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hello everyone and welcome to our first whiteboard session here Arjuna payments we really pride ourselves on working with our customers to help them understand card payments and make sure that we are there to best help you grow your business this is the first in a series of conversations where we're going to share with you some of our knowledge about the card payments industry we try to do everything we can to make payments as simple as possible but it's important that you understand what's going on behind the scenes so you can structure some of your business processes in the right way to take advantage of what we offer you of course when we go through here today is only an introduction and we're always here to help give us a call drop us an email we'll come visit you we'll talk to you over the phone and we'll help make payments as simple as it can be the first thing we want to talk to you about is all of the complicated players that exist within making a card payment and most of this you don't need to think about but it gets confusing and sometimes we get a lot of questions around who actually is involved in the card transaction so I want to walk you through a simple process and then we'll talk about a few different types of transactions and how those change the process so behind me on the board I've got a simple diagram that shows the folks who are involved in a card payment first and most importantly we have your customer and your customer is carrying some sort of a credit card in their wallet or maybe in their brain if they memorize the number they're the ones who are saying I'm going to provide money for this good or service and I'm you going to use a credit card to initiate that payment from the consumer you have the merchant and so in this case we've drawn a picture of a taxi it's just because it's easier to draw than what most of our customers sell and the taxi merchant is the driver or the taxi company and they need to accept payment for the good or service they're delivering in order to accept payments the merchant needs to be signed up with Visa and MasterCard which are commonly called the card schemes these are networks that connect thousands and thousands or millions actually a card holders with millions of around the world and help us move around different environments and different geographies and use the same cards to pay they aren't actually holding any of the funds all they do is provide the communication infrastructure between various parties so back to that merchant who's got that relationship with Visa and MasterCard in order to do that they have to go through what's called an acquiring Bank an acquiring bank is someone who takes responsibility for the merchant to be able to accept card payments we'll come back to that in a little in a minute for all intents and purpose judo is the acquiring bank when we work with our customers and I'll talk about in a few seconds with different types of transactions there's actually a few folks who are often involved here over back to the customer side of the cardholder side of the equation they've been issued this card by what's called an issuing bank so this is the bank that's saying I'm going to take responsibility for the credit or credit worthiness of this cardholder and when they present their card for payment I'm going to make sure that that those funds are guaranteed back to you again this is all done through Visa MasterCard and the scheme's as they're known so let's take an example of a transaction that goes through and show how the flow of information and then funds goes through these different parties so step one the customer takes out their card and they begin to process a payment and we're going to leave aside for now whether that's a card present payment so that the chip-and-pin here in the UK and most of the world outside North America or if it's what's called the card-not-present payment which is primarily if not exclusively what judo does and we do that through m-commerce and other folks do that through e-commerce but again for now let's simplify and they somehow presented their information to pay that information goes to the acquiring bank the acquiring bank receives that information and immediately passes it through to Visa and MasterCard who pass it on the issuing bank at that point the issuing bank says is there enough credit in this person's account was the card stolen and do I feel comfortable with this transaction you know maybe it's occurring in Dubai and my customer my cardholder has never been to Dubai so I don't think they're there right now you've probably had this happen to you when you travel I'm sure they'll respond with a message that says yes they have enough money no the card has not been stolen and yes we guarantee that we're going to provide these funds Visa MasterCard then go and grab that message back to the acquiring bank and that acquiring bank routes the message back to the cardholder cardholder through some sort of an interface and again we'll come back to this in a second of what that interface can be so this is just bits and bytes on data passing through and telling us whether or not a card or transaction can take place at the end of the day this transaction is settled and that means the issuing bank is going to take the funds that were paid and get them to the acquiring bank this is all done in batch transactions and done overnight it's things that you probably don't need to worry about but at that point the funds come from the issuing bank there's seven again through Visa and MasterCard who take their cup know this interchange and go to the acquire Bank who eventually gives it to the merchants here you've usually got some fees here you've got the interchange fees here the issuing bank also gets to charge fees because they're providing that service so a lot of people involved in accepting a card payment them all this may seem very complex and there's a lot of talk about well why should we be paying all this money through card payments this network is very very secure and most importantly if something goes wrong for either the merchants of the cardholder there's an established known process for working through any sort of disputes and that's really what makes these card scheme so powerful is that they can help globally no matter where you are no matter who you are sell a dispute in a known manner but let's come back here for a second in what we've really simplified which is the relationship between the cardholder and the mark merchants but before we talked about two different types of transactions we call it a card present which CP or in the UK and the EU chip and pin or what's known as card not present the card enough presence has nothing to do with whether the customer is there it has everything to do with whether someone's enter their pin on an EMV certified chip and pin device EMV being the standards that everybody's agreed to into how we will accept the transaction through this process so let's start with a chip and pin you're all probably used to this and what happens you stick your card into some sort of a ugly reader on there is going to be a key PIN pad where you're going to get enter your PIN and hope nobody looks over your shoulder and then that data comes through usually some level of a gateway and that gateway is taking the information that comes out of this chip and pin machine and passes it in a format that everybody down here understands in the old days that was a dial-up gateway so it was calling up much like used to maybe use a dial-up internet service but now it's much more frequently done through a connected device to the basically the Internet this is considered highly secure because the customer has provided their PIN and provided a pin against the chip that's in the card and it's done a dual authentication of the transaction this is the lowest cost method of accepting payments it's low cost because there's a low risk of fraud so everybody down here knows that it's very unlikely that this card was stolen and used in an unusual manner and in ways that we wouldn't be able to pick up in the fraud algorithms that work in each one of these stages things get quite a bit more complex when you go into this card-not-present environment and again card-not-present has nothing to do with whether the individual is in front of the merchant that can be sitting in the taxi it has everything to do with whether or not Chip and PIN was used so let's take the most easy common an understandable card-not-present transactions and that would be anything you buy online so when you go online you've gone to a merchants website and so let's ignore the taxi driver right now actually let's choose the taxi driver example and go so you've gone to their website pre book a ride to come home for the airport you log on to their website and on their website they're going to have some sort of a form where they're capturing your card details they'll take those card details and now you're doing this through kind of some sort of our website hopefully secured and that data is going to go through to something that's called a gateway a gateway is a company a type of company that was created in order to take card-not-present transactions and allow them to route through this existing infrastructure it seems like something that the acquiring banks should have been able to do the problem is that all of the infrastructure built down here is on technology that was from the 70s and 80s it's highly secure and highly robust but it's very difficult for them to change and so when people move from you cart present transactions onto paying for things in the internet with tons of different browsers and formats and ways that data came across and created an opportunity for companies called gateways to come in to streamline that data and present it back through this network in a way that they could understand most gateways perform a per transaction cost they'll often do a monthly fee and then they'll take every transaction above a certain amount is charge it usually around 10 to 20 P a transaction so this isn't becoming an added step because you still got the acquiring bank involved in the mobile world you've got the same thing essentially it's a gateway that's within a mobile app that's allowing you to process the payments so with judo does for you to make it very simple is we combine the gateway all the way down to the acquiring bank to keep our fees low to keep the process simple and to make sure that you get the best deal possible when you're going to interact with this highly complex network so again a judo we want to make this as simple as possible thanks for tuning in for our first whiteboard session hopefully you've learned a lot today but if there's any questions that have come out of this or anything you at all about payments don't hesitate to contact us follow the links on our site or call the phone number at the bottom of our page and we'll get back to you as quickly as we can and do all we can to help your business grow with judo Cheers you