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Embedded Finance 101: The bridge connecting tech and financial services

Future of Digital Payments: Matched With Industry Needs

<img src="https://m2p-website-file.s3.ap-south-1.amazonaws.com/m2p-website-file/marketing-cms/m2p-blog/2022/06/Bring-to-me-Blog_31May21-2.webp" alt="M2P Fintech" title="" width="100%" height="358">Brian was a kid who loved bedtime stories, and every day his mother picked a new book for his bedtime story. One day, his mother read him the Japanese folktale “The Magic Mortar.” In this folktale, the magic mortar gave whatever its owner wished for until he says stop. Brian was mighty impressed and wanted one for him. The very next day, he saw his mother ordering groceries from an app, and he wanted to know how it works. When explained, Brian exclaimed that the app is the magic mortar he was looking for.Pretty interesting, isn’t it?Little did we realize that we all have a magical tool in our pockets to make our lives easier. We can enjoy the comfort of our home and make everything reach our front door.Yes, you are thinking it right. It is called — ‘Bring it to me’ or simply ‘to Me’ economy.<h2 class="heading-node" id="7a46" style="text-align: justify">So, what exactly is the ‘Bring it to me’ economy?</h2>The products and services are right at your doorstep instead of you getting in your car and going to the store every time. Starting right from fertilizers for your garden to vegetables for sumptuous cooking, you get every item online.Furthermore, ‘time’ has become a valuable currency and today’s customers are willing to bear the cost if it reduces their workload. Also, businesses have started realizing that they need to go a step beyond the digital realm to retain customers. So, front door delivery options have become the new normal.<h2 class="heading-node" id="836f" style="text-align: justify">The Role of Technology</h2>On the other hand, silently, our economy is moving ahead with a plethora of advancements and innovations. Technology is the leading player that drives the rapid economic growth of every country, including ours. With the cool trends springing up every day, shoppers expect more like same-day delivery and technology inclusion into their lifestyle.(i) Financial TechnologyFintech’s biggest contribution to this evolution is the digital money transfer services, as economic growth is highly connected with <a class="link" href="https://m2pfintech.com/blog/fintech-a-catalyst-for-financial-inclusion/">financial inclusion.</a> Digital wallets were a huge hit to pull many customers to ‘bring it to me’ economy lifestyle. They are widely accepted right from a street vendor to huge shopping centers, which make their transactions quicker. Mobile payment apps and gateways help in hassle-free and secure money flow during transactions. They also assist in tracking and analyzing the customer’s spending habits and preferences to bring matching products and advertisements.<a class="link" href="https://m2pfintech.com/blog/bnpl-the-rising-fintech-star/">BNPL (Buy Now Pay Later)</a> gives the customer the comfort of purchasing their desired products anytime with the ‘pay later’ option. Even Fintechs can now customize loans and insurance for the assistants helping in delivery service. Thus, fintechs helps businesses in building a friendly and personalized approach to the customers.(ii) Artificial Intelligence &amp; Machine Learning TechnologyMany grocers and FMCG companies have started incorporating AI &amp; ML technologies to capture their target segment. The virtual fitting room is the buzz during this pandemic. A customer can virtually try on clothes, accessories, shoes, or watches and check if it fits them in a 360-degree view. Even the shoppers can visualize a 3D furniture model to check if it fits their environment and space before making an order. So, there is a virtual solution to everything using artificial intelligence and augmented reality technologies in today’s digital world.Delivery models like Autonomous ground vehicles (AGVs) with lockers, droids, and drones are state-of-the-art in the regular delivery service with their super-fast and reliable features. AGVs with lockers boost the delivery system even on Sundays and late nights, where human effort is least expected. On the other hand, drones will help in reaching the product (up to 15kg) in the rural areas at a relatively high average speed. Droids are small autonomous vehicles that relatively travel slowly on the sidewalks for doorstep delivery. With these innovations, we are on the way to reduce human intervention in delivery systems.(iii) Blockchain TechnologyBlockchain technology guards the customers’ information involved in the process and avoids any digital breaches and other cyber-attacks due to its centralized nature. It builds the customers’ trust in their privacy and the security of digital assets. It also increases sales and streamlines payment processing with high efficiency.<h2 class="heading-node" id="22e8" style="text-align: justify">What awaits us in the future?</h2>The ‘Bring it to me’ economy has gained its popularity by bringing services home. Be it personal grooming or professional cleaning, or any other service; the customers are ready to avail them.Nowadays, people are redefining their satisfaction based on memorable experiences and interactions. Businesses need to put their heart and soul into providing their best customer experience to reinforce and market their brand digitally.Be it a simple emoji that brings a smile or the level of service offered, businesses are now in a race against themselves to turn their products and customers as their brand ambassadors because the end is not the supermarket shelves but the customer’s doorstep.<a class="link" href="https://m2pfintech.com/newsletter/">Subscribe</a>&nbsp;to our newsletter and get the latest fintech news, views, and insights, directly to your inbox.Follow us on&nbsp;<a class="link" href="https://www.linkedin.com/company/m2pfintech/mycompany/">LinkedIn</a>&nbsp;and&nbsp;<a class="link" href="https://twitter.com/m2pfintech">Twitter</a>&nbsp;for insightful fintech tales curated for curious minds like you.

