Benefits of adding Debit & ACH Lowering Cost of Payments

Transcription

1 Your source for payments education Benefits of adding Debit & ACH Lowering Cost of Payments Nandan Sheth, First Data, SVP, Global Debit Solutions

2 Key Takeaways 1. Evolution of commerce and expansion of payment acceptance/disbursements 2. Customer Experience considerations 3. How to evaluate and create strategy 2

3 History of Payments The transformation of the U.S. ecosystem Amex (founded in 1850) is incorporated First merchant PIN pads for debit transactions installed in supermarkets Debit is the fastest-growing retail payment method in the U.S. as of 2006, with double digit annual growth from EMV liability shift looms Credit cards introduced, including the BankAmericard Online ATMs developed; ATM networks established; shared networks emerge First debit card launches National EFT networks completed; universal ATM access established Online shopping begins; PayPal founded Durbin Amendment goes into effect The rise of mpos begins Mobile wallet/payments battleground continues to intensify with new entrants The ACH network conceived Gift cards introduced 1950s 1960s 1970s 1980s 1990s 2000s 2010s 2015 Debit terminal installation & online debit transactions begin growing rapidly in the early 1990s Online & offline debit transactions speed up in the mid-1990s; POS network consolidation begins Checks used as a mass instrument in the 1950s & 1960s Beginning of modern ATM & POS systems Master Charge becomes MasterCard Credit cards see widespread use BankAmericard becomes Visa Discover card launches Ameritech is the first U.S. firm to offer prepaid cards mcommerce is born in Finland Supreme Court ruling encourages interstate EFT networks; consolidation of shared ATM networks begins Modern smartphones emerge (i.e. iphone, Android) Bitcoin begins Mobile wallets/payments gain momentum Increasing demand for omni- channel/omnicommerce capabilities Continued proliferation of cloud POS systems for SMBs 3 Source: Federal Reserve Bank of Kansas City, Federal Reserve Bank of Boston, Federal Reserve Bank of Philadelphia, Aite, Mercator, Double Diamond Research, Intele-CardNews, The Next Web, company websites.

4 ACH and Debit Network Renaissance 2020 Beyond!! 2010 ACH use trending: less paper; Digital emergence new use cases Debit Rails routing/new options 4

5 Types of Electronic Payments An un-ending proliferation of product options Examples Credit General purpose (i.e. Visa, MasterCard, Discover, Amex) Private label Debit ATM card Signature debit (aka offline debit ) PIN debit (aka online debit ) Charge American Express Diner s Club Prepaid Automated Clearing House (ACH) Gift cards Payroll General purpose reloadable Payroll (direct deposit) Online bill pay (i.e. mortgage, utilities) Funding PayPal account And More 5 Source: Nerdwallet, NBPCA, NACHA.

6 Understanding the Total Cost of Acceptance (TCA) Payment processor costs represent a small fraction of the total cost of acceptance at the point of sale Interchange Fees Payment Brand Fees Value Added Solutions Acquirer Item Fees PCI Fees Chargeback Fees $3,126,504 75% $2,415 0% $71,940 2% Total Cost of Acceptance $4,141,265 $114,379 3% $211,881 5% $614,146 15% Interchange Fees Paid to the issuing bank that issued the card Payment Brand Fees Paid to the card brands, i.e. MasterCard, Visa, Discover Processor Fees per transaction fees, etc. 6

7 Maximize savings: ROI examples Retail PIN Debit Merchant total annual PIN Debit spend provided: $587MM in spend 10MM transactions Average transaction: $58.56 Savings per transaction: $0.04+ Three-year savings opportunity to merchant: Quick Service Restaurant PINless Merchant annual Signature Debit spend provided: $4.4B in total spend, $2.0B in eligible spend 184MM eligible transactions Average transaction: $10.89 Savings per transaction: $0.01+ Three-year savings opportunity to merchant: $1.3MM+ $3.6MM+ 7

