IP Connectivity for Card Authorisations - The ACK view
Increasing numbers of Merchants are now looking to take advantage of their investment in broadband technology. In many cases the justification for the investment has already been made on the basis of greater store to head office traffic efficiency. The fixed cost nature of broadband is ideal since it allows any volume of data (within the confines of the line speed) to be sent and received, unlike previous solutions based on dial up connections where costs can very quickly spiral out of control.
IP connectivity into the bank authorisation networks for Merchants can currently be split into 3 methods. First, it is important to remember that the banks do not run their own network infrastructure for authorisation access, there is always a third party involved acting as an intermediary.
Broadband access via Vodat, Bank poll per branch
Vodat International are an ACK partner dedicated to provided IP services to the retail community. They have set up connections out of their network into the banking environment and provide two methods of connection. First they can engage directly with the Merchant and will provide a closed network between the branches, head office and out into bank using MPLS (Multi Protocol Label Switching). In this scenario Vodat will provide a full network management service for all connectivity, monitoring lines and connection capabilities. The second option is for those Merchants who already have a broadband network in place. Here the existing broadband routers will need to have VPN capabilities, bear in mind that most routers sold today have multiple VPN capability so the existing head office connection will not be effected, simply a second VPN is set up into the Vodat network.
Once this is all in place the operation is straight forward. During the day when an authorisation request is made it is routed through Vodat into the banking network and responses are received back at the store. It should be noted that Vodat simply act as the interface between the Merchants IP networks and the bank, they do not take responsibility for delivery of the settlement data into the bank at end of day. It is therefore required that the store be polled by the bank overnight in the usual way to ensure that the Merchant gets paid.
This solution provides a simple evolution for Merchants moving from the traditional dial up, modem/ISDN method of card authorisation. The costs of setting the solution up are not excessive and when moving away from dial up authorisations there is usually an opportunity to negotiate a reduced Merchant Service Charge. This is because in the dial up model although the authorisation call is to an 0800 number the cost of supporting that service to the banks is often passed on to the Merchant via the MSC.
On a similar vein to Vodat but with the enhancement that use of a VPN or MPLS network is not a requirement. The Datawire service allows merchants to use regular Internet connections and first adds a layer of security (512 bit encryption) at the entry point into the Internet and then routes the data packet over its own managed links through to the banks. Once the data packet has been created and authenticated by the Datawire service the monitoring begins 24/7 giving consistently reliable, real time performance through intelligent routing.
How is this service be delivered? The Datawire service is currently being offered by another ACK partner ReD, branded as ReDLink. What will be required at the stores will simply be ACK software supporting the Datawire standard, a quality internet connection and a contract with ReD for the transportation of the authorisation request. Charges are based on a per transaction fee from less than 2p. It should be noted that this service does not include submission of the transaction log file currently which will still need to be polled by the merchant head office or by the bank. The ReDLink service offers full PCI DSS compliance for the transportation of card details across the public internet.
So the ReDLink service powered by Datawire will give merchants a simple, fast, secure and managed method for using the public Internet to gain card authorisations.
Broadband access via Vodat, Head Office bulk submission
This solution is a follow on from the previous but brings control for the end of day transaction log submission into the Merchant head office functions. It is expected that the Merchant has an existing method for collecting data files from the branch. Amongst these files the EFT transaction log file from each branch needs to be delivered to the ACK application, Bulk Delivery System. This application takes responsibility for checking and grooming the data received, producing financial reports and then finally delivering a single submission file to the banks, returning later to collect confirmation of receipt and exceptions.
This solution provides the benefit of giving Merchants complete control over the delivery of card transactions to the bank. BDS is capable of producing exception reports where branches failed to deliver transaction logs successfully. These ‘stragglers’ can then be rectified the following morning ensuring that the Merchant delivers in a timely manner, all the data he is expecting to be paid on. From an additional commercial perspective by undertaking the polling function Merchants save the monthly polling fee from the banks.
Managed Service Provider
Managed Service Providers are growing in presence in the customer present marketplace. The advantage that a Managed Service Provider (MSP) brings is that they handle all aspects of the card acceptance process and reduce some of the issues involved in storing card holder data, covered by PCI DSS. When a card is offered for payment a connection is made via the Internet over SSL into the MSP. Here transactions are routed out to the bank host network and back for completion of the sale. The transaction is then recorded by the MSP who go on to complete the process on behalf of the Merchant by delivering the transaction log to the bank at the end of the day. In addition the MSP will provide a full reporting facility so that the Merchant can establish just what was submitted to the bank and therefore what funds he can expect to receive into their account.
Currently there are two pricing models available from Managed Services Providers for their services, one is a flat fee per month based on a limited number of transactions per PoS. This is typically in the order of £10 to £12 for up to 1,000 transactions per month per PoS. The other price model is based on a per transaction fee and is better suited to those organisations processing many millions of transactions per year.
Broadband access, Merchant owned network with central submission
In this scenario the Merchant takes control of providing the complete infrastructure for card processing traffic from authorisation at the Store through to final submission to the banks. The advantage here is in the complete control of the solution being within the Merchant giving fixed costs and fully utilises the VPN/broadband network.
A number of elements from ACK are involved in this solution. Stores will operate as they would for any of the other solutions proposed so far. However the authorisation request travels via the corporate VPN to head office. Once into head office the transaction is controlled by the ACK Deterministic Queuing Server. This application ensures that card authorisation traffic flow is managed given a ‘many to few’ situation, many sites contending for the single connection into the banking network. DQS ensures that the authorisation traffic is fairly shared across all competing authorisation requests.
Transaction logs continue to be produced locally with each store as with previous solutions and therefore need to be collected as part of the end of day routine and then the ACK Bulk Delivery Service takes control to deliver a single submission file to the bank.
ACK have produced a series of spreadsheets available to customers that allow the various cost models to be run according to the Merchants current and future requirements. These spreadsheets will give a good indication of the annual running costs and potential savings. If you would like to receive a copy please call Chris Hyde on 0118 946 9233.