E U R O P A Y I n t e r n a t i o n a l
Multi-Currency Programme Solution • Central Acquisition (CA) Programme. • Cross-Border (X-Border) Acquiring Programme. • Mail Order Telephone Order (MO/TO) Programme. • Central Issuing Programme. • Global Key Account Support. • Corporate Payment Programme Solutions (Acquiring & Issuing). • Dynamic Currency Conversion at the Point-of-Sale (DCC). • Master-Merchants & e-Commerce Acquiring. • Third Party Multi-Currency Processing.
Subjects • Europay’s CA program specifications. • Interchange. • Multi-Currency technique. • Strategic options for consideration. • Costing & Business model. • Central Issuing.
What is Central Acquisition ? Central Acquisition is the ‘central collection and processing’ of transactions acquired in more than 2 European countries (or Globally), by one Member organization on behalf of an International merchant.
What is Central Acquisition ? • Central Acquisition represents a ‘shift’ of transaction processing from domestic to International processing environments. • Processing modules that are impacted includes: Transaction processing, network switching, multi-currency, risk detection, multi-lingual & integrated cash management.
Europay Member ’s Processing Centre Merchant Merchant Merchant Merchant What is Central Acquisition ? Merchant ’s Central Processing Centre
Major rules changes to CA program • Any merchant can be acquired by a registered CA in any of the below named EPI country. Andorra, Austria, Belgium, Channel Islands, Cyprus , Denmark, Finland, France, Germany, Gibraltar, Greece, Iceland, Rep of Ireland, Isle of Man, Italy, Liechtenstein, Luxembourg, Malta, Monaco, the Netherlands, Norway, Portugal,San Marino, Spain, Sweden, Switzerland, Turkey, the UK & Vatican City.
Major rules changes to CA program • Each merchant must still be declared to EPI via the CA application. • For all other EPI markets not above-named, only merchants that are present in more than 2 countries and have a central network will be eligible for the EPI CA program.
Which merchants categories & regions qualifyfor Central Acquisition? Merchant categories International Airlines Permitted regions as of Jan 1, 2000 All Europay & masterCard regions All International Merchants All Europay regions
CA Rules applied to Non-Physical merchants • Rules applicable to any merchants that is organized in a manner that warrants CA is subject to CA rules. • Acquirers can acquirer e-comm trxs from all merchants located in the Area of Use mentioned in their product license .
CA Rules applied to Non-Physical merchants • A Merchant’s location is determined by the address stated in the merchant agreement which it has signed with the acquirer (PBS). • Acquirers also have the right to acquirer e-comm trxs. that reflect sales to cardholders residing in their area-of-use.
Specific to Airlines AIRLINE TRAVEL AGENCIES other brand other brand other brand Switching CENTRAL RESERVATION SYSTEM • MemberAcquirer MasterCard traffic BSP-BANKSETTELMENT PLANAirline Transactions Registration Bi-lateral Agreements National European Acquirers for Authorization Europay International Waterloo - Belgium Your Country Global accessibility via INET Regional office Regional office Regional office Specific to Car Rental, Hotel , Ferry & International Retail (oil, MO/TO)companies CENTRAL ACQUISITION Generic Network Topology
What are some of the advantages? • Single agreement & contract with one Member. • Opportunity to negotiate bilateral interchange and preferential merchant fees. • Standardization in POS and in procedures regionally and globally.
Advantages. • Centralization of expertise at one centre (Centres of Excellence). • Opportunity to optimize economies-of-scale. • Opportunity to upgrade and automate processes.
Advantages. • Interface with merchants pan-Europe or global reservation system. • Opportunity to build a State-of-Art Management Information System. • Central Acquiring reduces float and currency exposure in transaction processing.
Advantages. • Clearing cycles are speedier. • Multi-currency processing in tandem with treasury management functionality. • One system interface lessens possibility of Fraud. • Over time-horizon, clear cost reduction !
The Central Acquisition Product MixValue-added spin-off services • Multi-Lingual call center facilities. • Integrated & advisory cash management facilities. • Management Information system [detailed]. • Central network administration. • These USP’s command higher Merchant Discount Fees.
What are the [current] Requirements? • Central Acquisition license. • Operational procedures. • Merchant criteria: • Must be a compatible international merchant. • Operational in more than 2 countries. • Central processing & accounting system. • For additional information please refer to the Product Guide.
Likely Changes to CA program rules • Qualifying Merchant Criteria will go. • Merchant must have established presence in more than 3 markets. • Merchant must have central network system. • New application procedures (simplified) & new geographic areas for consideration.
Likely Changes to CA program rules • Will be similar to Visa’s X-Border program. • Member Licensing & merchant application fees will not change. • Date for the above TBD (subject to EPI Board approval).
Application procedure • Application form (per merchant). Duly completed. • Copy of latest annual report. • Bilateral agreements can be made with an issuing organization. • Contact your regional office for more assistance.
What is the CA / X-Border Formulae ? • A Centrally Acquired transaction can follow 4 identified pathways. • These transactions pathways have direct impact on transaction processing and in the application of the correct interchange fee (either domestic, intra or inter-regional interchange fees). • The fees and other rules (including rules per card type), must be implemented within Europay’s / MasterCard’s system.
