1. The Innovative World of ePayments 2014
A Quick Reference Guide to the world of CASHLESS
payments
1Author: Sandeep Arora

2. About the Author
2
Sandeep Arora, an expert & Professional with high level of experience in the
area of online & offline sales , marketing, e- commerce & customer engagement.
He believes that his life's strategy evolved from the tale of the bird who
accidentally got frozen inside ice. A cow defecated on the bird which brought
back warmth into the birds body. When it was thawed completely, it started to
chirp. A passerby cat got curious & came to inspect the dung & found the bird
inside.
It killed the bird and ate it. MORAL: Not everyone who puts you in shit is necessarily your enemy; Not
everyone who gets you out of that shit is a friend & when you are deep in shit, you better learn to keep your
mouth shut..
He is fond of reading and learning new skills & loves to keep abreast with technology. Also fond of exercising
and cooking in his leisure time . Apart from working as a full time Senior Marketing and Business
Development Consultant, he enjoys writing blogs inspiring people around the world who are in search of
success and self discovery.
This useful eBook is a result of his hard work and curious attitude. This eBook can be used as a quick
reference guide by anyone who is interested in the sector of online payments and would like a quick update
on the current and future developments in the industry.
Sandeep lives with his wife in beautiful & quiet vicinity of Heemstede which is a small district based in
Northern Holland, The Netherlands. He can be reached via e- mail at sandeepinspires@gmail.com.

3. 3
A Note of Thanks from the Author
I first and foremost am grateful to the great almighty divine which has always been a guiding
buoy for me at times when I desperately needed its guidance.
My sincere gratitude to all the readers and fans who follow my articles and blogs religiously.
I appreciate their comments and feedback which helps in my personal development.
I have tried putting in my best efforts to gather all the possible information and add it here.
However, if I missed touching up on some critical information about the financial sector ,I will
be happy to review and add it if you step on something useful and bring it to my notice.
As always, I will highly appreciate a note from you letting me know your feedback and
suggestions.
I could be reached by e- mail at sandeepinspires@gmail.com.
Many Thanks once again & Enjoy Reading!!
-Sandeep Arora
Statutory Declaration: All trademarks or registered trademarks, product names, company
names and logos appearing in this electronic book are the property of their respective owners.
They have only been used for illustrative purposes. All images are acquired from the public
domain resources.
-Author

4. 4
Table of Contents
 The Payment Industry: A Simple Definition……Page 5
 A quick peek into the history of credit cards……Page 5
 An Electronic Payment……Page 6
 The Four Corner Model for an Electronic Payment Transaction……Page 6
 Security……Page 7
 Payment Gateway……Page 7
 Payment Service Provider……Page 8
 US Financial & Payments Sector......Page 9
 EU Financial and Payments Sector……Page 10
 UK Financial and Payment Sector……Page 11
 The Present Podium……Page 13
 Donations Like Never Before……Page 15
 Social Commerce……Page 16
 A Token of Security……Page 16
 Payments On The Move……Page 17
 Hardware and Software MPOS bundles……Page 18
 A Glimpse in FUTURE……Page 19
 Challenges……Page 21
 Glossary……Page 22
• Online Transaction Process......Page 22
• The Ibeacon: Customer Discovery Tool......Page 24
• Table of Acronyms......Page 25
Please Note: For details on terms marked with *, see Glossary

5. The Payment Industry: A Simple Definition
Payment industry evolved as a cash-substitutes to traditional payment systems such as cash,
drafts (e.g. checks) and documentary credits such as letters of credit leveraging computers and
electronic communications. These incorporate using payment methods like debit cards, credit
cards, electronic funds transfers, direct credits, direct debits, internet banking etc.
A quick peek into the history of credit cards
Credit card market started in early 2000, when issuers first began
launching products. In just eight years, growth on Visa card
purchases went from $306 million in 2002 to $61.5 billion in 2010.
Merchants accepting Visa cards also increased from 21,000 to
331,000 during the same period. Major card brands include
American Express, Discover Financial Services, Japan Credit
Bureau, MasterCard Worldwide and Visa International.
5

6. An Electronic Payment
The term electronic payment can refer narrowly to e-commerce which is a payment for buying
or selling of goods or services offered through the Internet.
The Four Corner Model for an Electronic Payment Transaction
For a descriptive version of the electronic payment transaction process, Please refer to the glossary
section at the end of this presentation
6

