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Digital Merchant Acquiring futuristic digital solution Table of Contents

Executive summary

How a traditional process poses problems

Smart solution and business flow

Benefits

EVRY’s offerings

Introducing a rapid evolution to

Adoption of QR codes for transactions

Simpler way to transfer funds

Card Interchange Network v/s Digital Interchange Network

Traditional landscape and digital landscape

Conclusion

About EVRY and EVRY’s BFS offerings DIGITAL MERCHANT ACQUIRING - WHITE PAPER

Executive Summary

Over the past few decades, plastic money has been facilitating Merchant Acquirer business between merchants and customers. The collaboration between card organizations and terminal operators is enabling transaction acquiring to develop into a prominent business among the financial institutions acting as merchant banks (acquirers) and customer banks (issuers). Card In this equation, to exchange the card information among various holder financial stakeholders, issuers and acquirers have to share reasona- ble revenue with card organizations in conducting this business. Card organizations charge a certain percentage of amount for every transaction. These factors have made card organizations a monopolized segment today. Issuer Card network In addition to these overheads, neither the acquirer nor the merchant is benefiting, owing to huge maintenance costs within With an aim to generate measurable business impact, Digital the transaction processing landscape. It further leads to delayed Acquiring using digital QR code interchange network can make financial settlements with merchants. All these factors result in high a substantial difference. It can reduce the number of stakeholders transaction fees for merchants. in the business chain, which in-turn generates big revenue. The digital acquiring solution also features new techniques that help The present day’s digital world brings across various smart transa- in achieving direct business transaction between merchants ction acquiring solutions like NFC payments, fingerprint payments, and customers. Also, the digital QR code interchange network mobile payments, etc. Moreover, these smart solutions are contributes towards saving the environment by reducing the use of challenged in addressing revenue sharing among various financial plastic in cards. stakeholders. How does a traditional merchant Smart Solution acquiring process pose problems

Revenue sharing: Acquirers have to share revenues with card organizations and terminal The digital issuing bank provides customers with a QR code scanner mobile app linked to operators, resulting in losses in the process. customers’ bank accounts on behalf of the digital interchange networks.

Maintenance: Acquirers are required to maintain a high cost landscape and physically Digital merchant uses smartphone with a dynamic QR code generator mobile app pro- connect with all the card organizations through its technical landscape. vided by the acquirer to authorize as well as transfer funds to the merchant.

Delays in settlement process: Amount due to the merchants will be settled only after two The digital acquiring bank processes these QR code payments through the digital inter- days or more, followed by the transaction. change network on behalf of a merchant, in association with issuing banks.

Merchant overhead charges: The fee charged from merchants is usually more.

Business Flow Scan barcode / Validate master Push money to QR code barcode merchant

Retrieve User App product information

Merchant App

Scan barcode / Generate master Enter amount related QR code barcode details DIGITAL MERCHANT ACQUIRING - WHITE PAPER

Benefits

No revenue sharing: Acquirers need not share profits with card organizations nor share the revenue with terminal operators.

Low maintenance: Acquirers need not maintain high cost landscape. They can maintain the existing core banking landscape.

Reducing dependencies: There is no requirement for acquirers to communicate with card organization networks through its technical landscape.

No investment: Merchants need not invest in terminal operators. Instead, they can use their own multipurpose mobile phone.

Faster settlement: The amount due to the merchants from customers will be transferred immediately.

Low overhead costs: Merchants will be charged with lesser fee.

Freedom: Merchants can carry out business with any issuing bank customer. EVRY’s Offerings - Digital Merchant Acquiring (Using Digital Interchange Network)

We extend our support to banks in:

• Building their own mobile bank QR code generator / scanner applications.

• Generating QR code by using ISO/IEC 18004 standards & digital tokenization concept.

• Using digital interchange network to ensure QR code authorization between customers, issuing banks, acquiring banks and merchants.

• Ensuring DSS compliance in maintaining QR code server information. EVRY can assist banks by introducing digital acquiring and prevent the use of plastic cards. We can help banks increase their revenue • Migration of merchants from old ISO 8583 clearing by avoiding revenue sharing with card organizations, terminals & gateway to ISO 20022 / SWIFT message gateway. terminal operators. EVRY can aid in building a separate technical landscape for processing card payments using ISO 8583 clearing & • Providing strategic solutions & services to handle various settlement gateway. merchant-specific requirements. DIGITAL MERCHANT ACQUIRING - WHITE PAPER

Introducing a Rapid Solution for Payments

Traditional Card Network Merchant Acquiring Card holders swipe their cards to pay for the services or items purchased. The payment details (transaction) are sent to the acqui- ring bank, which processes plastic card payments on behalf of the merchant. If the card issuer bank is different, then the transaction details are sent to the issuing bank for authorization and approval. Acquirer Cards Payees Eventually, the acquiring bank credits the amount to merchant’s (Merchants, MO/TO & e-Commerce) account.

