Broadly speaking, the sponsor bank is responsible for receiving the funds paid to the merchant from the end consumer and elsewhere receiving the ACH payment to the processor.
They are also responsible for paying part of the exchange fee to the card brand and issuing bank, O’Brien said.
In the midst of a major digital shift, sponsor banks are trying to expand their presence in acquiring merchants, while receiving backlash from ISOs and ISVs to upgrade their front-end experiences, he said.Sponsoring the PSP to provide payment capabilities to merchants is no longer enough — banks also need to help navigate merchants Onboarding With speed and compassion (while strengthening their own risk management activities).
As he pointed out, banks PayFac client The industries where Square and Stripe are facilitating the acceptance of payments in any number of industries are demanding changes. Call it the Amazon effect. In a sense, the fluid interaction from the first step takes the customer on a journey without mistakes (as O’Brien pointed out, with a bit of a tongue, “Jeff Bezos is his own. It was okay for. “)
Get hints from squares and stripes
Merchants “expect the same kind of experience” from their PayFacs, he said. “That’s why we’re currently putting pressure on our sponsor banks.”
But, of course, increasing the number of merchant acquisitions poses a risk problem to the equation.
O’Brien said speed is only considered dangerous by human nature. In other words, accelerating the onboarding process with the aim of getting more payment options for more merchants can miss some warning signs of the underwriting process.
“But when we start talking about front-end experiences and automation, it’s beauty. In fact, it can be done with less risk,” O’Brien said. “In reality, it means doing things much more efficiently.”
He said automation can be used to catch what the eye misses, especially in underwriting where complexity is ultimately simplified. So the “curl effect” is gone — the fictional human underwriter (named Karl in this case) is the best judge of the merchant’s risk, with all the human failures that make us human. May not be a person. With a view to identifying and resolving bottlenecks, you need to provide the right data to your intelligent data underwriting engine.
According to O’Brien, sponsor banks can behave like factories if they have the right digital tools at hand.
“They have a lot of people who are sales organizations going out to merchants, and they are your salespeople who are bringing in orders. The more orders you have, the more payments you have to process, and the final Will be better for the bank. “
Don’t rely too much on curls
O’Brien, who said the concept may be offensive to underwriters, does not say that the underwriting process should be completely friction-free or completely friction-free.
“It requires some friction. We need to investigate whether the risk is a good risk.” Beyond automation, there is Room for underwriter Karl. He can balance with yet another check.
There is an urgent need for sponsor banks to fine-tune the front-end experience. Especially if the bar is set high enough, such as when the customer wants to approve 90% of what they are undertaking. The first impression is important, he warned that the underwriting journey to “turn on” merchant payments should be as easy and intuitive as buying a shirt from Amazon.
Against this background, sponsor banks need to be enthusiasts in pursuit of easier onboarding, and perhaps quarterly strategies to gain as much market share as possible. ..
“Many people will switch many payments for these merchants very quickly,” he told PYMNTS. “If merchants are dissatisfied, it’s a very competitive industry. They will jump — and it will cost a lot if the sponsoring bank isn’t really focused on it.”
https://www./digital-payments/2021/sponsor-banks-face-pressure-to-keep-isos-payfacs-on-board/ Sponsored banks face pressure to maintain ISO, PayFacs