Leveraging Regional Debit Networks to Reduce Online Card Acceptance Costs in a Post-Durbin World

Transcription

1 Leveraging Regional Debit Networks to Reduce Online Card Acceptance Costs in a Post-Durbin World September 2015 By: Zac Ebrams 1 Leveraging Debit Networks to Reduce Online Card Acceptance Costs in a Post-Durbin World

2 Table of Contents... 1 Leveraging Regional Debit Networks to Reduce Online Card Acceptance Costs in a Post-Durbin World... 1 Introduction... 3 Background... 3 Why is Information Scarce?... 3 Online Merchants Today Have Options... 4 What is Acculynk?... 4 Business Case Analysis... 5 Identical Customer Experience... 5 Global True Debit... 6 References... 6 List of Figures Figure 1. Business Case Analysis... 5 Figure 2. International Debit Card Issuance Leveraging Debit/EFT Networks to Reduce Online Card Acceptance Costs in a Post-Durbin World

3 Introduction This white paper explores the online debit card benefits provided to them as a result of this new legislation. acceptance options available to merchants, in the post- Durbin 1 payments landscape. It outlines the benefits available to online merchants that least cost route from Visa and MasterCard to regional debit networks, leveraging a dynamic debit gateway. Background Beginning October 1 st 2011, roughly one year after the passage of the Dodd-Frank Wall Street Reform and Consumer Protection Act of 2010, new rules regulating debit transactions took effect. Almost instantly, brick and mortar merchants began seeing the financial benefits available to them under this new legislation at the pointof-sale. Mandated interchange caps for debit card transactions and the ability to route debit activity to lower cost debit/eft networks amounted to huge savings for merchants in card-present environments. Until recently however, merchants operating in card-notpresent (CNP) environments were not able to enjoy the same benefits offered to their counterparts at the pointof-sale. Primarily due to different portions of the Durbin provision of the Dodd-Frank Act having different effective dates, and also because of the length of time required for financial institutions and processors to make the mandated changes, online merchants have only recently been afforded the option to fully enjoy the Currently, the opportunity exists for online merchants that accept card payments online to significantly reduce their expenses by leveraging 'least-cost debit routing. As one of the major provisions of the Durbin Amendment requires that each debit card must provide routing through at least two unaffiliated networks, merchants are now afforded the right to route transactions to lower cost networks. Routing through these debit networks is the only way to reduce the overall costs associated with accepting debit cards online. As a preferred method of payment for consumers, it is important that online organizations know their rights and are empowered to process debit card payments in the most cost-effective and efficient way possible. Why is Information Scarce? The primary hurdle preventing organizations from actually realizing expense reductions can be attributed to a few different factors that exist in the marketplace today. While this paper goes into detail on the many reasons below the primary reason is due to the fact that the channels a merchant has traditionally relied upon for communicating this type of information, are not distributing it. 3 Leveraging Debit/EFT Networks to Reduce Online Card Acceptance Costs in a Post-Durbin World

4 Other underlying reasons that information is not getting into the hands of merchants, are: of all their options can now experience significant cost savings associated with shifting their debit card Merchant providers have little incentive to bring these options to their clients and are often reluctant to do so because they are being compensated by Visa/MC to route activity to them. Providers of true debit/eft routing capabilities are not as well-known as mainstream processors (FirstData, TSYS, Chase, etc.); and, Routing capabilities through debit/eft networks, like; Star, Pulse, NYCE, Accel, and others have only recently become available for online merchants through a single gateway connection. processing volume from the Visa/MC networks to the true debit/eft networks. On average, merchants who leverage True Debit routing capabilities online, save between 15% and 30% per transaction. Currently, due to the time and resources involved in establishing the relationships and connections to the appropriate networks, there are very few processors and gateways that can assist merchants in shifting their online debit card volume to true debit/eft channels. This being the case, providers that can enable routing Online Merchants Today Have Options The ability to route online transactions made with a debit card to the true debit/eft networks is now available to merchants who process online payments. Merchants who leverage this capability enjoy Durbin regulated routing options, providing lower interchange and network assessment fees. The online debit acceptance landscape has changed and the ability for online merchants to leverage "True Debit " transaction routing is becoming an invaluable options for merchants are scarce in today s payments environment. What is Acculynk? Acculynk 2 is a patent backed payment and authentication innovator serving some of the largest and fastest growing ecommerce markets in the world. Providing ecommerce merchants with solutions like the PaySecure True Debit gateway, Acculynk is leading the charge to provide merchants with innovative tools to help them reduce payment costs, accelerate settlement, and increase security. tool for merchants to leverage in reducing their overall payment acceptance costs. Merchants who are informed 4 Leveraging Debit/EFT Networks to Reduce Online Card Acceptance Costs in a Post-Durbin World