New Smart QR Code Network Digital Merchant Acquiring Digital acquiring bank (or digital acquirer) is a bank or a financial institution that processes QR code-generated payments on behalf of a merchant. “Digital acquirer” is a new term and concept. The innovative process involves generation of QR code payments for Acquirer QR code Payees (Merchants, MO/TO & merchants through an association with issuing banks. e-Commerce) Adoption of QR Codes for Transactions

Card Issuers (Issuer banks) In the current scenario, the issuing bank is also known as the credit or company. The issuer acts as the middleman for the customer, card network and the acquiring bank by forming contracts with cardholders for the terms of repayment of transactions.

Digital Mobile Application Issuers The digital issuing bank is a financial institution that issues QR code scanner mobile app (bank account-linked) to customers on behalf of the digital interchange networks. The issuing bank is also known as the digital QR code scanner company. The issuer acts as the middleman for the customer, digital interchange network and the digital acquiring bank. This is achieved through forming a contract with the QR code mobile app users for the terms of repayment of transactions.

A digital issuer provides customers with a QR code mobile app linked to their bank accounts to transmit this data to digital acquirers for authorization and finally to transfer funds to the acquirer.

DIGITAL MERCHANT ACQUIRING - WHITE PAPER

Simpler Way to Transfer Funds

Merchant Acquiring Equipment Digital Merchant Acquiring Equipment (POS terminal & terminal operators) (Smartphone & mobile app) A merchant is licensed to perform payment activities for Point-of-Sale (POS) A digital merchant, having a smartphone with licensed QR code generator terminals with the help of Service Provider (PTSP) using mobile app provided by the acquirer, will transmit the data to acquirers for various kinds of POS terminals like flex, tele & integrated terminals and NCR / authorization. Followed by this, the funds are transferred to the merchant. , Verifone terminals, etc.

PTSP allows a merchant to insert, swipe or manually enter the required credit / debit card information to transmit this data to the merchant acquirer for authori- zation and further transfer funds to the merchant. Majority of the card terminals transmit data over a standard telephone line or a wired / wireless Internet connection. Card Interchange Network (card organizations) v/s Digital Interchange Network

Card A card organization is a network of issuing Interchange banks and acquiring banks that processes payment Network cards of a specific brand. With the help of issuing bank’s orders, a card organization prepares plastic payment cards.

Digital The Digital Interchange Network is a network of digital Interchange issuing banks and digital acquiring banks that process mobile app-generated QR code payments. Network DIGITAL MERCHANT ACQUIRING - WHITE PAPER

Acquiring Card Platform / Traditional ISO 8583 Landscape

Merchant

Terminal operator

Card holder Processor Acquirer ISO 20022

ISO 8583 Issuer Card network Digital Acquiring Platform

Issuer QR code scanner mobile app

Processor ISO 20022 network QR code network

Acquirer Merchant DIGITAL MERCHANT ACQUIRING - WHITE PAPER

Conclusion

Rise in customer expectations and several new industry entrants are rapidly transforming the way today’s banking industry operates. Diminishing interaction with customers as well as maintaining long-stan- ding relationship with them have become huge challenges for banks. Implications of PSD2 compliances and open banking are creating a coarse situation for banking institutions.

Using digital merchant acquiring explores the incorporation of open APIs, which present new and strategic avenues. It helps banks offer engaging services that reach the market faster and in a cost efficient manner. Digital merchant acquirers aid banks to create and offer standalone services all by themselves. With this, banks can build unique roles & identities of their own and provide futuristic services.

It is important for banks to visualize their market position in the digital acquiring landscape of the future. Banks can formulate and implement digital acquiring strategies that are in sync with their visions. The efforts and endeavors of banks should completely focus on creating a clear, concise and organization-wide digital acquiring strategy. About EVRY

EVRY is an established software services company offering comprehensive IT services and digital solutions. Our clients include Fortune 1000 enter- prises, software firms (ISVs) and tech start-ups. We have multiple offshore development centers in India (Bangalore and Chandigarh) that are certified for ISO 9001:2015 & ISO 27001:2013, certified for PCI-DSS compliance and appraised at CMMI Maturity Level 5 and PCMM Maturity Level 5. We have a global footprint with offices in the U.S., Singapore, India and group offices in Europe. EVRY is a Nordic IT services major with over 10,000 employees worldwide.

About EVRY’s BFS Author EVRY offers a variety of banking and financial services flourishing in the era of digital disruptions. Implementing best practices helps us in exceeding Nishanth Garikipati the highest expectations of our customers. EVRY is the No.1 IT solutions Business Analyst provider in the banking and finance sector across the Nordic region. (cards & payments domain) EVRY’s solutions, coupled with a comprehensive set of banking services, EVRY India serve in excess of 12 million end customers. [email protected] For more information about all our solutions and offerings, get in touch with: [email protected] or [email protected]

USA Headquarters: EVRY USA Corporation 1425 Greenway Drive, Suite 490 Irving, Texas 75038, USA Phone: 972-514-1113 / 1-844-9-EVRY-USA Fax: 972-514-1109 www.evry.com/us

India Headquarters: EVRY India Pvt. Ltd. Ground Floor, No. 42, 27th Cross Brigade Software Park 1, Building B Banashankari Stage 2, Bangalore – 560 070 Karnataka, India Phone: +91-80-67388000 Fax:+91-80-40219632 www.evry.in

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