In this webinar, ROI Payments provides details on end-to-end transaction flows of major electronic payment types including Credit/Debit Cards, Real-time and Delayed Bank Payments, Digital Wallets, and Closed Loop Systems. Topics include how each transaction network works, features and limitations of each payment type and which providers play key roles in each payment type. Coupled with the terminology and vendor ecosystem details learned in Boot Camp #1, ROI Payments will increase your Payments IQ with the business benefits and technical capabilities of each payment method.

1. Brion Bonkowski
Managing Director
June 6, 2013
Boot Camp Week 2
Improve your Payment IQ
Mechanics of an Electronic
Payment - “Go with the
(Transaction) Flow”

2.  Notable Trends
 What’s Next?
 Wrap-up / Q&A
 Introduction
 Who is Interested in Payments?
 Ecosystem Recap w/ Terms &
Terminology
 Electronic Payments Market Share
 Electronic Transaction Types
 Deep Dive of Transaction Flows
 Credit and Debit Cards - 4 Party
 Credit and Debit Cards - 3 Party
 Bank Payments (Non Real-time)
 Bank Payments (Real-time)
 Closed Loop & Digital Wallets (Point
systems too)
Agenda

3.  My Story – Moving into the Payment Space
 Who is ROI Payments?
 Why a Boot Camp Series?
Introduction

4.  Who?
 Roles including Finance, IT, Sales, Marketing, and Treasury are all involved in the payment
chain at some point
 It is rare when someone is specifically assigned to payments, as such many people find
themselves unprepared to navigate the payment ecosystem
 ROI Payment Webinars attract
 A cross section of industries, including state/local government, non-profit organizations,
eCommerce, SaaS and payment industry insiders
 Senior Finance folks (CFOs, controllers, etc), technology execs, operations managers and
sales/marketing team members
 Why?
 People become involved in payment projects and need a holistic overview of the industry
so that they can dive deep into their project, work, etc.
 Wikipedia and Google searches don’t provide a comprehensive understanding
 Result?
 Everybody can benefit from an increased “Payment IQ”
 Comprehensive understanding helps in today’s environment (rapidly evolving)
Who is Interested in Payments

5.  Recap of Five Major Categories from Boot Camp 1:
 Schemes
 Issuers
 Acquirers
 Processors
 Technology
 Authorization
 Process for reserving funds on a card holder’s account
(reduces available balance)
 Merchants use a gateway or terminal to perform
authorizations against a “front end” network and receive
auth code
 No money changes hands during an authorization
 Merchants ~30 days to capture the authorization
 Capture / Settlement
 Merchant uses an authorization code to complete a
transaction
 Merchants generally close a daily batch containing
multiple auths
 Amount captured can be lower than original auth
Terms & Terminology
 Void
 Removal of an authorization from the network
 Some networks do this realtime, others do not
 Refund
 Used to reverse a capture transaction
 References an original authorization code
 Funding
 Process whereby merchant receives funds from
captured transactions

6. Let’s Review Some Data regarding
Market Share by Payment Type

7. Non Cash Payments Market Share US vs EU vs BRIC
USA & Canada Europe
Brazil, Russia, India
, China

8. Card Purchase Volume in US (billions)

9. Now Let’s Do a Deep Dive on
Transaction Flows

10.  Most typical electronic transaction
 Merchant Accounting System usually managed by Processor
Credit & Debit Cards: 4 Party System
1 2
34

11.  Much simpler as less parties involved
 Better management of risk (chargebacks, etc) due to visibility
of both issuing and acquiring history
Credit & Debit Cards: 3 Party System
1
2
3
Note that the
issuer and
acquirer are the
same party

12.  Originating/Receiving Depository Financial Institution
 No authorization or guaranteed funds
 Costs less than cards due to lack of interchange
Bank Payments (Non Real Time)
Merchants
Originating Bank
Customers
Bank

13.  In several markets, banks or groups of banks have teamed up
to provide Real-Time Bank Transfers.
 Real-time bank transfers give an immediate online
authorization/confirmation of funds availability.
 Quick settlement (usually next-day), security for the merchant
as payments are guaranteed (no chargeback)
 Security for the consumer (consumer interacts with their own
online bank application)
 Often more cost-effective for higher value transactions,
combining the benefits of a card-based transaction with the
benefits of a bank-based payment.
Bank Payments (Real Time)

14.  Closed Loop system doesn’t need to contact a 3rd party
network for auth, settlement, etc - it is all Internal.
 Best known example is a merchant gift card – with the
most popular being Starbucks card
 Digital wallets such as PayPal, Facebook Credits, etc
are emerging
 Decidedly simpler than open-looped systems (aka multi-
party networks) because the network, issuance and
acquiring is all the same company
 These payment schemes generally come about in
verticals or controlled markets (Starbucks, Playspan,
etc)
Closed Loop & Digital Wallets
SBUX Card is a gift
card morphing into
a payment network

15.  Innovation in payment networks being born from competing agendas:
Google, ISIS, Amazon, etc
 Mobile Payments: Lot’s of buzz but no real winner yet as there has been
very little consumer benefit
 New Business Models – LevelUp and Google are willing to give away
processing in return for advertising opportunities and data
 eWallets and Closed Loop networks will lead innovation vs multi-party
networks
What’s Next and Should we Plan for Changes?

16. Relevant Acquisitions
 American Express:
 Payfone for mobile payments
 Sometrics as a virtual currency and offers platform
 eBay/PayPal:
 FigCard- mobile payments
 Zong- enabling phone bill billing for ecommerce
 Gifts Project- enabling group buying
 Google:
 Lending Club- a peer to peer lending platform
 TxVia- a prepaid processing platform
 Zave- digital coupons and loyalty
 Google:
 Lending Club- a peer to peer lending platform
 TxVia- a prepaid processing platform
 Zave- digital coupons and loyalty
 MasterCard:
 Linkable- turns ads into linkable offers tied to
credit cards
 Truaxis- a merchant funded offers network
 Visa:
 Playspan – Game specific closed loop network
and players card
 Fundama – Mobile based prepaid platform for
unbanked consumers
 Square – App and Hardware for in person
payments

17. Contact Information:
Brion Bonkowski
brion@roipayments.com
212.812.4177 x: 2134
Questions & Contact Info