‘Bring It To Me’ Economy: A Touch of Digital Magic

<img src="https://m2p-website-file.s3.ap-south-1.amazonaws.com/m2p-website-file/marketing-cms/m2p-blog/2022/04/banner1251-6-1.webp" alt="M2P Fintech" title="" id="t5u9jgsxm" width="100%" height="317">The advent of international payments has been long-standing in the financial world, facilitating commerce and trade. Be it sending money back home or international business contracts, today’s rising global commerce can be attributed to the growing volume of international digital <a class="link" href="https://m2pfintech.com/blog/future-of-payments-processing-matched-with-industry-needs/">payments</a>.It is a valuable ally for businesses and individuals who wish to enjoy commerce or transactions across borders. The surge in cross-border B2B payments is exponential since the penetration of the internet. With predictions of 30% growth in the next three years, cross-border e-commerce has taken off to exponential heights in these 2 years.Also, the businesses that offer software as a Service (SaaS) heavily depend on cross-border payments as their demographic is spread across the globe. In recent years, these players have played a monumental part in increasing the volume of cross-border transactions.The advancements in Fintech today empower many businesses and individuals to make instant payments. Businesses can experience stress-free invoicing, tax handling, and recurring billing in a few clicks. They also have access to top-notch support portals to handle any issues that arise out of a transaction.Fintech companies experiment with technologies like <a class="link" href="https://m2pfintech.com/blog/blockchain-and-fintech-use-cases-and-applications/">Blockchain</a> to bring more transparency and Artificial Intelligence for better regulatory compliance.<h2 class="heading-node" id="2511" style="text-align: justify">What are cross border payments?</h2>Cross border payments happen when the payee and the recipient are in different countries. These transactions can be retail, wholesale or recurring in nature. Decades back, the electronic messaging system served as a crucial mode to enable cross border payments.The cross border payments industry now utilizes many payment modes like <a class="link" href="https://m2pfintech.com/blog/credit-card-processing-a-definitive-guide/">credit cards</a>, cross-border <a class="link" href="https://m2pfintech.com/blog/what-is-a-payment-gateway-and-payment-switch-understanding-the-basics-of-payments-architecture/">payment gateways</a>, <a class="link" href="https://m2pfintech.com/blog/tale-of-money-transfers-from-hawala-to-one-click-remittances/">wire transfers</a>, e-wallet, distributed ledger technology, <a class="link" href="https://m2pfintech.com/blog/api-the-power-that-drives-new-age-banking-ecosystems/">APIs,</a> etc., every day to facilitate international payments.<h3 class="heading-node" id="d1xc42b0j" style="text-align: justify">Cross-border payment methods</h3>In fact, we can classify cross-border payment methods as Past, Present, and Near Future, where every advancement is an incremental leap in payment facilitation and user experience.<img src="https://m2p-website-file.s3.ap-south-1.amazonaws.com//m2p-website-file/marekting-cms/m2p-blog/2025/05/1-1.webp" alt="Cross border payment" title="" id="py8ljf39p" width="100%" height="253">The Past<h3 class="heading-node" id="8e54" style="text-align: justify">Wire transfer</h3>It is an electronic transfer of money, where the money is ‘wired’ from one account to another. If you are initiating a domestic transfer, it is called a “Bank wire.” In the case of cross-border payment, wire transfer is interchangeably referred to as “Remittances.” It is the oldest method of initiating a cross-border payment.<h3 class="heading-node" id="c67b" style="text-align: justify">How does it work?</h3>Here the payee visits their designated branch and provides the details of the receiver. Those details include the bank account number, name, recipient country’s currency, SWIFT code, IBAN (International Bank Account Number), bank address, amount to be transferred, etc.The currency rate is fixed before the transaction. The details are directly sent to the recipient branch or via an intermediary bank. That’s not all; the payee also has to pay certain charges like service tax, conversion charges, and other applicable charges. Based on the instructions, the recipient bank credits the amount to the recipient’s account within 5 working days or more at times.<h2 class="heading-node" id="dd8c" style="text-align: justify">Payment Service Providers (PSP)</h2>A popular option for immigrants, Payment Service Providers (PSP), effect transactions either in the form of physical cash or online payments.<h3 class="heading-node" id="b848" style="text-align: justify">How does it work?</h3>The sender visits the agency with the current nation’s currency and proper ID proof for physical cash. The recipient can visit the agency at his location and collect the money after dedicating transfer charges to completing the ID verification process. For online transactions, the sender visits the PSPs apps or websites. Within a few clicks, money flies over the nations and reaches the receiver’s bank account directly.<h2 class="heading-node" id="8db4" style="text-align: justify">The Present</h2><h3 class="heading-node" id="affb" style="text-align: justify">Credit cards</h3>It is a reliable mode of payment while traveling abroad. A <a class="link" href="https://m2pfintech.com/blog/credit-card-processing-a-definitive-guide/">credit card</a> eliminates the need to carry cash in hand. They also offer attractive benefits like interest-free loan periods (a month or more), reward points, gift coupons, shopping offers, easy EMI options, travel insurance perks, etc.<h3 class="heading-node" id="0caa" style="text-align: justify">Forex cards</h3>Many banks and financial institutions offer <a class="link" href="https://m2pfintech.com/blog/forex-cards-international-travel-made-effortless/">forex cards</a> explicitly designed for globetrotters. They can make money transfers across multiple countries with a single card. It helps the users avoid currency exchange rate fluctuations by locking in the rates while getting the card.<h3 class="heading-node" id="0b4e" style="text-align: justify">Digital wallets, ewallets &amp; mobile wallets</h3><ul class="list-node" id="th56mo1sb"><li>These are virtual wallets that can store money and customer information (credit card/debit card number, date, bank details, etc.).</li><li>eWallets are used like <a class="link" href="https://m2pfintech.com/blog/prepaid-cards-101-a-definitive-guide-for-growth-and-profitability/">prepaid cards</a> where we can store our money.</li><li>Digital Wallets are used to store card numbers, account numbers, expiry dates, IFSC codes, etc. This confidential information resides in the cloud.</li><li>Digital wallets can be used on desktops, whereas mobile wallets can be used on mobile devices.</li></ul><h3 class="heading-node" id="f39a" style="text-align: justify">MasterCard Send</h3>Initiated by the global network provider, MasterCard Send allows both businesses/ individuals to make real-time cross-border payments to the recipient’s debit card number. It does not rely on the bank’s ACH system, so there is no need for a routing or account number to send the money across.<h3 class="heading-node" id="a125" style="text-align: justify">Visa Direct</h3>Visa Direct offers push payments to individuals/businesses across the globe. The business/user can tap into Visa’s global network and send payments in real-time or by a maximum time limit of 24 hours.<h3 class="heading-node" id="c742" style="text-align: justify">SWIFT GPI</h3>SWIFT GPI or Global Payment Initiative aims for transparent and faster cross-border payments. It breaks down all the costs involved, and the payee can keep tabs on where the payment is at any given time. While the older methods of cross-border payments are traditionally mysterious, SWIFT GPI unveils the mystery and significantly increases the speed.