7. Security
7
The payment industry consists of all the organizations which store, process and transmit data
for debit cards and credit cards. Individual card brands have their own compliance programs in
place and they also are required to follow security standards developed by the Payment Card
Industry Security Standards Council, the PCIDSS* compliance used throughout the industry.
Payment Gateway
A payment gateway is an e-commerce application equivalent of a physical point of
sale terminal located in most retail outlets facilitating the transfer of information between a
payment portal (such as a website, mobile phone or IVR*) and the Front End Processor or
acquiring bank. Many payment gateways also provide tools to automatically screen orders for
fraud and calculate tax in real time prior to the authorization request being sent to the
processor. Tools to detect fraud include geo location, velocity pattern analysis, 'black-list'
lookups, delivery address verification, computer finger printing technology, identity morphing
detection, and basic AVS* checks.

8. Payment Service Provider
A payment service provider (PSP) offers shops online services for accepting electronic
payments by a variety of payment methods. Typically, they use a software as a service model
and form a single payment gateway for their clients (merchants). A PSP can connect to
multiple acquiring banks, card, and payment networks. In most cases, the PSP will fully
manage these technical connections, relationships with the external network and bank
accounts. This makes the merchant less dependent on financial institutions and free from the
task of establishing these connections directly, especially when operating internationally.
Furthermore, by negotiating bulk deals they can often offer cheaper fees.
A full-service PSP can offer risk management services for card and bank based payments,
transaction payment matching, reporting, fund remittance and fraud protection in addition
to multi-currency functionality and services. Some PSPs provide services to process other next
generation methods (payment systems) including cash payments, wallets, prepaid cards or
vouchers, and even paper or e-check processing. There are more than 900 Payment Providers
in the world.
8

9. US Financial & Payments Sector
United States uses a magnetic stripe on a card to process transactions and its security relies on
the holder's signature and visual inspection of the card to check for features such as hologram.
This system will be outmoded and replaced by EMV in 2015. EMV a global standard for inter-
operation of integrated circuit cards (IC cards or "chip cards") and IC card capable POS
terminals and ATM*.
US finance and payments are regulated by the Federal Reserve System & FDIC*.
Initiatives to prevent financial frauds in the US are following:
i. FBI Internet Crime Complaint Center
ii. NCSA*
iii. American Bankers Association's Center for Payments and Cyber security
iv. FinCEN*
v. FFETF*
A few Member Banks:
First National Bank; Peoples National Bank; City National Bank; Chase Bank; Merchants
National Bank; Bank of America; Wells Fargo
9

10. 10
EU Financial and Payments Sector
The EPC*supports and promotes the creation of the Single Euro Payments Area.
The EPC is the decision-making and coordination body of the European banking industry in
relation to payments. The EPC* develops the payment schemes and frameworks which help to
realize SEPA*. SEPA is a EU* integration initiative in the area of payments.
The EACT*, TWIST*, The European Central Bank, the European Commission, the European
Payments Council, the EACHA*, payments processors and pan-European banking associations
– EBF*, EACB* and the ESBG* play an active role in defining the services which SEPA delivers.
19 states that fall under SEPA are following:
Austria, Belgium, Cyprus, Estonia, Finland, France, Germany, Greece, Ireland, Italy, Latvia, Lith
uania, Luxembourg, Malta, Netherlands, Portugal, Slovakia, Slovenia, Spain.
Initiative to prevent financial fraud in the EU:
i. National Fraud Initiative
A few Member Banks:
ABN AMRO; Credit Europe; Royal Bank of Scotland; Bank Austria; Sparebanken; Alior Bank;
Alpha Bank; Citibank; Barclays; Deutsche Bank; Swiss Bank; Allianz

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UK Financial and Payment Sector
The UKPA is a United Kingdom trade organization that brings together all payment
systems organizations and gives banks, building societies and card issuers a forum where they
can work together on non-competitive issues. It covers most forms of payments within the UK
including cash, credit cards, debit cards, cheques, and automated payments such as direct
debits and online/phone transactions.
The UKPA standards define both procedural and technical practice for:
i. Debits (including cheques)
ii. Coin packaging and banknote wrappers
iii. Magnetic media interchange
iv. Interchange data formats
v. EFTPOS* device communications
Initiatives to prevent financial frauds in the UK:
i. FFA: Financial Fraud Action
ii. DCPCU: dedicated cheque and plastic crime unit (a police unit fully sponsored by the
banking industry devoted to identifying and controlling financial fraud activities in the UK)

