, in-person, or other channels. The growing diversity in payment methods, including contactless and e-wallets, creates an environment where having the right partner is paramount towards achieving your payments and overall business goals. The right payments partner will equip a merchant with the necessary capabilities to operate in this rapidly digitizing business environment, where automation and frictionless experiences are vital in ensuring customer satisfaction and loyalty. Similarly, in order to help merchants provide these services, processors and other payments stakeholders must update their own services and products to keep up with the latest demands of the consumer market and regulatory requirements.

“This is a highly relevant and impactful report,” stated the author of the report, Shreyas Shaktikumar, Senior Analyst in the Merchant Services and Acquiring practice at Mercator Advisory Group. “We are following this trend among a number of similar technology trends that are making payments a frictionless and invisible part of our everyday activities.”

The post Reasons U.S. Small Businesses Choose Primary Card Processors: appeared first on PaymentsJournal.

THUD! That’s the sound of the 900-page 2022 Nacha Operating Rules & Guidelines book being dropped onto an engineer’s desktop. SIGH …That’s the sound of engineers as they work to understand and memorize the first, oh, 300 or 400 pages of the book while building the payment system the company is asking for. HEAVY SIGH … That’s the sound of the engineers realizing that they must recode part of the application because of something new they learned on Page 645 of the guidelines. FLIP … That’s the sound of calendar pages turning as, six months to a year later, the payment system is finally up, running and connected to … one bank. 

Current Payment Systems

Banks’ back-end systems are complicated, heavily regulated, and more than likely set up sometime in the ‘90s. Knowledge of how to integrate with those systems has been lost to time. For companies taking a DIY approach to marshaling payments, this results in a lot of hand coding for engineers who likely didn’t know what they signed up for – not to mention added risk to the company and its customers.  

All of this is to say that building a payment system is hard – really, really hard. Companies typically go the route described above, assigning an engineer or two who has never dealt with payments before to build a payment system; or they hire a few dozen accountants, give them an Excel spreadsheet, and tell them to log into the bank’s online system and process and record each payment by hand. Either way, the work doesn’t scale efficiently – it effectively doubles, triples, quadruples and so on with each new banking institution the company connects with. 

This has been the status quo for many years, but the process of building a DIY payment processing system is not keeping pace with today’s fintech reality, where virtually every company in every industry has a need to move money around quickly and efficiently. 

Indeed, companies tend to build what’s right in front of them. “I have this bank, and I need to build this integration.” They don’t think about abstracting the process across multiple banks and the differences between Bank A and Bank B (and, soon enough, Bank C and Bank D …). 

In fact, 84% of respondents to a recent survey said they face payment operations problems, including slow payments, a high rate of payment failures and data quality errors. The impact is huge, both in terms of employee frustration and loss of productivity, but also increased risk and the potential for lost revenue. It’s clear that something needs to change, with 99% of the decisionmakers surveyed responding that upgrades to payment operations would be helpful. 

The Advent of Payment Operations Platforms

A new technology category is emerging that will help companies move and track money: payment operations. With a payment operations platform, companies will be able to automate every step of the payment process by integrating with the organization’s banks, structuring their accounts, and managing their general ledger through APIs or a web app.

The advent of the payment operations platform is analogous in a way to the emergence of the public cloud. Twenty years ago, new companies bought a data center rack and added servers as needed. Now, public clouds are the default. If you are racking servers, you are a couple of decades behind the times – and wasting far too many IT resources on managing those servers. And so it will go with payment operations. Companies of all sizes and across all industries will be able to automate payments using modern software and APIs, resulting in significant gains in productivity, faster payments, reduced risk, fewer errors, better customer service and greater insight into finances.

Signs of the Fintech Times

There are few companies that won’t benefit from a payment operations platform, but there are several telltale signs that the automation and domain knowledge that come with payment operations platforms will save your company time and money, as well as significantly decrease risk. These signs include:

• A team is logging into the bank every day. 
• You are copying and pasting data from the bank into a spreadsheet.
• You are manually reconciling statements.
• The number of payments you are sending to the bank is growing.
• It takes you 28 days to close the monthly books.
• You are expanding into a different country or, more likely, countries.
• You are adding a new bank. 

If there is one place you do not want an error, it is in your payment operations stack. Yet, the process of building your own payment system is extremely prone to error. An automated payment operations system provides a platform that is simple, sustainable, secure, and scalable. 

The post Why Companies Can’t Bank on DIY Payment Systems appeared first on PaymentsJournal.