<h2 class="heading-node" id="80ee" style="text-align: justify">The Near Future</h2><h3 class="heading-node" id="05b1" style="text-align: justify">Open Banking APIs</h3>Open Banking<a class="link" href="https://m2pfintech.com/blog/api-the-power-that-drives-new-age-banking-ecosystems/"> Application Programming Interface (APIs)</a> aims to simplify the complicated procedures of cross-border payments. As it democratizes access to customer and their data, it becomes easier for fintechs and other financial institutions to build products that address their target demographic version of cross-border payment app.<h3 class="heading-node" id="f3c8" style="text-align: justify">Decentralized Ledger Technology (DLT)</h3>A term made popular by Blockchain tech, DLT can be applied to cross-border payments’ three most challenging aspects. They are backend processes, compliance, and as a means of payment. DLT can speed up the backend process while offering transparency at every step of the transaction. It can also reduce compliance-related costs and can introduce an entirely new method of payment.<img src="https://m2p-website-file.s3.ap-south-1.amazonaws.com/m2p-website-file/marketing-cms/m2p-blog/2021/05/2-1.webp" alt="M2P Fintech" title="" width="100%" height="253"><h3 class="heading-node" id="yj7z6hw5g" style="text-align: justify">How do cross-border payments work?</h3>Cross-border payment is a complex mechanism that involves many players. It carries many fees right from currency conversion to the respective country’s tax and other service charges. Both domestic and overseas entities work together to accomplish the transfer.For example, when a software purchase transaction is initiated, the “correspondent bank” requests the money from the “respondent bank.” Here both the correspondent and the respondent bank will have their colleague bank across the globe. So, the funds will leave the buyer’s bank and reach that bank’s counterpart present in the merchant country, ready for remittance. Then the remittance is transferred to the merchant’s bank for settlement. So, in short, banks work with other players like payment service providers; to transfer the money while navigating currency conversions, different tax regimes, transaction fees, etc. Further, slowing down the process.One of the most popular banks for forex settlements is the CLS bank. Founded in 2002, explicitly for mitigating risk and settlement of Forex transactions, CLS works with 18 currencies in cross-border payments. Even though it has been instrumental in making forex payments easier, it does have some drawbacks. With new emerging currencies gaining global transaction volume, CLS is limited by 18 currencies and is yet to catch up with technological advancements of member countries’ payment infrastructure.To create a seamless flow for the cross-border payments, some changes must be incorporated quickly to ensure better penetration across the value chains:<ul class="list-node" id="cp59ifqob"><li>Applications of Real-Time Payments will offer much-needed transparency. The parties involved can track the transaction status anytime. For example, this is what SWIFT GPI is trying to achieve. It has the potential to be replicated in other payment methods.</li><li>The time factor taken to complete a cross-border payment should be brought to days from weeks. Small and Medium Businesses (SMBs) should have better access to these payments as cash flow is the backbone of their operations. Unpredictable delays and complex transactions will hamper its growth.</li><li>Today’s customers, both retail and corporate, are looking forward to solutions that adapt to their evolving needs. They also favor the platforms where the solutions are embedded for all access.</li><li>Customers today prefer a choice of methods and security when initiating transactions. A flexible ecosystem where transaction history, audit, and reconciliation can give valuable insight and a seamless experience.</li><li>Integrations are a much-needed factor to bring about global interoperability and linking fragmented value chains. No matter the transaction origin, the experience of the transaction must be seamless for the merchant.</li><li>Typically, the stakeholders in this transaction flow more often follow the same regulations. They can be bifurcated into ‘front end’ and ‘back end’ stakeholders. The Front-end players are the Tech companies who look at the ‘data’ aspect of the transaction and can have lighter compliance standards. The onus should lie in compliance with balance-sheet exposure, counterparty exposure, and liquidity for the backend players.</li></ul><h2 class="heading-node" id="3198" style="text-align: justify">How is fintech disrupting cross-border payments?</h2>With Blockchain taking the lead in the fintech space, digital currencies can be used in cross-border payments instead of national currencies limited by geography. As digital currencies are built with technology, it provides a bread crumb trail for the transaction trace and reduces the need for intermediaries. Also, the DLT applications of Blockchain can provide transparency and security at the core. Along with these innovations, Fintech also offers the following benefits:<img src="https://m2p-website-file.s3.ap-south-1.amazonaws.com/m2p-website-file/marketing-cms/m2p-blog/2021/05/3-1-1.webp" alt="M2P Fintech" title="" width="100%" height="253"><ul class="list-node" id="4nv0g5ncq"><li>Constant enhancement: Fintech giants are leveraging the latest technologies like Blockchain to make cross-border payments completely transparent and tamper-proof. They concentrate more on the user experience and focus on making complex processes swift and convenient.</li><li>Ease of use: Virtual wallets allow the users to stay free from making a note of all the passwords, account numbers and worry about their confidentiality. You can feed all your confidential information with a single tap and complete your purchase.</li><li>Convenient:&nbsp;Forex cards are travel allies. It makes our wallets light when we are traveling to different countries handling different currencies. We can simply swipe on the retail outlets or wave it with a contactless card. Like an ATM card, it allows us to withdraw the local cash in any country (fed while receiving). The best part is few banks are waiving the ATM withdrawal fees, cross-currency charges, etc.</li><li>User experience:&nbsp;Cross-border payment gateways help businesses to sell across borders. As they comply with PCI data security standards, customers feel secure while buying from a foreign website. Consumers can purchase by simply typing their email ids and enjoy rapid check-out.</li><li>Marketing mate:&nbsp;Businesses can use the buying patterns of the consumers collected through their wallets and retarget them with attractive offers. Wallets offer rewards to buyers in the name of cashback. This money can be utilized only in their portal and increase the sales of the online platform.</li></ul>Over the past decade, cross-border payments industry innovations are drastic and soaring high, with creative Fintech minds entering the space each day. Cross-border payments are no longer a daunting task consuming more time and effort. And we can expect many more innovations that make cross-border payments a secure and transparent exercise.To know more about cross-border payments, write to us at business@m2pfintech.com<a class="link" href="https://m2pfintech.com/newsletter/">Subscribe</a>&nbsp;to our newsletter and get the latest fintech news, views, and insights, directly to your inbox.Follow us on&nbsp;<a class="link" href="https://www.linkedin.com/company/m2pfintech/mycompany/">LinkedIn</a>&nbsp;and&nbsp;<a class="link" href="https://twitter.com/m2pfintech">Twitter</a>&nbsp;for insightful fintech tales curated for curious minds like you.