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A few Member Banks:
Bank of America; DnB NOR Bank; NAB; Bank of England; Nationwide Building Society; Bank of
Ireland; GE Capital; National Westminster Bank; HSBC; Royal Bank of Scotland; Barclays;
Citigroup

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The Present Podium
Money Gets Money: The year 2014 has not only registered growth in new innovations and
technology, where startup companies like Payoneer, mPowa and Stripe have managed to
capture interest of some great investors world wide. Venture capital investment in payment
technologies hit a five-year high in the first quarter of 2014.

14. i. Stripe Inc. has raised $70 million in a financing round that values the digital-payments
startup at $3.5 billion.
ii. Amsterdam-base Adyen announced a $250 million funding round in December, led by
global growth equity investor General Atlantic.
iii. Digital River breaks away from Wall Street in favor of an acquisition by an investor group
led by Siris Capital Group for $840 million.
iv. Ingenico’s billion-dollar plus acquisition of Global Collect.
14

15. 15
Mobile donations are up by 71% compared to last five years.
The ice bucket challenge was a chance to give money to charity. ALS* research is estimated to
have raised $100 million because people the world over dumped ice water on their heads.
The example was closely followed by a Lather challenge which dumps soapy water on
participants as a reminder about how to stop spreading Ebola. A rice bucket challenge to raise
awareness about world hunger.
Apple Pay pushed Apple Red – a campaign to support AIDS* research.
Donations Like Never Before

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A Token of Security
Social Commerce
2014 was the year for social media players also to poke their heads out of their foxholes.
i. Twitter added a “Buy” button to help use Tweets to push sales.
ii. Face book initiated with its group selling app and buy button.
Apple Pay’s specialized token-based security platform kicked-off mass enthusiasm. Before its
launch in September 2014, only few payment’s devotees had any idea what a token was.
A token is the process of substituting a sensitive data into small encrypted, garbled packets
before relaying it on the information highway. These packets are meaningless until they reach
the intended destination, decrypted and recompiled into their original state. Tokens, and their
ability to reshape the secure payment’s landscape has been a popular topic of conversation

17. 17
Payments On The Move
The era of mobile payments also registered a significant rise in the year 2014. This also has
brought forth a lot of improvements in the m- commerce sector with the adoption 4th
generation technologies like NFC* and bio metric scan. This was on the charts for a long time
but a real-time experience was only possible after the launch of Apple pay. Not very far behind
Samsung has also announced teaming with China UnionPay to introduce the NFC* payment
services.
The desire of improvement and exceptional consumer
experience has also encouraged the key players in mobile app
development to integrate the capability of payment or fund
transfers in their apps.
i. S- money app in France already has enabled 3.5 million Twitter users to send payment's
via a tweet.
ii. Smartchat integrated smartpay services powered by Square, a peer to peer fund transfer
feature
iii. Facebook is working on introducing a payment system soon in conjunction with its
messenger application.

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Hardware and Software MPOS bundles
2014 was the year that MPOS* Tablets not only became more functional but some platforms
helped merchants future-proof their businesses by incorporating payment acceptance options
for NFC*, crypto currencies (Bit coin), QR Code*, EMV* and Apple Pay.
A few current developments are listed below for your reference:
i. First Data launched its Clover tablet solution, which provides a hardware and open software
platform including loyalty solutions, CRM*, data analytics and acceptance of Apple Pay.
ii. SumUp announced the acceptance of Bitcoin in its mPOS* solution through BitPay.
iii. Square struck a deal with Whole Foods to accept payments at checkout at in-store venues,
like sandwich, juice, coffee, wine and beer bars.
iv. ShopKeep had a deal for new customers. Any new customers that signed up for a iPad-
based in-store point-of-sale system would get free equipment to handle Apple Pay,
contactless, traditional magnetic stripe and EMV* (developmental phase) chip payment
cards.
v. PayAnywhere 3.0 launched as a way to offer new features and a redesigned user interface
focused on speed and simplicity for PayAnywhere Storefront. The new version also
integrates with PayPal through Discover’s processing network. This feature makes NAB the
first payments company to provide its distribution partners with a margin neutral solution
for PayPal transactions aligning with the other four major credit cards.
vi. ROAM, an Ingenico company, launched ROAMmcm5 to be the first enterprise-ready mPOS
solution and the first EMV*-ready solution to enable businesses to quickly deploy and
centrally manage global mPOS* environments. ROAM also launched an EMV compliant
mPOS platform for the U.S.