8 Unlock New Payment Options ACH Pinless Debit Payment Disbursements 8

9 Acceptance Cost opportunity New business Opportunity for volume shift 9

10 ACH - more options than ever Engaging Complements any loyalty program, reward consumers for paying from their bank account Payment Type Usage by Age Point of Sale Online Mobile APP Economical Freedom from interchange fees Guarantee solution removes burden of chargebacks Chart Source: The Federal Reserve Bank of San Francisco Findings

11 Debit routing is more relevant than ever Debit is the payment method of choice In 2011, Congress passed the Durbin Amendment giving U.S. merchants the right to route debit transactions by requiring card issuers to support two or more unaffiliated network routing options. Interchange fees were also capped for large issuers. 1 Because of this legislation, we now have: 73.8 Billion Annual Debit Transactions 3 Payment Type Usage by Age Cash preference Credit preference Debit preference 50% 40% 30% Increase in Network Competition Decrease in Cost of Debit Acceptance 2 Promotion of Choice 20% 10% 0% Chart Source: The Federal Reserve Bank of San Francisco Findings

12 Disbursements Seen as an extension of cash Formats to utilize Direct to Debit ACH PP- Wallet 12

13 Disburse-to-Debit solution benefits Faster payments, cost reduction and customer service differentiation BENEFIT DESCRIPTION PROOF POINT More Secure, Faster Payments Deliver near real-time payments to debits cards in seconds Available immediately to millions of U.S. consumers Tokenized and encrypted payments data replaces use of sensitive PAN data More secure than mailing paper checks Fully traceable, reconcilable Uses ACH as backup when debit is not available Limits PCI data points <5 seconds for a payment to clear 700M+ accessible accounts Proof Point Sources: Nilson, FDC Internal analysis 13

14 Disburse-to-Debit solution benefits Faster payments, cost reduction and customer service differentiation BENEFIT DESCRIPTION PROOF POINT Differentiated Customer Service Deliver near real-time payments to debit cards in seconds Reduce friction by eliminating need for thirdparty accounts, pre-registration and search for bank account numbers Incremental revenue stream/earning potential by charging for faster payments More responsive than mailing a check Self-service functionality 70% of providers say it takes +45 days to get paid 25% reduction in payment status inquiries Proof Point Sources: Nilson, FDC Internal analysis 14

15 Disburse-to-Debit solution benefits Faster payments, cost reduction and customer service differentiation BENEFIT DESCRIPTION PROOF POINT Reduced Costs Less expensive than paper check handling processes Route disbursements to a cost-effective global debit gateway and bypass checks, wires and ACH Ability to access 8 U.S. network connections and 6 international networks connections Route disbursements away from Visa /MasterCard to domestic debit networks to obtain immediate ROI Daily reporting capability promotes back office efficiency 23% savings vs. traditional paper check costs 96% savings vs. wire transactions Proof Point Sources: Nilson, FDC Internal analysis First Data Corporation. All Rights Reserved. The First Data name, logo and related trademarks and service marks are owned by First Data Corporation and are registered or used in the U.S. and many foreign countries. All trademarks, service marks and trade names referenced in this material are the property of their respective owners.

16 Disbursement opportunities for vertical markets Businesses are in a prime position to use Disburse-to-Debit offering competitive differentiation in the market and enhance the customer experience Faster Settlement Speed Check Replacement Efficiency Sharing Economy Contract Staffing Property & Casualty Healthcare Government Merchant Settlement Marketplaces Lotteries & Gaming Education Utilities Online Lending Affiliate Marketing Financial Institutions Telecoms Travel 16

17 Merchant Benefits Revenue Growth New volume from existing customers Cross-Border Expansion New customers from new markets Operational Efficiency Reduce cost of debit acceptance

18 How to evaluate and create strategy How do you take advantage Debit innovation technology Increased savings What to look for in partner/provider Take advantage of innovation 18

19 Future Global Debit Landscape 19

20 Key Takeaways 1. Evolution of commerce and expansion of payment acceptance/disbursements 2. Customer Experience considerations 3. How to evaluate and create strategy 20

21 Thank you Don t forget to submit your session evaluation! Nandan Sheth, First Data, SVP, Global Debit Solutions 21