Cross- Border Payments: A Swift Money Flow Across Borders

<blockquote class="block-node" id="l59nir9cq">How Covid-19 Pandemic shaped the Remittance sector in the year 2020?</blockquote><img src="https://m2p-website-file.s3.ap-south-1.amazonaws.com//m2p-website-file/marekting-cms/m2p-blog/2025/05/Upward-spiral.webp" alt="Upward Spiral" title="" id="agehfg19l" width="100%" height="358">When the ongoing Pandemic hit in 2020, the World Bank and other agencies predicted a substantial fall in the <a class="link" href="https://m2pfintech.com/blog/remittance-with-upi-a-giant-leap-for-cross-border-payments/">global remittance</a>. This fall would have done sufficient damages to the domestic finances of South Asian nations like India, Pakistan, Sri Lanka, Bangladesh, and Nepal. The first four countries observe maximum outward remittance from the GCC region, and as we were present in the region (HQ at Abu Dhabi), we thought of doing an analysis.We collected data from various sources and what we found was an extraordinary Story of the Upward Spiral in Remittance in the year 2020. The facts and figures we collected, pointed towards growth in outward remittance from the UAE and Saudi Arabia. Further, as brick-and-mortar stores saw closure due to the pandemic, growing remittance gave a level playing field for the rising Fintechs in the region. Read on to know more.<img src="https://m2p-website-file.s3.ap-south-1.amazonaws.com/m2p-website-file/marketing-cms/m2p-blog/2022/05/Artboard-1-copy-3.webp" alt="M2P Fintech" title="" id="t2yql5oox" width="100%" height="1466"><img src="https://m2p-website-file.s3.ap-south-1.amazonaws.com/m2p-website-file/marketing-cms/m2p-blog/2022/05/Artboard-1.webp" alt="M2P Fintech" title="" id="hc3yiy8pk" width="100%" height="1212"><img src="https://m2p-website-file.s3.ap-south-1.amazonaws.com/m2p-website-file/marketing-cms/m2p-blog/2022/05/Artboard-1-copy-2.webp" alt="M2P Fintech" title="" id="kszqc4ge3" width="100%" height="2066"><a class="link" href="https://m2pfintech.com/newsletter/">Subscribe</a>&nbsp;to our newsletter and get the latest fintech news, views, and insights, directly to your inbox.Follow us on&nbsp;<a class="link" href="https://www.linkedin.com/company/m2pfintech/mycompany/">LinkedIn</a>&nbsp;and&nbsp;<a class="link" href="https://twitter.com/m2pfintech">Twitter</a>&nbsp;for insightful fintech tales curated for curious minds like you.

Upward Spiral In Remittance - 2020

<img src="https://m2p-website-file.s3.ap-south-1.amazonaws.com/m2p-website-file/marketing-cms/m2p-blog/2022/04/banner1251-5-1.webp" alt="M2P Fintech" title="" id="l0awqi5yp" width="100%" height="356">Swiping a credit card for purchases has been a standard practice for decades. All we need to do is swipe the card, and the transaction is complete. If it is an E-commerce transaction, entering the card details and other requisite information does the trick. And the time taken to complete this happening is mere seconds. But there are many steps between the card swipe and receipt of the swipe. All those actions are an intricate part of how credit card processing happens on the inside.<blockquote class="block-node" id="6mo1864fw">Simplifying Wikipedia’s terms: The Credit card is a payment card used by consumers to pay the merchant in exchange for goods or services. It is a promise between the card issuer and the cardholder to abide by a few drafted financial terms &amp; conditions — the cost of the goods + interest rates or late fees.</blockquote>It is a calculative risk taken by many parties involved in the transaction.From transferring the funds securely to collecting the payment from the user later, it revolves under a virtual promise. So that the importance of understanding credit card processing is to avoid any mishaps.<h2 class="heading-node" id="b7b9">What is credit card processing?</h2>Credit Card Processing is the funnel through which the data related to the Consumer Credit Card and purchase are transmitted from their Credit Accounts to Merchant Account. As consumer uses their credit card to buy a product, a virtual process happens swiftly between many financial participants to allow or decline the purchase.The credit card processing framework is a blueprint that serves as a guide for payments to go in the right direction during the transaction, and when they take a toll, it acts as an investigator.<h2 class="heading-node" id="bab3">Stakeholders in credit card processing</h2>The credit card processing network actively processes millions of transactions with the help of rigid network infrastructure and various stakeholders behind each network architecture.Each task is a mini approval request raised and approved in a circular motion by the financial entities involved in the process.Card Holder:&nbsp;The consumer is the credit cardholder.Merchant:&nbsp;The owner of the online selling platform or the offline store where the goods or services are placed for the consumers to buy.Example: Amazon (online store) Costco HyperMarket (offline store)Payment Processor: These are the companies that communicate and relay information from Consumer’s credit card to both Issuing and Acquiring Bank. All this occurs at lightning speed. Payment processors collect, receive, and accept the payment using a combination of hardware and software advancements. They ensure the security and fraud protection measures in the transactions.Card Network: Visa, MasterCard are the dominant examples of the card network, followed by American Express and Discover. They are virtual payment infrastructure facilitating the communication between merchant and issuer bank. Along with these international players, we have an India-borne network RuPay, launched by NPCI (National Payment Corporation of India).American Express and Discover are also issuers in the credit card industry. Discover also owns and operates Discover Bank. In India, Discover-branded credit cards are seen in collaboration with HDFC Bank and