19. 19
A Glimpse in FUTURE
2015 promises to be a lot better as hardware gets slicker and the software platforms that
power them become even more robust. EMV-ready solutions will clearly accelerate in the U.S.
Everyone, everywhere, will pay attention to enabling new forms of payments providing the
ability to transact anytime, anywhere securely.
Figures and Forecasts

20. 20
The research from BI Intelligence shows leaps and bounds of growth for the mobile Payment
sector and a stable going for the web shoppers (ecommerce).
The other sources referred, forecast global e-commerce sales to increase by nearly 21% in
2015. It will go up to $1.592 trillion and account for 6.7% of all retail sales around the world.
By 2018 the number is projected to be around to $2.5 trillion compared to $1.316 trillion in
2014, up 22.2% from $1.077 trillion in 2013.
Online sales accounted for around 4% of global retail sales in 2014. However, those numbers
are expected to keep climbing offering yet a promising future year after year for the cashless
payments sector.
Clicks With Brick-And-Mortar Retail
Starbucks Story: The Start buck app shows customers the closest location and offers Mobile
Order & Pay. The option is only available on the iPhone app for now, but will be released to
android users in 2015. Starbucks is already close to hitting an average of 7 million transactions
a week, 16 percent of which are made on mobile devices.
Macy’s Story: In 2014 Macy’s had become one of the most active large retailers, with the chain
now getting about 10 percent of its sales from online orders. This was with the adoption of
high-profile rollout of the new Apple Pay mobile payment system in Macy’s towards the end of
the year. It is also making big with implementation of the Apple’s iBeacon (see extras)
technology at all Macy’s stores nationwide, which lets customers receive personalized
discounts, rewards and recommendations on their mobile phones.

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Challenges
The Never Ending Price War: New entrants are
taking a hit at the revenue which is important to all
conventional payment companies. LevelUp doesn't
charge for payments, Groupon and Square are
promoting new reduced pricing options. Major
merchants such as Walmart are also challenging the
recently proposed multi-billion dollar settlement over
interchange pricing.
Money Changing Faces: Even Cash is being ambushed by ambitious new currencies like
Bitcoin or virtual currencies like Facebook Credits and World of Warcraft gold. This is creating a
never ending loop of possibilities, new developments and more investments for the financial
institutions.
A Wipe Out Possibility: According to sources Groupon and Fiserv are both choosing to
distribute their new payment readers without the help of ISOs. Is it a possible WIPE OUT
indication for the ISO* sector to accept the change and start looking for alternatives?

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Online Transaction Process
• A customer places order on website by pressing the 'Submit Order' or equivalent button, or
perhaps enters their card details using an automatic phone answering service.
• If the order is via a website, the customer's web browser encrypts the information to be sent
between the browser and the merchant's web server. In between other methods, this may be
done via SSL* encryption. The payment gateway may allow transaction data to be sent directly
from the customer's browser to the gateway, bypassing the merchant's systems. This reduces
the merchant's PCIDSS compliance obligations without redirecting the customer away from the
website.
• The merchant then forwards the transaction details to their payment gateway. This is another
SSL encrypted connection to the payment server hosted by the payment gateway.
• The payment gateway forwards the transaction information to the payment processor used by
the merchant's acquiring bank.
• The payment processor forwards the transaction information to the card association (e.g.,
Visa/MasterCard/American Express). If an American Express or Discover Card was used, then the
card association also acts as the issuing bank and directly provides a response of approved or
declined to the payment gateway. Otherwise [e.g.: a MasterCard or Visa card was used], the
card association routes the transaction to the correct card issuing bank.
Glossary

