Open Payments Systems for Merchants: Don't Close Down Your Options
Remember “Open Systems”?
It was a big industry nom du jour in the 80s and 90s. Every IT system had to be open and therefore flexible and future-proof. Nobody can argue with the logic behind this; making systems easy to integrate with other systems, ensuring vendors could cooperate with one another; creating agility to improve time to market and drive down costs.
From a payments perspective, this meant that during the 90s, payments systems started to use more modern technologies that were better able to accommodate this philosophy. The use of Unix and Windows platforms for processing payments gained popularity and the payment standard of ISO 8583 became ubiquitous. Every part of the payment chain (POS systems, terminals, acquirers, card schemes, issuer bank hosts), in theory, could support ISO 8583 and that ensured that all systems could talk to each other in a common language. Only it didn’t work out like that.
ISO 8583 became a House of Babel. No two vendors or institutions adopted it in quite the same way. The framework helped to ease integration, but it did not provide for true interoperability. And, in fact, many important parts of the payments chain did not adopt its use at all, including the UK acquirer banks and many terminals.
We now have a payments landscape made up of many different payment protocols and a complete lack of standardization. But along came nexo as a potential solution to the problem.
nexo is a standards group promoting the use of modern, freely available non-proprietary ISO 20022 specifications for interfacing between players in the payments chain. The goal is for standardization to create fast, interoperable and borderless payments acceptance.
Will it succeed?
It’s already gained some traction and many of the key players in the payments world are signed up to it. Some large acquirers and merchants are already using it successfully. But one wonders if all vendors will truly embrace it and allow it to flourish. For many, nexo levels the playing field. Interoperability can mean replaceability and fierce competition, which may not be good for the incumbent vendor.
Irrespective of the noble cause being pursued by those behind nexo and its success or otherwise, merchants can still maintain elements of the flexibility offered by open systems. Merchants are best served by PSPs that are able to support nexo and can also allow merchants flexibility and choice over the acquirers and the payment terminals that they use (even if they are not nexo-compliant) so that the merchant is not tied into a one-size-fits-all straight jacket for payment processing. Merchants need the flexibility to be able to choose from the a la carte menu of payment options in order to maximize customer conversion and frictionless payment acceptance.
So open systems in its truest sense is still a work in progress, but with the right choices over their suppliers, merchants have the opportunity to keep their options open.
For more information about Merchant Payments, visit our Retailer industry page.
Related Blog Posts
From API to AI to I: Banking Tech Gets Personal
Tired feet. Running out of business cards. Countless LinkedIn connections – sound familiar? This time of the year is conference season; the annual SIBOS (SWIFT) and Money20/20 USA gatherings spanning the autumn give attendees plenty of hot topics and talking points. My American colleagues refer to this season as “the fall.” I trust this to be an observation on leaves and fruit rather than a sequitur on the state of the fintech industry. Either way, it’s a good time to harvest, to take stock and to work out what we should be doing with the apparent abundance of innovative produce.
How Do You Drive Full Value from SWIFT gpi?
As part of SWIFT and ACI Worldwide’s joint mission to accelerate adoption of SWIFT gpi, ACI’s SWIFT gpi global marketing lead Zhenya Winter spoke with Daniel Lynch, Data Analytics and Payments Innovation Lead at SWIFT, and ACI’s Global Head of Real-Time Payments, Craig Ramsey, about some of the key questions raised by attendees of our second Global Webinar: Drive Full Value from SWIFT gpi. The relevancy of these was reinforced at Sibos 2019, the SWIFT community’s annual conference, which recently took place in London.
India’s Unified Payments Interface: Breaking the Billion Barrier
September brought about quite a stir in the Indian payments ecosystem, with three years passing since the launch of UPI (Unified Payments Interface), and the realization that UPI is closing in on a significant milestone: one billion transactions per month. In September 2019, UPI clocked 955 million transactions, amounting to 1.61 trillion rupees (INR), demonstrating the extent to which Indian consumers have exuberantly welcomed real-time payments.
The Need for Financial Inclusion in Developing Countries
The payments ecosystem globally is changing – and the idea of financial inclusion is increasingly featuring as part of long-term strategy. At a glance, financial inclusion means that people and businesses have access to important financial products, services and data, such as transactions, credit cards, payments, savings and insurance, and that these are delivered in a sustainable way. The challenge for banks lies in being more inclusive and meeting social needs, while remaining profitable and increasing market share.
How to Maximize the Value of Partnerships Between Fintechs and FIs
The LATAM Open Banking & Fintech Partnership, organized by Connect Global Group, was held earlier this year in Mexico City, and ACI participated as one of the forum partners driving discussions on how to maximize value from collaborative partnerships between FIs and Fintechs. We explored the invaluable benefits of open API and strategies to differentiate the offerings of FIs and Fintechs, address consumer demands, and best practices for implementation aligned to regulatory requirements.
A Deep Dive into the Payment Tendencies in the Mexican Market (Part 2)
While the sheer volume and age of potential shoppers makes México an attractive market, there is another component to the viability of eCommerce: México is mobile. A recent study performed by the Asociación de Internet.mx, shows that México is one of 22 countries leading the trend toward mobile commerce, with young adults making 88 percent of smartphone purchases. The country has one of the largest mobile markets in Latin America, with one-third of all residents using smartphones.
A Deep Dive into the Payment Tendencies in the Mexican Market (Part 1)
The population of México is the second largest in Latin America, with 122 million residents, 39 percent of whom are considered middle-class. The population is relatively young, with an average age of just 27, and one-third estimated to be millennials, which is often a factor in driving the popularity of eCommerce. Last year, 56 million people accessed the internet in México, though despite the high number of internet and mobile phone users in the country, nearly two-thirds of the population do not have bank accounts (source: Banco de Mexico).
Women in Payments: It’s Time to Get Out of Your Comfort Zone
As we gear up for Money20/20 U.S next month, we are excited to shine a spotlight on Natalia Ruiz, manager, Payments Risk Solutions at ACI Worldwide, who was recently selected to be part of the 2019 Rise Up Academy. This global program created by Money20/20 addresses the gender imbalance in leadership positions within the financial services and fintech industry.
How to be a Payments Trailblazer – The Seven Habits of Highly Innovative Organizations
The new Culture of Innovation Index from Ovum and ACI identified segments—from banks to intermediaries to merchants to corporates—at the cutting edge (of innovation) across the payments ecosystem. But what is most notable about those segments that have reached ‘trailblazing’ status is the apparent lack of commonality between them. No one segment, nor one region fosters better innovation. In fact, what’s driving these segments/organizations to be best of breed is their own culture of excellence. The only thing they have in common is their attitude.
Get Customers to Race Through Your Payments Funnel
No matter how good the products, how nice the website and how slick the flow, there are so many reasons why an eager prospective customer does not convert into a paying customer even after they have filled their basket. The buying decision has been made, but so often customers don’t complete the transaction.