Diners Club International.Issuing Bank:&nbsp;An Issuing Bank (or “Issuer”) is an entity that provides Credit/Debit Cards to customers (VISA, Master, American Express, etc.). It authenticates a customer’s purchase at a store/online site. When a payment is made at a store, funds are transferred from the issuing bank (which authenticates the transaction) to the acquiring bank.Acquiring Bank:&nbsp;An Acquiring Bank (or “acquirer” or “merchant’s bank”) is an entity that maintains the merchant’s bank account. With the help of the acquiring bank, the merchant can process debit and credit card payments, access payment gateways, and receive payments from transacting customers.Any eCommerce entity or a brick-and-mortar store can collect online payments only after signing a contract with an acquiring bank. Once the contract is signed, the merchant can receive online payments, and the acquirer takes care of it on behalf of the merchant.In short, acquirers accept payments while issuers make payments. Also, the Acquirers provide their services to businesses, whereas Issuers offer their services to individuals. Acquirers and Issuers are like two sides of the same coin; though there are subtle differences in how they work, one cannot exist without the other.<h2 class="heading-node" id="92d9">How does credit card processing work?</h2>Credit card processing, which happens in a fraction of seconds, is a complex process in the background. We have tried demystifying the process in 7 simple steps:<img src="https://miro.medium.com/max/1400/1*K9bp4Kbg_HWik1wOxQw9jw.jpeg" alt="Credit Card Processing Flow" title="" width="100%" height="284"><h3 class="heading-node" id="46f4">Consumer confirms purchase</h3>The consumer, who is also the cardholder, confirms the purchase at the POS (Point of Sale) terminal or the checkout webpage of the e-commerce website.<h3 class="heading-node" id="7fec">Consumer submits transaction details</h3>To complete the purchase, the consumer swipes the credit card or submits his card details to begin the payment. The transaction here will follow two flows; if it is a POS transaction, the POS device will read the card information. In the case of e-commerce websites, the consumer enters card details in the payment gateway.<h3 class="heading-node" id="1675">Secured data transmission</h3>There are multiple levels involved in the card data transmission and the purchase amount.<ol class="list-node" id="z0vfnyiw9"><li>Encrypted details sent to Payment Processor-&nbsp;The card reader or the payment gateway passes the transaction information in an encrypted format to the payment processor.</li><li>Payment Processor to Card Network-&nbsp;The payment processor collects and transmits information to the Credit Card Network.</li><li>Card Network to Issuer Bank-&nbsp;The Consumer’s Bank or the Issuing Bank which has issued the Credit Card, receives the information.</li></ol><h3 class="heading-node" id="1ae6">Payment verification by issuing bank</h3>The Consumer’s Bank verifies the availability of sufficient funds for the purchase. It also checks the legitimacy of the purchase. Once all these checks are done, it sends an approved or declined message to the Credit Card Network.<h3 class="heading-node" id="834e">Payment authorization</h3>Authorization response from the Card Network is sent to the Payment Gateway or the Card reader, displaying the response at the Purchase window. Once the authorization is approved, the merchant can deliver goods to Consumer.<h3 class="heading-node" id="665c">Payment processing by acquiring bank</h3>Merchant’s Bank or the Acquiring Bank receives the approved authorizations and credit card payments in a batch from Merchant for settlement. The payments are processed by the Bank on behalf of merchants.<h3 class="heading-node" id="e50a">Payment settlement flow</h3>The merchant bank further raises the Credit Card issuing bank request for batch settlement. The issuing bank, in turn, makes a settlement payment to the merchant bank the following day. Once funds are received by the Merchant Bank; certain amount towards interchange fees, acquirer fee, etc. are deducted before depositing the remaining to the merchant’s account. The settlement process typically takes 2–3 Business days.<h2 class="heading-node" id="ec35">What happens if the card transaction fails to go through?</h2>In case of refunds, payment disputes, or fraud reports, the process begins at the issuer end and then flows to the acquirer. In these cases, too, the issuer will authorize, and the acquirer authenticates. Though the minor details may differ from case to case, the overall process is the same. This activity is also known as the&nbsp;Chargeback process.&nbsp;Here the issuing bank will reverse the transaction in question by withdrawing money from the acquirer and returning it to the cardholder.The merchant can dispute the chargeback through&nbsp;Representment, where the acquirer must gather evidence on the merchant’s behalf to prove the original transaction validity. The issuer will examine the collected facts and offer an outcome supporting either the merchant or the cardholder.<h2 class="heading-node" id="280d">What are credit card processing services?</h2>A credit card processing service handles the data transfer that happens between the card machine and the bank. It processes all kinds of credit card transactions, both offline and online. Also known as&nbsp;Merchant Service&nbsp;Providers, these companies are authorized by card networks such Visa, MasterCard, etc. They help businesses open merchant accounts and manage their daily card transactions for a fee.