23. 23
• The credit card issuing bank receives the authorization request and does fraud and credit or debit
checks and then sends a response back to the processor (via the same process as the request for
authorization) with a response code [e.g.: approved, denied]. In addition to communicating the
fate of the authorization request, the response code is used to define the reason why the
transaction failed (such as insufficient funds, or bank link not available). Meanwhile, the credit
card issuer holds an authorization associated with that merchant and consumer for the approved
amount. This can impact the consumer's ability to further spend (e.g.: because it reduces the line
of credit available or because it puts a hold on a portion of the funds in a debit account).
• The processor forwards the authorization response to the payment gateway
• The payment gateway receives the response, and forwards it on to the website (or whatever
interface was used to process the payment) where it is interpreted as a relevant response then
relayed back to the merchant and cardholder. This is known as the Authorization or "Auth"
• The entire process typically takes 2–3 seconds.
• The merchant then fulfills the order and the above process is repeated but this time to "Clear" the
authorization by consummating the transaction. Typically the "Clear" is initiated only after the
merchant has fulfilled the transaction (e.g.: shipped the order). This results in the issuing bank
'clearing' the 'auth' (i.e.: moves auth-hold to a debit) and prepares them to settle with the
merchant acquiring bank.
• The merchant submits all their approved authorizations, in a "batch" (e.g.: end of day), to
their acquiring bank for settlement via its processor.
• The acquiring bank makes the batch settlement request of the credit card issuer.
• The credit card issuer makes a settlement payment to the acquiring bank (e.g.: the next day)
• The acquiring bank subsequently deposits the total of the approved funds into the merchant's
nominated account (e.g.: the day after). This could be an account with the acquiring bank if the
merchant does their banking with the same bank, or an account with another bank.
• The entire process from authorization to settlement to funding typically takes 3 days.
Source: Wikipedia

24. 24
The Ibeacon: Customer Discovery Tool
iBeacon is a new technology that extends Location Services in iOS*. Your iOS device can alert apps
when you approach or leave a location with an iBeacon. In addition to monitoring location, an app
can estimate your proximity to an iBeacon. iBeacon uses a Bluetooth low energy signal, which iOS
devices detect. iBeacons can help a phone show notifications of items nearby that are on sale (retail
promos etc.), and it can enable payments at the POS* where customers don’t need to remove their
wallets or cards to make payments. The best part is that the app is capable of detecting the devices in
the vicinity with compatible apps and activate or wake up these devices remotely even when the app
is not on standby or active mode or blue tooth on the device is not 'ON'. This feature is not yet
available for android users. They can still get alerts provided they have compatible app running in the
background and the blue tooth is 'ON' on the handset.
Source: apple support, Wikipedia

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Table of Acronyms
• PCIDSS: Payment Card Industry Data Security Standards
• IVR: Inter Active Response
• AVS: Address Verification System
• PSP: Payment Service Provider
• ISO: Independent Sales Organization
• FDIC: Federal Deposit Insurance Corporation
• POS: Point of Sale
• ATM: Automated Teller Machine
• NCSA: National Cyber Security Alliance
• FBI: Federal Bureau of Investigation
• FinCEN: Financial Crimes Enforcement Network
• FFETF: Financial Fraud Enforcement Task Force
• EACT: European Associations of Corporate Treasurers
• TWIST: Transaction Workflow Innovation Standards Team
• EACHA: European Automated Clearing House Association
• EBF: European Banking Federation
• EACB: European Association of Co-operative Banks
• ESBG: European Savings Banks Group
• EPC: European Payments Council
• SEPA: Single Euro Payments Area
• EU: European Union
• UKPA: UK Payments Administration Ltd
• ALS: Amyotrophic Lateral Sclerosis
• NFC: Near Field Communication
• MPOS: Mobile Point of Sale
• EMV: Europay, MasterCard and Visa, a global standard for inter-operation of integrated circuit cards
• QR: Quick Response (QR code: Quick Response Code is the trademark for a type of matrix barcode which can be scanned at
POS for product description and relative payment.
• CRM: Customer Relations Management
• SSL: Secure Socket Layer
• IOS: Input Output System
• AIDS: Acquired Immune Deficiency Syndrome
• EFTPOS: Electronic Fund Transfer through Point of Sale