By Normand Provost
The payments landscape across North America has transformed beyond recognition in recent years. The contactless revolution, for example, is in full swing. The volume of contactless payments in Canada alone increased by 37 per cent in the first quarter of 2018, compared to the same quarter in 20171. QR Code payments have also been announced to be heading to Canada, with the method expected in almost 5,000 merchants by the end of 20182.
While good news for consumers, these technology revolutions, combined with new regulations, have resulted in a deeply fragmented global payment acceptance market that limits business growth and expansion. Payment players face huge integration headaches and substantial costs when expanding into, or setting up in, multiple geographies. Consequently, they can struggle to deliver the cost-effective and efficient services required by their customers.
Why standardization and issues
So, what’s the answer to successful international expansion and simplifying these complexities? Standardization. Global payments acceptance standards have the potential to enable all stakeholders (regardless of where in the payment chain they sit), to adopt a customer-centric approach and deliver a consistent user experience within and, crucially, across borders.
Fortunately, there has been significant progress towards standardization through the gradual adoption of ISO 20022, ISO’s universal financial standard. Already realizing huge efficiencies across Europe’s financial landscape, ISO 20022 is now gathering momentum across North America as central to both Payments Canada’s payments modernization strategy and the U.S.’s Faster Payments programme.
Even so there are still issues with standardization. The incompatibility of proprietary systems, together with the varying domestic interpretations of past ISO standards (ISO 8583, for example), have resulted in acceptance infrastructures differing both within and between countries. This has meant that, despite being ISO-compliant, domestic infrastructures still haven’t been able to talk to one another, resulting in substantial costs and lengthy integration timescales.
Enter nexo standards
Nexo standards is an open global association dedicated to removing the barriers in today’s fragmented global card payment acceptance ecosystem. Nexo standards works with its members—representing all categories of stakeholders present in the card payment acceptance chain—to standardize the exchange of card payment acceptance data between stakeholders. It does this by developing and maintaining ISO 20022-adhering specifications and messaging protocols that are universally applicable and are freely available globally.
The nexo protocols and specifications enable merchants, payment service providers (PSPs), acquirers and vendors to create a fully interoperable cross-border payment acceptance infrastructure. ISO 20022 is a globally standardized approach to the creation of financial messages for all kinds of transactions, enabling integration to be harmonized irrespective of domestic interpretations of legacy ISO standards. This allows for quick and cost-effective international growth.
A customer-and vendor-centric approach
For all players operating in the payment acceptance space, customer is king. And for merchants operating across multiple territories it is crucial that they can deliver an internationally consistent consumer payment experience.
Nexo’s protocols and specifications enable merchants to deliver a standardized customer experience at the points of interaction between multiple payment types. It also allows simple parameterization of payment services for individual countries, thereby ensuring that services are communicated to consumers in their native languages.
Separately, international standards provide vendors with a great opportunity to differentiate themselves from their competitors by avoiding vendor lock-in. Merchants and acquirers want vendor partners that can support their needs on a global scale, provide solutions that can be easily scaled up and down, expand quickly and easily into new regions and support migration to new solutions with minimal impact on their business models.
Nexo standards enable a common interoperable solution that meets these needs, enabling vendors to deliver much stronger value propositions to their merchant and acquirer customers. They, in turn, are presented with increased and stronger options for building global partnerships.
Centralizing and unifying payments management for all stakeholders can realize huge efficiencies and cost savings. By migrating systems to standards such as nexo’s messaging protocols, international merchants can consolidate payment requests from multiple locations around the world. Volume-based deals can then be negotiated via a smaller number of acquirers or even through a single acquirer.
Of course, domestic relationships can still be maintained. All it takes is for the acquirer in question to also support global standards and given the benefits on the table, why would they refuse?
The lingua franca of payments
ISO 20022 can be thought of as the “lingua franca” for the whole financial ecosystem: a universal messaging language for all kinds of transactions, including those performed with cards. Nexo standards’ specifications and messaging protocols are the card payments acceptance arm of ISO 20022.
North American players seeking to expand and transact beyond their nation’s borders should base their future payments infrastructure on these protocols and work towards a vision of a borderless, interoperable global payments system. Acting now to standardize the exchange of payment acceptance data globally will hugely simplify the job of introducing new and innovative payment solutions at scale, reducing cost, increasing operational efficiency and freeing up resources.
Normand Provost is marketing communications and liaison chair, nexo standards (www.nexo-standards.org). All nexo standards’ messaging specifications and protocols are universally applicable and freely available globally.
1 Gary Ng, “Canadian Contactless Payments Continue to Surge in Q1 2018: Moneris”, iPhoneinCanada.ca, April 19, 2018.
2 Steven Anderson, “Canada Gets Access To QR Code Mobile Payments With UnionPay”, Payment Week, July 2, 2018.
Adyen taps nexo standards
Adyen delivers frictionless payments across in-store, mobile and e-commerce channels through its single payment platform. Its key customers include L’Oreal, Superdry, Facebook, Uber, Netflix, Spotify, Tory Burch, Casper and Bonobos.
Keen to offer merchants a modern way of connecting in-store terminal hardware to its platform, Adyen incorporated the nexo Retailer Protocol into its Terminal API. This protocol defines a set of interfaces between a card payment application and a retail point of sale (POS) system.
Adyen quickly found it could accommodate merchants’ needs in several ways:
- Enabling the company to centralize its platform and offer cloud or on-premise based API options that transform the current resource-intensive one-to-one library management into a simple and agnostic service model that updates in real-time.
- As the on-premise and cloud integrations use standard Internet access, there is also no need for complex client configurations. Merchants simply plug and play their terminals to install the software and benefit from the latest services.
- This interoperable and centralized integration process alleviates the business risks for both payment processors and their merchant customers. For Adyen, it also means they can enhance their payment offering at the POS, while delivering consistent integration between POS terminals, cash register systems and their payment platforms.
By standardizing the exchange of payment acceptance data, Adyen realized huge operational efficiencies for merchants. This includes mitigating risks such as forced updates if old versions aren’t actively managed and having multiple devices on different versions. Both aspects also drastically slow the delivery of new services, such as shoppers’ preferred payment methods and they make fleet management complex. New services and system upgrade delivery are now dramatically streamlined, thereby removing reliance on on-premise installs of software and updates.
There are other innovative ways in which the nexo Terminal API is delivering in-store fluidity and advancing customer experiences. For example, since in-store payments can be initiated remotely merchants can create experiences where shoppers initiate orders in-app and then walk into stores where the sales assistants can then pull up the orders and push the payments to in-store terminals (e.g. pay by QR code) on collection of the items. Another example may be hotel assistants helping guests check-in on tablets or mobile devices, then routing the payments through to the closest available terminals.
Adyen is continuing to enhance its platform with the nexo protocol. It plans to offer merchants a unified commerce payments solution accomplished by integrating the Terminal API with its Checkout API by early 2019.