<h2 class="heading-node" id="3ad2">Credit card processing fees</h2>The whole operation of credit card settlement and processing is notoriously confusing and complex. Still, it’s made easy for a price, and that is your credit card processing fees. This amount is charged to the merchant based on the payment processor he is using.Payment processors like the fintech providers who provide the payment infrastructure in the selling platform are the ones that collect this fee. It is then split among the other active players in the credit card processing framework.Credit card processing fees are broken into<ol class="list-node" id="5i5ncnxcm"><li>Interchange:&nbsp;The commission fee that goes to the issuer bank, non-negotiable.</li><li>Assessments:&nbsp;The commission fee that goes to the card network brand, non-negotiable.</li><li>Markup:&nbsp;The commission fee that goes to the payment processor, negotiable.</li></ol><h2 class="heading-node" id="f95c">Payment processing technologies</h2><img src="https://miro.medium.com/max/1400/1*jEPc3qSRo-kXAHW_35lr0w.jpeg" alt="Payment Processing Technologies" title="" width="100%" height="284">Payments are sensitive everywhere. Lose a tooth nobody cares but lose a penny in the transaction everybody loses their temperance.It is essential to place your business into the next generation of the digital world that demands trust, fast, easy, and scalable fintech solutions. Only when your chosen payment processing technology can act as more than an enhancement can one survive the competition.To process a credit card, settle the credit card funds, and secure the payment process, the fintech industry caters to the technology accordingly. Irrespective of online or offline stores, payment processing, needs to happen few seconds to place an active bet in the competition. And here are some of the technologies<ul class="list-node" id="gt7lqlsep"><li>Mobile POS terminal (mPOS)- It is a device used at stores for retail card transactions</li><li>Payment Gateway- It is the key component of the payment processing system, and it sends the customer information to the acquirer</li><li>Real-Time Payments (RTP)- As the name suggests, RTP payments are initiated and settled almost instantly. Ideally, this technology is available 24*7*365</li><li>Mobile Wallets- It is a virtual wallet that stores an individual’s card details on a mobile device. They are used to make payments without the need for a physical card.</li><li>Blockchain in Payments- It is a promising tech for payment processing. Many companies worldwide are exploring its potential in the same.</li><li>NFC/Contactless Cards- NFC is available in smartphone payment gateways. It allows users to store multiple card data on their mobile, thereby reducing the need to carry cash.</li></ul><h2 class="heading-node" id="3bfc">Conclusion</h2>I know this is a lot to take in. We wish for an easy backend process, too, with fewer complications involved.However, that’s a job for us to worry about while you think only of choosing the right credit card processing system. The only thought you should have is about bringing in a suitable payment processor to make your credit card transactions occur in a fraction of seconds for a lower fee.Want to know more on this? Write to us at business@m2pfintech.com.<a class="link" href="https://m2pfintech.com/newsletter/">Subscribe</a>&nbsp;to our newsletter and get the latest fintech news, views, and insights, directly to your inbox. Follow us on&nbsp;<a class="link" href="https://www.linkedin.com/company/m2pfintech/mycompany/">LinkedIn</a>&nbsp;and&nbsp;<a class="link" href="https://twitter.com/m2pfintech">Twitter</a>&nbsp;for insightful fintech tales curated for curious minds like you.

Credit Card Processing - A Definitive Guide

<img src="https://m2p-website-file.s3.ap-south-1.amazonaws.com/m2p-website-file/marketing-cms/m2p-blog/2022/04/banner1251-7.webp" alt="M2P Fintech" title="" id="47w9r0aue" width="100%" height="447">Over the past few years, we have been witnessing ongoing digital advancements, ranging from communication to the way we transact. Out of these advancements, cashless transactions are reigning supreme and are further fueled by this raging pandemic. They have taken over traditional payments and banking practices.Also, there is a multitude of payment options available today. Major players such as Google Pay, Apple Pay, PayPal have access to sensitive user data stored across international servers. These actions led to many raising their voice about user data security and privacy.Being a global concern, RBI brought forth the concept of Data Localization to protect user data from potential threats.<h2 class="heading-node" id="909f" style="text-align: justify">What is data localization?</h2>Data protection created a buzz way back in 1993 when Public Records Act ensures the data transfer is restricted outside India for security purposes from surveillance of other countries.<blockquote class="block-node" id="gvz0ve27e">Data localization is the act of storing citizens’ data within the country’s geographical boundaries to avoid any foreign accessibility.</blockquote>It also plays a crucial part in the government’s cloud computing policy.<h2 class="heading-node" id="a1d6" style="text-align: justify">RBI guidelines on the data localization Policy</h2>Reserve Bank of India (RBI) issued a circular dated April 6, 2018, stating that all authorized Payment System Operators (PSOs) in India to ensure that the data related to payment systems such as customer data, payment sensitive data, payment credentials, and transaction data should be mandatorily stored within India itself under the Payment and Settlement Systems Act, 2007.A deadline of six months was tagged along with the data localization policy. Since the payment ecosystem has ballooned in the last few years, RBI was pushed to undertake this crucial step in protecting consumers’ data.All payment firms, including American Express, Master Card/Visa, PayPal, Google Pay, WhatsApp Pay, Paytm, and Phone Pe, should adhere to the RBI’s data localization rule. Subsequently, RBI insisted system providers for unfettered access to all data on complete end-to-end transaction details/information collected/carried/processed as part of the message/payment instruction by submitting Audit Report (SAR) conducted by CERT-IN.