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Merchant Acquiring Strategies:: Adapt and Grow in Challenging Times
Merchant Acquiring Strategies:: Adapt and Grow in Challenging Times
Merchant Acquiring Strategies:: Adapt and Grow in Challenging Times
Acquiring
Strategies: AC Q U I R E R
A case study
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We at OpenWay have been monitoring
Merchant Acquiring Platform
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No quick cure According to McKinsey, the quarterly “In every hardship, there lies an
Merchant Acquiring Platform
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Merchant Acquiring Platform
Demand and supply-chain disruption by industry, nonexhaustive Disruption level High Medium Low
Advanced industry Acute decline in global demand; existing vulnerabilities and trade tensions amplified;
and automotive supply chain and production disrupted
Hospitality
Tourism at standstill; hotel o
ccupancy down year on year; peak travel periods affected
and tourism
>200,000 flights cancelled; Asia-Pacific(APAC), with 95% of industry global revenue lost;
Airlines
APAC full-year passenger demand d own 13%
Hotels, restaurants
Online food-delivery spike; d
ine-in restaurants and cafés a
dversely affected
and catering
E-commerce
Cross-border e-commerce s talled; surge in online shopping
(nontravel related)
Impact • Maximum payment-volume decline • Supply-side uncertainty, factory • Triple-digit growth in nontravel
on payments in airlines; hospitality and tourism; closures, a
nd trade barriers affect e-commerce, remote ordering, a nd
electronics and consumer durables; B2B cross-border flows low-value contactless payments
luxury retail; hotels, restaurants,
• Refund transactions expected
and catering; and events
to increase in airlines and in
5 hospitality and tourism
Merchant acquiring Areeba, the leading processing Executive Board, Senior Managing
Merchant Acquiring Platform
alternative to
POS terminals
Halyk Bank, serving 74,000 merchants transaction. Compare this to an invest- the first in Central Asia to offer an mPOS
in Central Asia on the Way4 platform, ment of 250 US dollars, the average price service for only 20 US dollars per device —
introduced Visa Scan&Pay QR code service of a POS terminal in the region, and 2.7% 6 times cheaper than a POS terminal.
in 2018 as part of their expansion into the merchant charge for Visa transactions The merchant service charge was only
SME and transit market. Their merchants at a classic POS terminal. 2.6% per transaction, 10 cents lower than
began to print out QR codes and display the fee charged by Square, an mPOS
Halyk Bank has helped its merchants to
them in their stores as a payment alterna- pioneer at that time.
cut costs before when in 2013, it became
8 tive, with a merchant charge of just 1% per
Compensate for The long weeks of social distancing have malls now closed, the consumer journey
Merchant Acquiring Platform
fueled the adoption of contactless and starts with retailer websites and m-com-
empty stores with online payments. This trend is promoted
by card networks, governments and major
merce apps and finishes at designated
pick-up points. Those who provide
omni-channel financial institutions. Mastercard alone a seamless payment experience have
has enabled a limit raise of up to 200% for higher chances of expanding their port-
PIN-less contactless payments in 29 Euro- folio of online merchants.
pean countries. Central Bank of Russia
Another competitive advantage is
has required banks to limit the e-com-
to be prepared for the increased load
CHECKOUT
Bank Transfer
Bpay
Cash
Cheque
BitPay
POLI
Eftpos
Samsung Pay
American Express
Apple Pay
Diners Club
Discover
JCB
Mastercard
Union Pay
Visa
Paypal
Alipay
WeChat pay
Amazon Pay
Zip Pay
Afterpay
Reward points
11 0% 1% 2% 3% 4% 5% 6% 7% 8%
Merchant Acquiring Platform
When the acquiring platform dynamically The affordability and simplicity of in-app For multiple acceptance methods, the
adapts to the customer and transac- payments was one of the success drivers preferred scenario is when all clearing
tion context, and is able to highlight the of SmartPay, a domestic closed-loop and settlement is handled by one system.
most cost-effective acceptance method, wallet scheme in Vietnam. It signed It helps acquirers to avoid interface
merchants enjoy more cost savings. This in up over 250,000 SMEs and 585,000 redundancies and keep their payment
turn increases their loyalty to the acquirer. consumers in just seven months. Using processing more transparent.
our Way4 platform, SmartPay built an
An example of a cost-effective accep-
ecosystem of 100% cashless and instant
tance method is QR code payments
payments. When a buyer scans the
offered by an instant payment scheme
merchant QR code, the money is cred-
in Russia, the Faster Payments System.
ited to the merchant’s account instantly.
