Take a listen as George and Nick Starai, Chief Strategy Officer of NMI discuss the role of the independent payments gateway and its evolution as a technology and business enabler for today’s providers of payment acceptance: ISOs, ISVs, and merchants.

 

A key technology and business partner for merchants and the first-line providers of payment services (think ISVs and ISOs) is the payment gateway.

At their simplest, gateways provide a single interface to their users that, once built, lets the party using it switch between acquirers with relative ease in order to get better performance, service levels, and/or pricing.

For independent software vendors (ISVs) selling line of business software this flexibility allows their customers to choose their acquirer of choice from the range of acquirers supported by the gateway. Many such relationships are in place long before the ISV relationship is established. ISVs can’t insist that their potential customers change acquiring banks in order to use their software. That’s one use case for a gateway.

Another is the Independent Sales Organizations (ISOs) that also realizes the necessity of using gateway technology in order to reach their increasingly demanding merchant customers. Placing stand-beside payment terminals next to a cash register is no longer nearly enough. Integration of payments into the overall business process of even a smaller merchant is now table stakes. Gateways can help make integration of more advanced capabilities happen.

Independence Means Acquirer Neutrality
Many formerly independent gateways have been acquired by processors. What processor wouldn’t want to move all the transactions managed by the gateway onto its own systems? It’s all about volume, after all.

But for independent software vendors, independent sales organizations selling to ISVs and merchants, and for many merchants themselves, an important virtue of the gateway function is its processor and acquirer independence.

Value-added Services
Gateway operators generally charge flat fees for each transaction handled so they have every incentive to expand the volume of transactions they manage as well as to provide value-added services that increase revenue on each transaction handled.

To increase volume, gateways make it as easy as possible for a customer to integrate to the gateway. They make their APIs simple and robust so it’s easy to add new services. The gateway provider builds software developer kits (SDK) to support in-app payments and makes sure their code runs on every important operating system.

Gateways often specialize on a particular payment domain such as large ecommerce merchants or in-store systems. Others offer a broader set of services. NMI, the subject of this Payments on Fire® podcast, supports both EMV terminals and the card not present environment.

Payment Facilitation
The payment facilitation business model has broadened card payment acceptance to the wide base of small merchants who would otherwise not qualify for a traditional merchant account.

The greatest impact of this payfac model is how it streamlines the onboarding process. Instead of the days-long underwriting process traditionally needed, sellers working through a payment facilitator (PayPal, Square, and Stripe all employ that model) can start to take payments within minutes of creating an account.

Because of that swift onboarding, the payment facilitation model reduces sales friction for ISVs. Their customers can install the ISVs line of business software and start taking payments at the same time.

For the ISV, there’s also the opportunity to earn revenue from their customer’s payment transaction flow. We’ve seen multiple merchant companies selling software services earn substantial revenue from the payments side of their business. NMI provides essential infrastructure services for the payfac business model including onboarding, sub-merchant account creation, KYC, and other reporting services.

The NMI Story
Nick relates NMI’s growth and service expansion. It’s a cool story that speaks to the industry’s evolution as well as the company’s own growth. By the end of the podcast, you’ll understand how enabling technology and new business models have shifted, yet again, the payments ecosystem. The gateway and payment facilitation services offered by NMI help move ISVs and tech-forward ISOs into a first position over traditional providers of merchant services.

 

Direct download: EP105_NMI.mp3
Category:general -- posted at: 5:52pm EST

Take a listen to Ian Drysdale of Zelis Payments and George as they discuss how complex the payments process is in the healthcare industry. 

 

Near the peak of payments complexity and specificity is the healthcare industry. If you’ve ever looked at an explanation of benefits letter from a healthcare insurer, you’ve had a glimpse into the complexity of these payments. Multiple parties are paid a lot of money, before you may be required to ante up a co-payment yourself.

Regulation, compliance, the huge range of services delivered, and the scale of the healthcare ecosystem—from giant healthcare insurers to the local dentist—make healthcare payments a challenging, and attractive, market to serve. It is an enormous business-to-business market. Americans spent $3.5T, over $10K per person, in 2017. We spend something like 1 in 6 of our dollars on healthcare.

Simply getting the payment to the right party is complicated. Consider the imaging clinic that operates within a big regional hospital. It has its own back accounts, its own P&L, its own accounts receivable. Getting payments routed into the right account isn’t easy.

Checks still dominate in this industry because the development and maintenance of databases to track bank accounts is a major headache for a payer like an insurance company. Dropping a check in the mail, along with invoice information, at least communicates what’s necessary despite slow speed and high cost.

That’s where Zelis Payments and Ian Drysdale, its president and guest on this Payments on Fire® podcast, come in. Zelis Payments specializes in shifting healthcare payments from check rails to ACH rails. Using the service, providers get paid within a two or three days instead of two weeks. That speed has a huge impact on cash flow, a business metric of particular importance to smaller providers.

Zelis Payments also enables an EDI message format that communicates what’s being paid for in a manner consumable by the accounts receivable software in almost every healthcare provider’s office. Matching up the ACH deposit to what it covers is automated. While neither ACH or EDI are considered modern technologies, pairing them tightly produces real efficiencies.

Another area of complexity Ian discusses is healthcare fraud. Unfortunately, no small number of providers enter fraudulent claims into the system. They add up to huge numbers.

Zelis Payments adds value specific to the healthcare industry around the general functionality of EDI and ACH rails. If you’re a dentist getting paid 10 days faster than before, that added value is a very good thing.

 

Direct download: EP104_ZelisPayments.mp3
Category:general -- posted at: 4:04pm EST

Need an early warning system for what payment system hackers are about to do? Then knowing what’s happening on the dark net is imperative.

In this episode of Payments on Fire®, George speaks with Aamna Zia, VP of Finance and Growth at Flare Systems, and David Hetu, its Chief Science Officer. Based in Montreal, Flare Systems operates a dark net monitoring system that brings intelligence to the InfoSec and fraud management teams at banks.

The dark net is a mysterious place for most of us. It exists on something called Tor, an internet overlay that is designed for anonymity. Using a purpose-built browser, users can access websites, chat rooms, and the like, similar services to those we use on the open internet. The anonymity feature makes performance slow but it also works.

And that’s why it is the hub that marketers of stolen card numbers, user IDs and passwords, personally identifiable information, and hacking tools use to buy and sell. It’s this activity and the discussions around it that Flare Systems monitors and reports on.

Among the findings of Flare’s analytics is the fact that the vast majority of card data sellers probably have to live with their parents to get by. There’s not a lot of money in that particularly tired approach.

Obviously, there’s plenty of money to be made in payment fraud, though. Account takeover (ATO) fraud is growing quickly as recent losses on the UK’s Faster Payments system demonstrate. Synthetic identity fraud is fueled by the kind of data sold on the dark web.

Take a listen as Aamna Zia and David Hetu as they describe how Flare Systems works and what the hackers are up too. Then, if you’re on a bank’s infosec or security team, try to get some sleep.

Direct download: EP103_FlareSystems1.mp3
Category:general -- posted at: 10:57am EST

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