9 episodes

The PaymentsJournal Podcast is a weekly podcast that features payment and banking industry professionals throughout the value chain discussing relevant payment and banking topics. If you have a topic you would like us to cover or would like to be on the podcast please reach out to us at info@mercatoradvisorygroup.com

The PaymentsJournal Podcast – PaymentsJournal The PaymentsJournal Podcast – PaymentsJournal

    • Business News
    • 4.8 • 5 Ratings

The PaymentsJournal Podcast is a weekly podcast that features payment and banking industry professionals throughout the value chain discussing relevant payment and banking topics. If you have a topic you would like us to cover or would like to be on the podcast please reach out to us at info@mercatoradvisorygroup.com

    How PayPal Achieves High Authorization Rates

    How PayPal Achieves High Authorization Rates

    Nobody wants to be the person holding up the line because their credit card was declined, and merchants definitely don’t want to turn away business. Small improvements in authorization rates can make a difference of millions of dollars, which is why all merchants strive to have customers complete their transactions successfully on the first try. Fortunately, PayPal has an impressive data set, network tokenization, machine learning, and strong partnerships with both networks and issuers that work to create the best buying experience for all parties involved. 

    To learn more about PayPal’s role in increasing authorization rates while keeping fraudulent activity low and how it is using machine learning to do so, PaymentsJournal sat down with Jim Magats, SVP of Omni Payments at PayPal, and Tim Sloane, VP of Payments Innovation at Mercator Advisory Group.

    PayPalHow PayPal Achieves High Authorization RatesPayPal How PayPal Achieves High Authorization RatesPayPaljQuery(document).ready(function ($){var settings_ap43273049 = { design_skin: "skin-wave" ,autoplay: "off",disable_volume:"default" ,loop:"off" ,cue: "on" ,embedded: "off" ,preload_method:"metadata" ,design_animateplaypause:"off" ,skinwave_dynamicwaves:"off" ,skinwave_enableSpectrum:"off" ,skinwave_enableReflect:"on",settings_backup_type:"full",playfrom:"default",soundcloud_apikey:"" ,skinwave_comments_enable:"off",settings_php_handler:window.ajaxurl,skinwave_wave_mode:"canvas",pcm_data_try_to_generate: "on","pcm_notice": "off","notice_no_media": "on",design_color_bg: "111111",design_color_highlight: "ef6b13",skinwave_wave_mode_canvas_waves_number: "3",skinwave_wave_mode_canvas_waves_padding: "1",skinwave_wave_mode_canvas_reflection_size: "0.25",skinwave_comments_playerid:"43273049",php_retriever:"https://www.paymentsjournal.com/wp-content/plugins/dzs-zoomsounds/soundcloudretriever.php" }; try{ dzsap_init(".ap_idx_157593_2",settings_ap43273049); }catch(err){ console.warn("cannot init player", err); } });

    How does network tokenization lead to higher authorization rates for merchants?

    Authorization rates are incredibly important to merchants because they increase both revenue and customer satisfaction. The higher the card authorization rate, the greater likelihood for repeat customer transactions, which results in higher business revenue.

    One way to boost auth rates is through network tokenization. “Think of a network token as a fake 16 digit number that’s assigned to each of your card numbers that you have within your wallet,” explained Magats. Network tokens provide an alternative number for the consumer’s card, and when the issuer receives this transaction, it recognizes the number in the same way as the actual debit or credit card.

    So how does network tokenization  increasing auth rates? Well, the network token is a number known only by the merchant—PayPal, for example—the issuer, and the network provider, making it difficult for a criminal to access or use the card number fraudulently. It also offers a cryptogram, or a piece of data only known between the above stated three parties, which increases the safety and security of a transaction.

    If a customer’s card is lost or stolen, they can get a different credential that allows them to continue to make purchases with the same account, even if the card has been canceled, because the token is not known outside of the intimate ecosystem.

    • 30 min
    QSRs Can Address Loyalty Program Shortcomings by Serving Up Better Offers

    QSRs Can Address Loyalty Program Shortcomings by Serving Up Better Offers

    The loyalty programs of quick service restaurants (QSRs) like Starbucks, Dunkin’, and McDonald’s have come a long way since the days of the paper punch card. As technology advanced, punch cards were largely abandoned in favor of plastic cards. Later, mobile apps became the predominant platform used to host QSR loyalty programs.