<h2 class="heading-node" id="b109" style="text-align: justify">As per RBI’s data localization policy...</h2><ol class="list-node" id="2v2w7zt70"><li>There is no bar on payment processing outside the country, but post-processing, the data should be deleted from the foreign systems and brought back to India not later than the one business day or 24 hours from payment processing, whichever is earlier. The same should be stored only in India.</li><li>However, any subsequent activity such as settlement processing after payment processing, if done outside India, shall also be undertaken/performed on a near real-time basis by storing it only in India.</li><li>In case of any other related processing activity, such as chargeback, etc., the data can be accessed, at any time, from India, where it is stored.</li><li>RBI’s prior approval is necessary for sharing the payment system data with overseas regulators.</li><li>The banks operating in India must strictly adhere to the storage norms.</li><li>Exceptionally, a foreign leg of a transaction is permitted to store their banking data abroad. However, the domestic payment transactions should be stored only in India along with the details which include end-to-end transaction, payment, and settlement transactions — customer name, mobile number, e-mail address, Aadhar card number or PAN, beneficiary details, and payment credentials like One Time Password (OTP), PIN and passwords.</li><li>For cross-border transactions that include data with a foreign and domestic component, a copy of the domestic component may be stored abroad, if required.</li><li>System providers were given six months to ensure the directive’s compliance and report the same to RBI.</li></ol><img src="https://miro.medium.com/max/700/1*UWIdZTi2f31G70qkfQJqLw.png" alt="An image representing the RBI Data Localisation Policy" title="" width="100%" height="349">The RBI guidelines on storing payments data provoked a noteworthy impact on Payment System Operators. Indian payment firms, viz. Paytm, PhonePe, and MobiKwik backed the RBI regulations on data localization policy in protecting citizens’ data and restricting any foreign accessibility.But the representatives of top leading companies such as Amazon, Flipkart, Google, Microsoft, Facebook, and American Express met with government and RBI officials to raise concerns regarding the stringent nature of this policy (2019).Later the Indian government took the responsibility to determine the category of data to be stored locally. This categorization ensured that the data is not misused by various companies, which involves transferring it to third-party providers.<h2 class="heading-node" id="f733" style="text-align: justify">Personal data protection bill</h2>The Personal Data Protection Bill (PDP Bill) applies to the processing of personal data by the companies registered in India, foreign companies dealing with personal data of individuals in India, and the Indian Government. The PDP bill categorizes the collected data into three categories:<ul class="list-node" id="0gtvgf1gh"><li>Personal data,</li><li>Sensitive personal data and</li><li>Critical personal data.</li></ul>The PDP bill is not applicable for the processing of anonymous data.The PDP bill proposed to store sensitive personal data and critical personal data in India. However, it permits the processing of sensitive personal data by transferring it to outside of India in certain cases provided that at least a copy of that data continues to be stored in India and explicit consent is needed for the same. Whereas critical personal data can only be stored and processed within India.<h2 class="heading-node" id="e7e0" style="text-align: justify">The impact on payment industries</h2>Multinational payment systems located in India faced a major impact after the RBI’s intervention on Data Localization. Popular foreign credit card companies such as Visa and Mastercard missed the strict six-month deadline set by the RBI (2019). Usually, International payment companies store their data on global servers, but this rule made them store data locally with an additional investment.India is the fastest-growing market for mobile apps and digital banking. The Indian start-up companies in the FinTech sector often go through the toughest challenge of outsourcing technical support and shifting from cloud services to cheaper and cost-effective services.Data Localization Policy will prohibit these start-ups from opting for cost-effective cloud service providers globally and choose localized alternatives, which ends in high operational costs. But this will be a fruitful drift that leads to shielding of payments data from identity fraud and other digital breaches associated with it.<h2 class="heading-node" id="3200" style="text-align: justify">The current scenario</h2>RBI reiterated its stand on data privacy by issuing a circular stating that from April 1, 2021, all Payment system operators to submit a compliance certificate duly signed by their CEOs or Managing Directors on a half-yearly basis adhering to the RBI’s regulations on securing payments data.This again triggered an active interest in RBI’s continuous intervention on securing and continuously monitoring the data to avoid any future risks to the country. With the advancements in the digital economy, financial data security is a must for the country’s economic growth and development.Want to know more about data localization? Write to us at business@m2pfintech.com<a class="link" href="https://m2pfintech.com/newsletter/">Subscribe</a>&nbsp;to our newsletter and get the latest fintech news, views, and insights, directly to your inbox. Follow us on&nbsp;<a class="link" href="https://www.linkedin.com/company/m2pfintech/mycompany/">LinkedIn</a>&nbsp;and&nbsp;<a class="link" href="https://twitter.com/m2pfintech">Twitter</a>&nbsp;for insightful fintech tales curated for curious minds like you.