CA Formulae • The central acquirer must pay the issuer all declared (and implemented) domestic or inter / intra-European interchange fees 1.CENTRAL ACQUIRED (INTRA-EUROPEAN TRANSACTIONS) Example of CA Trxs pathway Issuer Member Merchant location Card issued by UK bank EKS Spanish merchant
CA Formulae • The central acquirer must pay the issuer domestic tariffs • As these transactions are flagged domestic ‘centrally acquired transactions’, no assessment fee will be levied on volume shifted • Central Acquisition activity provides a truly (100%) incremental revenue opportunity to EPI as these transactions are now being shifted via EPSNet. 2.CENTRAL ACQUIRED (DOMESTIC TRANSACTIONS) Example of CA Trxs pathway Issuer CA Merchant location = Card issuedby Spanish bank EKS Spanish merchant
CA Formulae 3.CENTRAL ACQUIRED (DOMESTIC TRANSACTIONS) Where EPI are under contract to processes domestic transactions for local acquirers & issuers. • CA trxs are re-routed via ECCSS. There is a clear shift in processing fees & tariffs as EPI already are contracted to process domestic acquired traffic for the respective issuers. • CA’s must pay intra-European tariff, while local issuers will pay the negotiated EPI ‘domestic tariff’. For domestic centrally acquired ’trxs, must ensure that assessment fee is not levied on volume shifted. Example of CA Trxs pathway Issuer CA Merchant location = Italian merchant Hungarian merchant Polish merchant Russian merchant Card issued by Italian bank Card issued by Hungarian bank Card issued by Polish bank Card issued by Russian bank EKS
CA Formulae 4.CENTRAL ACQUIRED (INTER-REGIONAL TRANSACTIONS) Where either the merchant or Issuer is non-European based (i.e. central acquisition in MCI territories). • To ensure that the correct intra-regional / domestic rules are respected, the central acquirer should pay domestic fees. Example of CA Trxs pathway Issuer CA Merchant location EKS Mexican merchant Card issued by Mexican bank
US $ Euro € F francs Aus $ HK $ NZ $ Peseta Can $ Multi - Currency • Multi to Single Currency transaction acquiring & processing YEN ¥ AUTHORISATION ALWAYS IN THE CARD ISSUER / TRANSACTION CURRENCY CLEARING IN SINGLE-CURRENCY FORMAT MULTI-CURRENCY & CONVERSION FACILITIES PRIMARY, SECONDARY & FORCED CURRENCY TO BANKS
Euro € Can $ Rand F francs HK $ YEN ¥ Peseta Aus $ NZ $ Multi - Currency • Single to Multi-Currency Transaction Acquiring & Processing US $ AUTHORISATION ALWAYS IN THE CARD ISSUER / TRANSACTION CURRENCY CLEARING IN MULTI-CURRENCY FORMAT MULTI-CURRENCY & CONVERSION FACILITIES PRIMARY, SECONDARY AND FORCED CURRENCY TO BANKS
US $ US $ Euro € Euro € F francs F francs Aus $ Aus $ HK $ HK $ NZ $ NZ $ Peseta Peseta Can $ Can $ Multi - Currency • Truly Multi-Currency Transaction Acquiring & Processing YEN ¥ AUTHORISATION ALWAYS IN THE CARD ISSUER / TRANSACTION CURRENCY YEN ¥ CLEARING IN MULTI-CURRENCY FORMAT MULTI-CURRENCY & CONVERSION FACILITIES PRIMARY, SECONDARY & FORCED CURRENCY TO BANKS
Categorization of transactions As an important element of central acquisition, please note the following.
Merchant's Central Processing Centre Merchant GERMANY Domestic transactions Cardholder using a German - issued card
Merchant's Central Processing Centre Merchant GERMANY Intra-regional transactions Cardholder using an Italian - issued card
Merchant's Central Processing Centre Merchant GERMANY Inter-regional transactions Cardholder using a Non - European issued card
Product Development activity • Project (Phase 1 ended with release 99.1). • Phase 2 began Sept 2000. (To encompass international Maestro & E-commerce). • MO/TO vs. X-border vs. Central Acquisition. Product Differentiation. • End of exclusivity. • New Rules (domestic rules, penalties & fines). • MIS.
Activities Central Acquisition Unit 2000 - 2001 • Central Acquisition. • CA Projects. • (Phase 2 / Debit & MCI Project, e-Comm.). • MO/TO. • Acceptance in Corporate Card. • 3rd party Processing / Acceptance. • Maestro Acceptance Development. • Member Relationship.
Definition of Currencies Transaction Currency Authorization Currency Issuer Currency Reconciliation Currency Cardholder Billing Currency Payment Currencies (Settlement Currencies) Primary Secondary Forced
Authorization Currency Currency in which the transaction is Authorized 100 110
Cardholder Billing Currency Authorization: Conversion from Transaction Currency to Cardholder Billing Currency (Issuer Currency) 100 110
Clearing Settlement Reconciliation Currency The currency in which batches are transferred from the Clearing to the settlement Reconciliation Currency
Payment Currency • Member’s account currency. • Currency used to calculate Buy & Sell Orders. • Members choose their own Payment Currency.