5 Acculynk is the leading processor in the online and mobile debit routing marketplace for True Debit transaction routing through the debit/eft networks. PaySecure supports connections to both domestic and international debit networks. With PaySecure, online Using the same $ transaction on an unregulated financial institution (assets $10B) issued debit card, the savings are approximately 28% on the transaction when processed as True Debit, as opposed to signature debit. merchants now have the ability to route transactions to the lower cost debit/eft networks and can do so by making just one simple API connection to the PaySecure, True Debit gateway. At scale, a large organization who processes thousands of transactions and millions of dollars per month has the unique opportunity to save hundreds of thousands, if not millions of dollars per year, simply by incorporating a Only Acculynk provides: least-cost routing debit solution into their online A single API for all 6 domestic networks and multiple international networks. Centralized reporting, settlement, and chargeback management across all networks. A Least-Cost Routing engine that is fully customizable based on a merchant s parameters. Risk filters for unauthenticated transactions. Analytics of actual cost savings. The ability to work in conjunction with a merchant s existing payment card processor. processing. Example Business Case Merchant Type: Retail Channel Mix: 80% Web / 20% Mobile Processing Data Signature Debit Volume: $1B / yr. Volume Converted to True Debit : $500M / yr. Average Transaction: $75.00 Estimated Annual Savings: $1,083,333 Figure 1. Business Case Analysis Identical Customer Experience From the customer's perspective, the checkout experience is seamless. All transaction routing takes Business Case Analysis For a $ transaction, on a card issued by a regulated financial institution (assets $10B), processed through debit/eft networks; a merchant would experience savings of roughly 24% on the transaction, as place behind the scenes of the merchant's existing checkout process. There are no enrollment requirements and the customer is not required to leave the merchant's website. Transaction routing decisions that determine if payments can be processed using lower cost debit routing occurs real-time, in just a fraction of a second. compared to Visa/MC signature debit. 5 Leveraging Debit/EFT Networks to Reduce Online Card Acceptance Costs in a Post-Durbin World

6 Millions As soon as a customer submits a payment, the details are immediately routed to PaySecure to determine if it can be processed as True Debit. If it can, PaySecure sends back a real-time transaction approval displayed to the customer the same way the merchant currently displays the customer s credit card result. If PaySecure is unable to route the transaction through the debit networks, the transaction is immediately routed to the merchant's existing card payment acquirer Billion China Union Pay Cards Issued Figure 2. International Debit Card Issuance 2.5 Million 220 Million 300 Million Puerto Rico ATH Cards Issued India RuPay China AliPay With new global networks currently in development and even more in the pipeline, PaySecure allows merchants The look and feel of the payment experience provided to the customer by the merchant is not visibly altered in any way by adding PaySecure's True Debit routing capability. Global True Debit to use the same integration as domestic debit to accept cards issued from banks around the world. References For merchants currently serving global markets or looking to expand their reach, PaySecure provides PIN debit solutions that enable merchants to accept internationally issued debit cards. With global PIN debit, online merchants now have the unique ability to open their doors to international customers in fast growing markets like China, India, and Puerto Rico. 6 Leveraging Debit/EFT Networks to Reduce Online Card Acceptance Costs in a Post-Durbin World