    But there are shortcomings to these programs. The process of signing up and using a QSR loyalty program can add a burdensome level of friction to the customer experience. Customers who do sign up often forget to pull up their app as they make their way through a drive-thru. Luckily, modern technology makes addressing such pitfalls possible.

    To learn more about what QSRs can do to improve customer engagement by enhancing their loyalty programs, PaymentsJournal sat down with Tom Byrnes, VP of Marketing at Quisitive LedgerPay and Raymond Pucci, Director of Merchant Services at Mercator Advisory Group.

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    Friction is the biggest obstacle for QSR loyalty program adoption

    “To attract diners, all the big restaurant chains dropped the old plastic loyalty card approach and moved to tech-driven systems to encourage folks to dine out more frequently,” said Byrnes. 

    But to sign up for loyalty rewards programs, consumers have to take the time to download an app, enroll in the program, fill out their profile, add a debit or credit card, then remember to actually use the app as they pull up to order their morning coffee. As a result, “the biggest issue with traditional loyalty programs is that they have a high degree of friction,” explained Byrnes.

    The bottom line? Traditional loyalty programs have a lot of friction built into them by design, which results in a high churn rate with mixed financial gains. 

    Overly generic loyalty programs have a high churn rate

    Getting customers to sign up for a loyalty program is difficult, and the low percentage of customers using loyalty apps means QSRs have a huge blind spot as to what a majority of their customers are ordering.

    A recent a href="https://www2.deloitte.com/us/en/pages/about-deloitte/articles/press-releases/deloitte-the-restaurant-of-the-future-ar...

    • 26 min
    How Banks Can Leverage Tech Partnerships to Enable Innovation for Commercial Clients

    How Banks Can Leverage Tech Partnerships to Enable Innovation for Commercial Clients

    Banks have an opportunity to be stable, well-financed technology disruptors when working with appropriate partners. By partnering with technology providers, banks can combine their financial strength and market power with the innovation and speed of high-tech product companies, enabling banks to compete against newly formed fintech startups.

    To talk more about how banks can differentiate themselves from fintechs through strategic tech partnerships and what that means for corporate innovation, PaymentsJournal sat down with Scott Goldthwaite, President at Aliaswire, and Steve Murphy, Director of Commercial and Enterprise Payments Advisory Service at Mercator Advisory Group.

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    Partnerships enable banks to compete with fintechs

    “The financial services industry has always been a technology-driven set of business models; fintech is really nothing new here,” said Murphy. Banks have been working with technology partners for a long time, including core service providers and dozens of other software and product categories.

    “However, in the past few years, it’s become increasingly evident that a fast evolution to partnerships and collaboration between these sectors is becoming more the norm,” Murphy added. “Banks are adapting to the reality that they can’t provide required services and new products using legacy solutions, and fintechs are realizing that working with and through banks is a better distribution model for their products.” 

    As a result, the vast majority of banks are now using alternative technology providers, with the number one tech category being process automation.

    There is a void in corporate banking technology and innovation

    Even so, there are shortcoming in corporate banking technology and innovation. Even as more banks turn to tech partners, they tend to stick with a select few partners whose core systems perform the basics of running the bank. They then have to buy into that technology provider’s ecosystem of value added apps and add-ons.

    This creates a dilemma for banks: if banks can run the same core and add-ons, how will they distinguish themselves from other banks using the same products? As a result, pure innovation can be very challenging for banks.

    COVID-19 has accelerated the shift to electronic payment acceptance…

    • 17 min
    The Future of Phixius (and Interoperable Financial Services)

    The Future of Phixius (and Interoperable Financial Services)

    In February 2020, Nacha announced that it was developing an online platform that integrates technology, rules, and participants to exchange payment-related information across all payment types. The platform, named Phixius, went live and completed its first information exchange transactions by early November. 

    To learn more about Phixius, the significance of interoperable financial services, and what the future holds, PaymentsJournal spoke with George Throckmorton, Managing Director at Nacha and Sarah Grotta, Director of Debit and Alternative Products Advisory Service at Mercator Advisory Group.

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    Phixius: A background

    The story of Phixius goes back multiple years. In response to calls from the industry for a simplified and automated process for exchanging payment related information, longtime industry leader Nacha conceived of and created the platform.

    “In conversations with [financial services] organizations over the last several years, it became apparent that there was a gap and an area of improvement needed around the exchange of what we call payment related information,” said Throckmorton.

