Relationships are Complicated: Part Two


Shelli Garcia

Risk & Compliance

September 7, 2022

September 7, 2022

September 7, 2022

In part one of this series, we wanted to acknowledge that we know the relationships needed to manage payment processing are complicated. While some of these relationships are necessary to function, the best relationships create business opportunities and resemble partnerships (not in the traditional legal sense).

As referenced in the first blog post, relationships in payments—and in business in general—develop out of strategic objectives that include:

  • Gaining access to new markets and channels

  • Achieving a competitive advantage

  • Providing future strategic business options

  • Reducing risk

  • Accessing new technological innovation

The Impact of Innovation on Payments

You could say all the objectives listed above are also the drivers behind every major Industrial Revolution. Most of us can only truly relate to the Digital Revolution, which started with an industry shift from mechanical to digital technology in the late 1960s and included the hatching of ecommerce. Ecommerce, digitalization, and mobile changed everything in payments; it created a global marketplace on a scale and pace that had never been seen before or even considered possible. 

We are now well into the Fourth Industrial Revolution, which was popularized by Klaus Schwab, the World Economic Forum Founder and Executive Chairman in 2015. In a report to the World Economic Forum in 2016, Schwab wrote:

On the whole, there are four main effects that the Fourth Industrial Revolution has on business—on customer expectations, on product enhancement, on collaborative innovation, and on organizational forms. Whether consumers or businesses, customers are increasingly at the epicenter of the economy, which is all about improving how customers are served………. A world of customer experiences, data-based services, and asset performance through analytics, meanwhile, requires new forms of collaboration, particularly given the speed at which innovation and disruption are taking place. And the emergence of global platforms and other new business models, finally, means that talent, culture, and organizational forms will have to be rethought.

He goes on to write: 

Overall, the inexorable shift from simple digitization (the Third Industrial Revolution) to innovation based on combinations of technologies (the Fourth Industrial Revolution) is forcing companies to reexamine the way they do business. The bottom line, however, is the same: business leaders and senior executives need to understand their changing environment, challenge the assumptions of their operating teams, and relentlessly and continuously innovate.

Well, we are all seeing this play out in vivid detail. Capturing the customers' needs and delivering at light speed across more channels with increasing complexity are the new norms. Fintech innovation has responded by launching new methods of payment and commerce—and it’s not even done yet. 

Gone are the days when face-to-face transactions involved the consumer presenting a physical card to a merchant who swiped the card's magnetic stripe through a POS device, or worse yet, keyed in the card number because the mag stripe was demagnetized. Fraudsters around the globe leveraged the digital age to exploit traditional card processing for exploitation at scale. New technology was needed, the chip card was introduced, and this new technology required new devices and infrastructure.  

New Technology = New Relationships….That Evolve

In response to the need for greater transactional security, Mastercard, Visa, American Express, Discover, JCB and UnionPay collectively formed EMVCo in 1999 to enable the development and management of specifications to address emerging fraud needs. These specifications include advancements in Consumer Device Cardholder Verification Methods (CDCVM), which have evolved from a signature or PIN, to now include biometrics passcodes used in many mobile apps. These advancements also include the need to create a surrogate value that can replace the primary account number (PAN) without interfering with processing. Enter EMV payment tokens. 

EMV payment tokens are different from acquirer and issuer tokens because they aren’t intended to exclude other solutions. The major card brands are adopting this specification because it offers a globally interoperable acceptance method that can work in face-to-face transactions as well as card not present transactions. EMV payment tokens restrict usages based on the trusted relationships between the consumer, the merchant, and the issuer—like a secret handshake! EMVCo has established a Token Service Provider Code (TSP Code), which is a three-digit code assigned to a TSP and maintained by EMVCo. The TSP Code is included in the Token Requestor ID (TRID), which uniquely identifies the pairing of a token requester with the TSP. This helps achieve transparency of the entity that provided the payment token.

So it’s no wonder that relationships in payments are complicated. In order to adopt or adapt to new technology, just look at how many new entities and processes have emerged! Increasingly, merchants need trusted relationships that understand the merchant challenges and provide businesses with information, data, insights and thought leadership. Merchants need relationships that can help them transform changes into enablers of simplicity. 

Enter Pagos Solutions

In addition to providing thought leadership and products that increase a merchants insight into their own data, Pagos helps you drive better performance (revenue) at a lower cost of payment acceptance without you having to change your technology stack or payment partners.

As Shwab writes near the end of his report:

Today’s decision-makers, however, are too often trapped in traditional, linear thinking, or too absorbed by the multiple crises demanding their attention, to think strategically about the forces of disruption and innovation shaping our future.

Pagos is a disruptor in the traditional payment ecosystem. We are here to empower simplicity through relationships with our clients that enable processor-agnostic services and harmonized data insights. Pagos has established direct relationships with the card brands and has achieved PCI DSS Level compliance. These relationships authorize Pagos to provide you with network tokens, enabling a single “secret handshake” that is recognized regardless of which payment processor you use. Without this, you have to have a different secret handshake for each processor you send your customers card through to the same issuer. 

With Toucan by Pagos, our network tokenization service, you receive a single Toucan Reference ID that means nothing to a fraudster if exploited. You also have a single reference to a customer's card that is not subject to the same security rules that a PAN is, so you can use it to search for all your transactions by the card used. Imagine the ease of identifying different customer profiles that use the same card, and how that changes how you might calculate customer lifetime value, customer loyalty, and a host of other back office use cases!

But relationships are complicated, success and failure often do not hinge on a single value, so Pagos is here to provide you with additional services that will provide you with even more insights to help you see your data in a whole new way! Check out our website to learn more about our other products: Peacock, Canary, Parrot, and Loon.

If you are ready to expand your traditional view of payments and reduce customer effort and friction with processor agnostic solutions, we want to establish a new type of relationship with you. Everyone can drive more sales and lower costs with Pagos! Let's find out how much that is together and if this is on the top of your priority list. For many it already is.

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