In this scheme, merchants pay only
It helps SMEs replenish their stock and
a third of the usual cost of accepting
invest in business growth quicker.
12 card payments.
Dynamic multi-factor
Merchant Acquiring Platform
merchant pricing
Due to the combination of different Adjusting to the merchant’s business schemes in Way4 can be based on over
acceptance methods, channels and conditions in real time: waiving the 30 transaction factors. The system can
regions, pricing management may be a terminal rental fee if the monthly gross even analyze shopping cart items in real
challenge for acquirers. It takes a highly sale total was less than a certain amount, time and charge transaction fees or apply
flexible tariff engine to ensure that every or giving discounts to those using online discounts accordingly.
merchant gets an optimal offering. Here and touch-free acceptance.
With pricing diversity comes complexity
are some examples of the required flexi-
Applying special rules in bulk to a group in revenue calculation. How can acquirers
bility supported in Way4:
of merchants: for example, decreased keep a healthy balance between compet-
Configuring fees depending on the fees for all merchants selling essential itiveness and profitability? What’s the
merchant size: the simplified fixed goods in the areas hit by drought. lowest merchants service fee that still
pricing for a stable SME; the interchange- makes sense for the acquirer? There are
One of our clients works with over 40,000
plus model for big retailers; and for a several business intelligence tools that
merchants and offers personalized pricing
growing startup — the dynamic pricing predict acquiring revenues. Way4, for
to each. This acquirer company saves
based on the mix of total transaction example, allows acquirers to measure the
much time and money by configuring all
value and average transaction size. profitability of every individual account
tariffs on its own, without heavy customi-
in their portfolio.
13 zation or vendor involvement. Their pricing
Five revenue niches
Merchant Acquiring Platform
that acquirers
can explore
With less foot traffic to merchants
and their need of financial relief, conven-
tional acquiring revenue based on the
merchant service charge is in decline.
Price:
Some acquirers are compensating
for losses through these innovative £ 289 RMB 2544
business models:
Currency exchange
for cross-border payments
Due to travel bans and self-isolation,
people are shopping mostly online.
Statistically, they are 20% more likely
to buy products if allowed to pay in their
preferred currency. Acquirers support
such transactions with two services —
dynamic currency conversion (DCC) and
multi-currency pricing (MCP). When the
purchase is complete, the merchant and
acquirer can split the conversion markup
14 between themselves.
In-store and e-commerce Marketplace ecosystems businesses and enables purchase of their
Merchant Acquiring Platform
consumer installments An acquirer that has grown its business products and services right in the app.
A joint acquirer-merchant consumer to the state of a multi-player ecosystem While those merchants can recover sales
finance program can support merchant has more leverages to pull itself and its faster, Alipay gets more revenue from the
sales at times of crisis. Way4 enables customers out of crisis. This has been related payment processing.
buyers to get instant instalment loans — demonstrated recently by Alipay. As part Another example is SmartPay, mentioned
whether on POS or during e-commerce of post-pandemic support to the Chinese earlier. This Vietnamese mobile wallet
checkout. Acquirers can set up a special city of Wuhan, a new page appeared in has connected SMEs and consumers
fee for each instalment-based sale. the Alipay mobile menu. It lists Wuhan with the country’s largest consumer
finance company, FE Credit. Through a
special menu, the app users can apply for
loans and get the funds instantly to their
wallet account. Their purchasing power
BANK
increases, and it has a positive impact on
SmartPay’s processing volumes.