    The movement of money itself isn’t the issue. “Emerging rails are very capable of moving money from point A to point B, and they do that very effectively and meet the various needs of businesses in order to move those funds,” he added.

    Rather, deficiencies lie in pre- and post-payment processes. “There is a lot of work [that needs to be done] on what we call the pre- and post-payments side of these processes—for businesses, there’s a lot of data that needs to be obtained [and] that needs to be verified when they are onboarding new businesses to make payments,” explained Throckmorton. The same is true for companies on the receiving end of payments.

    Phixius was built to solve the problems of today and tomorrow

    Today, companies typically rely on bilateral agreements to safely exchange data. While these are effective, they become difficult to stay on top of when organizations are tasked with managing hundreds to thousands of different agreements that each have their own specifications.

    “It can be massive—from 3,000 to 10,000 to 30,

    • 28 min
    Fraudulent Activity is the New Virus, and Here Are Some Possible Solutions

    Fraudulent Activity is the New Virus, and Here Are Some Possible Solutions

    Fraudulent activity is on the rise, with criminals looking to take advantage of the pandemic, and faster payments is shaping up to be a prime target. That is because faster payments shorten the time that financial institutions can use artificial intelligence and other fraud identifiers to determine the legitimacy of a transaction. Without a standard means for classifying fraud, financial institutions are left with the inability to collect the appropriate statistics that assist in locating where fraudsters are gaining access.

    This topic is further explored in the US Faster Payments Council’s recent report, “Examining Faster Payments Fraud Prevention.” And a Model by the Federal Reserve’s Fraud Definitions Work Group, the FraudClassifer model breaks up transactions into two categories: authorized party and unauthorized party.

    To learn more about the “fraud classifier,” and to better understand what’s causing this increase in fraudulent activity and how to stop it, PaymentsJournal sat down with Rebecca Kruse, executive vice president of operations at ICBA Bancard, and a member of the task force that worked on the white paper. She was joined on the interview by Tim Sloane, vice president of payments innovation at Mercator Advisory Group.

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    FraudClassifier model: Who initiated the payment?

    FraudClassifer model

    Classifying the types of fraudulent activity taking place comes down to one question: who initiated the payment? As seen in the visual above, the party initiating the transaction is either authorized or unauthorized. Based on the answer, there are five possible scenarios for how the fraud is executed, followed by 12 possible conclusions.

     “This is a giant step forward to help everybody standardize how they evaluate fraud,” said Sloane. Without specific vocabulary, individual representatives of financial institutions can run into points of confusion, leading to a delay in finding the tools needed to mitigate fraud and come up with a positive solution.

    “All of these classifiers pertain to a href="https://www.paymentsjournal.

    • 19 min
    Who Runs the World? APIs.

    Who Runs the World? APIs.

    These days, most of what businesses and individuals do on the web involves interacting with APIs, or application programming interfaces, which are an essential pillar of many of the online services we have come to rely on.

    In the payments and financial services industry, the interoperability of banking technology is just as important to stakeholders as checking out Beyoncé’s new Instagram post is to music fans. And the standardization of these more nuanced APIs is the key to interoperability.

    To further discuss the future of APIs and how they have benefited the financial services industry, PaymentsJournal sat down with George Throckmorton, Managing Director of Advanced Payments Solutions at Nacha and Executive Director of Afinis, and Tim Sloane, Vice President  of Payments Innovation at Mercator Advisory Group.

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    Afinis 101

    At their core, APIs help businesses interact with payments and the data around those payments. It’s promising to see this technology implemented as a creative solution to many of the industry’s problems. However, initially much wasn’t being done in terms of standardization, which created challenges for businesses seeking interoperability.

    So how did Afinis Interoperability Standards come to be? In essence, industry stakeholders determined that the APIs they used to interact with organizations all had subtle differences and that was becoming a challenge. “There was some consensus in the industry that standardization would be of value. We have seen standardization occur elsewhere around the globe, but it was mainly driven by mandate. We needed another approach in the U.S.,” Throckmorton said.

    “Nacha, working with the industry, set up an organization called Afinis. Today, we have about 60 member organizations that are very diverse and of all sizes, including financial institutions, fintechs and service providers,” he said.

    “By collaborating through both technical and business groups, Afinis is working to actually develop API standards for the U.S.—and maybe even on a global scale,” Throckmorton said.

    “Combining both technical users who understand the data and business users who really  understand API use cases is very important. If we are going to bring the industry together and create these standards, we all have to talk the same language.”

    • 33 min

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