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5 Reasons you need a gateway for POS payments and 5 reasons you dont_ACCEO

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5 Reasons you need a gateway for POS payments and 5 reasons you dont_ACCEO

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5 Reasons you need a gateway for POS payments and 5 reasons you dont_ACCEO

  1. 1. 5 Reasons You Need a Gateway for POS Payments and 5 Reasons You Don’t Anand Goel, CEO – Optimized Payments
  2. 2. • Understand a framework for evaluating gateways and non- gateways • Understand features and benefits provided by gateways and non-gateways • Understand the economics of gateways and non-gateways Actionable Takeaways from this session:
  3. 3. • About Optimized Payments • Defining Processors • Defining Gateways and Non-Gateways • 5 Reasons You Need a Gateway • 5 Reasons. You Don’t Need a Gateway • Summary • Q&A Outline
  4. 4. • Niche consulting firm with 12 years of card payments experience • Helped over 50 Fortune 1000 firms evaluate and implement gateways and other components of payments infrastructure • Helped our clients save over $220 million in card related fees • Independent and trusted payments partner About Optimized Payments
  5. 5. • Connects a merchant to the card networks – Visa, MasterCard, Discover and American Express for authorization and/or settlement. Also connect to gateways, if used. Defining Processors (Merchant Acquirers) • Provide other products; including gateway, security, gift cards, fraud • Provide funding, reporting, service
  6. 6. • A payment gateway is a service provider that connects a merchant’s POS/ERP/shopping card to the payment processors for authorization and settlement • Many gateways will connect to multiple processors, while offering functionality to simplify connectivity and enhance security • In retail channel, gateways are also referred to as switches, semi- integrated solutions and ‘non-gateways’* • There are hundreds of gateways in the marketplace. The quality, services and benefits of each may vary significantly Defining Gateways and Non-Gateways *There are architecture and on-prem vs. cloud deployment differences between traditional gateways, switches, semi-integrated solutio and ’non-gateways’.
  7. 7. 1. Best of Breed Solution (features not offered by acquirer) 2. Simplified Architecture (connection to multiple processors) 3. Security & Tokenization (“omni-tokens”) 4. Business Flexibility (ability to change processors, test auth rates between processors) 5. Economics Favoring Mid-Market Merchants 5 Reasons You Need a Gateway
  8. 8. Homegrown Solutions •Many of the largest enterprises build direct connectivity to their payment processors and payment networks. •This requires a high level of sophistication and IT resources but allows for in-house technology and support. Switches •Payment connectors that pass transactions with limited functionality. •Benefits of a switch would be for speed •This appeals to the largest retailers and grocers. Middleware/Non- Gateways •Some payment providers support all the functionality of a gateway but provide on-premise integration into the POS and direct to processor connectivity. •Benefits of these solutions are the reduction in “hops” in the transaction. •Great for large, high volume retail and restaurants. Alternatives to Gateways While many consider any connection between two points (merchant and processor) a gateway, there are alternative options to traditional gateways:
  9. 9. 1. Economics Favoring Large Merchants 2. Increased Flexibility (combination of building components inhouse, selecting some components from processors) 3. Want End to End vs. Point to Point Encryption (acquirer tokens) 4. Reduce Hops (on prem vs. cloud gateway solution) 5. Estate Management Solution 5 Reasons You Don’t Need a Gateway
  10. 10. • Scenario 1: Retailer with 10,000,000 annual transactions • Vendor A = $0.04 per transaction ($400,000/YR) • Vendor B = flat monthly fee totaling $300,000 annually • Vendor B provides $100,000 in savings, and does not increase as processing volumes grow • Scenario 2: Retailer with 1,000,000 annual transactions • Vendor A = $0.06 per transaction ($60,000/YR) • Vendor B = flat monthly fee totaling $180,000 annually • Vendor A provides $120,000 in savings, much lower than the flat monthly fee • Make sure you are accounting for all types of fees and review your offers carefully • Additional implementation, encryption/tokenization, per location, monthly support, P2PE, routing, account updater, authorization optimization, fraud management, etc. fees could add up quickly Business Model Comparisons
  11. 11. Evaluating Gateways Based on Channel & Size Merchant Size Annual Txns Channel Needs Recommendation Perspective Small 100K CP Square Register, First Data Clover, PayPal Here Gateway built into POS Small 100K CNP Paypal, Stripe, Braintree No separate fees for gateway services, bundled with core processing Small 100K CP + CNP Square, PayPal No separate fees for gateway services, bundled with core processing Medium 1M CP Freedompay, Cayan Genius Strong competitive solutions with origins in retail Medium 1M CNP CardConnect, Acquirer Gateways Acquirer gateways offer competitive pricing Medium 1M CP + CNP Freedompay, Cayan Genius Offer competitive omni-channel solutions Large 10M CP Tender Retail, ACI PAY.ON Competitive pricing, charge monthly fees instead of per transaction fees Large 10M CNP Cybersource, CardConnect Acquirer Gateways Established solutions Large 10M CP + CNP Tender Retail, ACI PAY.ON, Aurus, Freedompay Strong omni-channel solutions while being processor agnostic
  12. 12. • Identify your needs and budget for a gateway or non-gateway • Conduct a gateway RFP if choice isn’t clear • Utilize a consulting firm if you need help Summary Anand Goel anand@optimizedpmts.com 404-542-8520

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