Post on 06-May-2015
description
Brion BonkowskiManaging Director
June 6, 2013
Boot Camp Week 2Improve your Payment IQ
Mechanics of an Electronic Payment - “Go with the (Transaction) Flow”
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
My Story – Moving into the Payment Space
Who is ROI Payments?
Why a Boot Camp Series?
Introduction
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
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
Let’s Review Some Data regarding Market Share by Payment Type
Non Cash Payments Market Share US vs EU vs BRIC
USA & Canada EuropeBrazil, Russia, India, China
Card Purchase Volume in US (billions)
Now Let’s Do a Deep Dive on Transaction Flows
Most typical electronic transaction
Merchant Accounting System usually managed by Processor
Credit & Debit Cards: 4 Party System
1 2
34
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
12
3
Note that the issuer and
acquirer are the same party
Originating/Receiving Depository Financial Institution
No authorization or guaranteed funds
Costs less than cards due to lack of interchange
Bank Payments (Non Real Time)
MerchantsOriginating Bank
Customers Bank
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)
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
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?
Relevant Acquisitions
American Express: Payfone for mobile payments Sometrics as a virtual currency and offers
platformeBay/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
Contact Information:Brion Bonkowskibrion@roipayments.com212.812.4177 x: 2134
Questions & Contact Info