This post contains some perspectives on Payment Gateway Solution, an Online Collections Solution for Corporate/ Financial Institution clients. The Solution is being introduced from an Indian perspective; in case of other geographies, the Solutioning would differ.
Background: An important component of the Cash Management Product suite is a Payment Gateway Solution. It is an Online Collections Solution for Clients that allows them multiple options to collect funds electronically from their customers in a secure environment and with comprehensive tracking/ reporting of these transactions. This article looks at a scenario where a white – labelled Solution is provided by the concerned bank under tie – up with a trusted Service Provider. Apart from this, there are banks who are into Online acquiring themselves and can offer their own Payment Gateway for collecting funds from Client’s customers through Credit Card/ Debit Card/ Net banking (if remitter has account with the same bank).
Some typical use cases: Some businesses where Payment Gateway Solution is required include:
- Companies into e-auctions (where Earnest Money Deposit is paid by bidders through Payment Gateway)
- Utility Companies (for Collecting Utility bills online)
- Insurance Companies (for Online collection of Insurance premium)
- Companies offering airline ticket booking or hotel booking through their website, etc.
Need for a tie – up with Service Provider: Typically, the advantage of tying up with a Service Provider is that it enables a Structured Solution for Clients across various payment modes. Moreover, leading Service Providers also offer a strong reconciliation mechanism as well as a highly secure environment in which the transaction gets executed. Also, the key requirement of interfacing with Client website gets taken care of. Most importantly, if Online Collections via Internet Banking are to be offered, tying up with a Service Provider is the only option, as otherwise collecting funds from customers of different banks in the country online would not be feasible.
Modes offered to collect funds: The following modes are offered for collecting funds under this model:
- Credit Cards and Debit Cards (Visa/ Mastercard/ Amex/ Others)
- Internet Banking (covering banks with whom the Service Provider has tie – ups)
- Cash/ Pre-paid Cards
- Unified Payments Interface (UPI), etc.
The Solution: The following benefits are offered under this Solution:
- Online Collections through various modes defined above
- A web – based reporting tool enabling Client to reconcile receipts on Day T (transaction date) itself
- Strong security infrastructure (the leading Service Providers have certifications by Mastercard and Visa, PCIDSS certification, 128-bit SSL encryption and so on)
- Customised interface with Client website developed promptly as per Client needs.
The Client accesses the Corporate Internet Banking platform for accessing the account statement and for making payments.
Limitations: One of the key limitations of this Solution is the fact that if B2B payments are to be enabled, then: a) the Corporate Internet Banking portals of only a limited number of banks could be covered under the Service Provider’s tie – ups and b) the payment limits via any mode are limited – these shall suffice for a C2B Model, but not for a B2B Model. The best Solution in such cases is to supplement the Payment Gateway Solution with a Virtual Account Solution (for RTGS/ NEFT) with complete details of remitters as per Client needs (an earlier post of mine covered Virtual Accounts).
Types of tie – ups/ Agreements: Generally, the Agreement is tripartite in nature, where the Client being offered the Solution enters into an Agreement with the bank offering the packaged Solution and the Payment Gateway Provider. However, some Clients (specially in the PSU space) insist on executing an Agreement only with the concerned bank. In such cases, the bank needs to execute two back – to – back bilateral Agreements: first with the Client and second with the Service Provider.
Benefits to the Client: The major benefit for the Client is the fact that through a single tie – up, Online Collections via multiple modes can be availed. They can provide a hassle free and secure payment experience to their customers. Moreover, the web-based tool ensures smooth reconciliation.
Benefits to the bank: The Bank gets an opportunity to earn revenue from the Client balances (float). The Solution may provide the proverbial ‘foot – in – the door’ (this had happened in several mandates I was involved in) allowing a dialogue for other Solutions from the bank. The bank also gets a chance to position itself as a one – stop shop for addressing various Client requirements.
Would welcome your views/ thoughts on this topic. What are some of the concerns Clients have in such mandates? What additional steps do banks need to take to strengthen this offering?
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