Decrypting RBI Data Localization Policy for Payment Companies

<img src="https://m2p-website-file.s3.ap-south-1.amazonaws.com/m2p-website-file/marketing-cms/m2p-blog/2022/05/Artboard-1-copy-7-4.webp" alt="M2P Fintech" title="" id="z6xoivwf2" width="100%" height="356">The fintech industry is a big ocean where one gets easily lost if unaware of the operational standpoint of digital solutions. It has so many entities built with innovative ideas, frameworks, and processes that offer high scope to elevate the business to different levels.Among the pool of technology offered by the fintech world, payment solution is the essential competitive niche with robust ideologies already in action.The statement&nbsp;Payments are happening in the air&nbsp;is surreal because of the customized payment solutions popping out from every nook. These customized payment solutions are powered by two little, but mighty players called the Payment Gateway and Payment Switch. Though invisible to the human eyes, this duo is at the center of every scalable payment method that today’s banks and businesses are trying to deploy for a niche customer experience.<h2 class="heading-node" id="5533">What is a Payment Gateway?</h2>A payment gateway is a tool that potentially takes care of the transaction process end-to-end, covering security to settlement. Payment gateway, also known as the facilitator of the payment, is an online digital cashier who charges, verifies, collects cash, and hands over the deliverables.Payment Gateway is developed and launched by fintech’s to allow the merchants (businesses) to accept the payments in their selling platform, online or offline.They are third-party software sitting between businesses (merchant selling platform) and issuing bank account. This software creates a pathway in which the user (customer) can submit his/her sensitive information (card details, passwords, PINs) to the merchant in exchange for the promised goods.The payment gateway validates the submitted information, checks for the fund availability, deducts the fund. When the products are shipped or handed over, the fund is moved to the merchant account in 1–2 business days.<img src="https://m2p-website-file.s3.ap-south-1.amazonaws.com/m2p-website-file/marketing-cms/m2p-blog/2022/05/Artboard-1-copy-10-3.webp" alt="M2P Fintech" title="" id="ueyc1wyvd" width="100%" height="284">The powerful coding lines in the payment gateway enable the user to request a payment transaction within the seller platform. It assists the transaction process by executing the following steps,<ul class="list-node" id="qof5gk3a6"><li>Accepts the payment request</li><li>Verifies the user card details or submitted account details</li><li>Check for the fund availability</li><li>Processes the transaction</li><li>Transfers the fund to the acquirer bank account (merchant bank account)</li></ul>In simple terms, the software allows the smooth transaction between the issuing bank account and the acquirer’s bank account.<h2 class="heading-node" id="29e9">Benefits of a Payment Gateway</h2><ol class="list-node" id="bcxfx2siy"><li>Allows millions of users to perform a transaction with the merchants</li><li>Reduces the fraudulent services in online payments with various authentication steps like OTP, CVV, or CCV</li><li>Allows multiple payment options like a credit card, net banking, mobile wallet, or digital transactions.</li><li>Easy report generation, reconciliation, and settlement for accounting frameworks.</li></ol><h2 class="heading-node" id="5679">What is a Payment Switch?</h2>Payment switch is also a technology but embedded into the payment gateways. It is an independent entity that conveniently sits inside the payment gateways to assist the <a class="link" href="https://m2pfintech.com/blog/future-of-payments-processing-matched-with-industry-needs/">payment processing</a>.Being an OLTP (online transaction process tasks) a payment switch takes care of all the nuances inside a transaction. Suppose the payment gateway is a founder who oversees the transaction. In that case, the switch is the executive who does the actual payment processing tasks.In a payment gateway, there are multiple merchant accounts boarded with their bank (acquirer bank). So, when a payment request comes from a merchant selling platform, switch dynamically identifies the acquirer bank (associated with that merchant) and the issuing bank of that specific request through <a class="link" href="https://m2pfintech.com/blog/the-bin-migrationpreparing-for-8-digit-bins/">BIN</a> allotment and then permits the transaction to happen securely.BIN allotment is one among many ways for the payment switch to route the transaction. It also supports routing by amount, routing by the time of the day. Once it receives the message from the issuing bank, it formats and sends back the response to the acquirer.The payment switch is a flexible entity accepting the payment request from the payment gateway and beginning the transaction steps.<ul class="list-node" id="5zkz91mvg"><li>Accepts the validated payment request from the PG</li><li>Reads the merchant rules for the transaction process</li><li>Identifies the PSP for that particular payment request</li><li>Routes (switches) the transaction based on a BIN allotment for a specific PSP associated with that payment request</li><li>Processes the transaction based on failure or success</li></ul><img src="https://m2p-website-file.s3.ap-south-1.amazonaws.com/m2p-website-file/marketing-cms/m2p-blog/2022/05/Artboard-1-copy-9-1.webp" alt="M2P Fintech" title="" width="100%" height="284"><h2 class="heading-node" id="h40nrxm4e">Benefits of a Payment Switch</h2><ol class="list-node" id="ccsypcdsi"><li>Highly Scalable</li><li>Dynamic Routing</li><li>Fewer outages’ issues</li><li>No more connectivity time out</li><li>Secure and eliminates the fraud risks because of the encrypted BIN allotment</li><li>Allows extension of payment networks</li></ol><h2 class="heading-node" id="eeqyxyhej">Payment Gateway vs. Payment Switch</h2>In the whole payment ecosystem, payment gateway and payment switch are the two variables that have become the atom to all the online and offline businesses appending banks. The two entities are not different but not the same too. They are embedded onto each other to reduce downtime and outages.It is easy to confuse both and interpret them as one, but it is not. Although on a bird’s view, the operations of both are alike, the underlying subtlety in the payment processing tasks differentiates payment gateway from payment switch.<h2 class="heading-node" id="2280">How do they work together in sync?</h2>Payment gateway and Payment switch work together in a fashionable way enabling faster, safer, and dynamic transactions. At a fraction of a second, the payment gateway can process more than a million transactions because of the flexible switch. You can imagine a payment gateway as the train track, and the payment switch is the railroad switch to change train routes. Just like the railroad switch guides the train to their proper destinations, the payment switch guides the transaction process to the right acquirer’s place.<blockquote class="block-node" id="u3fmyga0u">One platform, multiples payment requests, no mishaps, no outages, and no time outs — all possible because of payment switch.</blockquote><h2 class="heading-node" id="q8g6rg92k">What is the future of both?</h2>Payment switches will not go away because banks face intense competition to bring the topmost secure and faster payment methods. Payment initiatives will take the revolution road only till the switch exists.However, the future remains unpredictable (after what 2020 has taught). So, maybe the end might eliminate the switch and bring in a more robust payment gateway technology.In retrospect…The switch will be the payment gateway and grow as a monopoly in the payment ecosystem.Since owning a switch needs BIN allotment, the regulations charges are heavy; also, the technology requires a fast server with 24*7 hours access.But the real question for our thought here is, what if AI intelligence operations are allowed into payment technology. Then the game changes — switches will get a complete upgrade. But the future is yet to be witnessed.<a class="link" href="https://m2pfintech.com/newsletter/">Subscribe</a>&nbsp;to our newsletter and get the latest fintech news, views, and insights, directly to your inbox. Follow us on&nbsp;<a class="link" href="https://www.linkedin.com/company/m2pfintech/mycompany/">LinkedIn</a>&nbsp;and&nbsp;<a class="link" href="https://twitter.com/m2pfintech">Twitter</a>&nbsp;for insightful fintech tales curated for curious minds like you.

Tag: "Digital Payments (63)"

M2P Fintech