Such marketplace ecosystems benefit
API all parties. Businesses connect to poten-
tial customers and partners faster and at
a lower cost; consumers get more options
to choose from; and acquirers charge a
commission for each deal that happens
on the marketplace. To ensure these
benefits, the acquirer’s platform has to
support multi-level hierarchies of partic-
ipants and comprehensive settlement
schemes. For example, in Way4,
15 the system applies due fees automatically
to instalment-related transactions and
Merchant Acquiring Platform
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Merchant financing cards for the merchant’s employees. The modular architecture of the payment
Merchant Acquiring Platform
After the US government offered corona- These cardholders get instant access platform will be an advantage for a
virus relief loans to its SMEs, JP Morgan to credit funds. The merchant, of course, payment company that wants to generate
Chase received 60,000 applications in can set various spending limits and more revenue streams by offering
five minutes. “It was Hunger Games,” configure which goods each employee advanced technology to customers
commented one banking executive when may and may not purchase. The and partners. Acquirers who use Way4
the dedicated fund ran out of money too accounting becomes digital and simpli- can expand into new business areas by
soon. Many financial companies are now fied, as cash is removed from the process. connecting additional Way4 modules such
following suit and entering the merchant The acquirer can charge a fee for each as card issuing or loan management.
financing market to meet the increased of these value-added services.
demand. This niche may generate signifi-
cant additional revenue for acquirers. happybaker.com
My cart Total
In case of revenue-based financing, 12
operational
expenses
To stay cost-effective during the crisis, tion solution automates the analysis support via online portals.
companies are optimizing not just revenue of over 150 parameters in transactions
models, but also internal operations. coming from any acquiring interface. It
Acquirers can reduce the probability applies fraud-preventing restrictions in
of internal fraud and human error by real-time — this is the key to reducing
automating key payment processing chargeback cases for merchants and
routines — merchant onboarding, saving money
payment acceptance, chargeback for acquirers.
management, clearing and settlement,
For most industries, the shift to auto-
risk monitoring and more.
mated workflows provides one more
With the growing number of digital benefit — an improved customer experi-
payments and external systems involved, ence. Our clients confirm that they have
it takes advanced technology to keep risk become more attractive as acquirers
monitoring consistent across all channels. after launching 24-hour digital merchant
18 The Way4 Intelligent Fraud Preven- onboarding and real-time merchant
Way4 Intelligent Fraud Prevention.
Merchant Acquiring Platform
Case
Rule Engine Database Management
Transactions
Payment Authorization
Switch Decisions
Systems
Way4 Intelligent
Fraud Prevention Reporting
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Why waiting It is tempting to foster an illusion that For acquirers, the COVID-19 crisis is an
Merchant Acquiring Platform
the worst is behind us and everything opportunity to test their payment infra-
out the crisis will return to normal soon. Experts say
that it will not: the impact on customer
structure. How well is it prepared
for the new market? Will it compensate
is not an option expectations and behavior and those of the reduction or loss of traditional reve-
businesses is too intense, and payment nues by generating new ones? According
players will have to deal with “the new to technology consultancy Omdia (formely
normal”. Ovum), legacy system modernization and
creating digital capabilities were the top
“Payments today are a major cost burden
imperatives for financial institutions in
for many banks, and most spending main-
the beginning of 2020.
tains existing systems instead of creating
change. In the postcrisis world, banks will
need to reflect on how to organize them-
selves for change, possibly by running
some of their payments businesses in a
completely different way. They could, for
example, consider structural moves on
the use of onshoring versus outsourcing,
cloud-based infrastructure, automa-
tion, and analysis-driven decisions to
reimagine scale or the realignment of
products.”
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Key technology trends driving retail banking in 2020
Merchant Acquiring Platform
0 10 20 30 40 50 60 70 80 90 100
relying on Way4
Most of the acquirers using our platform • To save costs by automating multiple
merchant acquiring operations,
prioritize the same abilities:
including customer onboarding, risk
• To optimize acceptance costs for monitoring, payments, and dispute
merchants by supporting multiple management.
traditional and alternative payment
Another advantage for these times is compli-
methods.
ance with social distancing regulations:
• To support end-to-end omni-channel the option of launching our platform 100%
22 payment processing. remotely, whether in-house or in the cloud.
Way4 Acquiring solution at a glance
Merchant Acquiring Platform
Onboarding International /
POS Local payment schemes
Accounting
mPOS Other bank systems
Merchant Settlement
e-Commerce Billers
Pricing
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Learn more: Bruno Ph., Chaudhuri R., Denecker O., mPOS terminals are six times cheaper than
Merchant Acquiring Platform
analytic reports,
can adjust to the coronavirus pandemic— Accessed: 6 May 2020
and help the world adapt, McKinsey.
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Merchant Acquiring Platform
www.openwaygroup.com