I hope that now you no longer confuse an acquirer with an issuer, and the expression "acquiring network" does not evoke associations with computer games. If, nevertheless, there are ambiguities, then you need to figure out who is who in card transactions.
And today I will talk about how all these seemingly indivisible entities can technically be separated.
Generally speaking, participation in a payment system (Visa, MasterCard, JCB, etc.) is generally very expensive pleasure. The bank needs to have quite expensive technical equipment, appropriate communication lines, rather expensive software, personnel who serve all this, etc., etc. Plus, you need an acquiring network (ATMs, POS terminals, etc.). Plus to this - participation in the payment system (or, more correctly, in the card association) is very paid. For example, BIN (Bank Identification Number) - the first digits on cards issued by the bank - is also purchased from the payment system. It is clear that you have to pay commissions as well. Plus, you need to have a solid deposit in the bank of the payment system (I already wrote that payment systems have special banks through which all mutual settlements between financial institutions are made). All in all, it all pours out in a round sum. If the bank is small, it can become completely overwhelming for him. And the times are now such that the card business does not bring profit to the bank (!). Often even losses. But a bank that works with retail and does not provide card access to the account is nonsense. Well, in a sense, the theory admits, but it's like Bigfoot - it seems to exist, but personally I have not seen it.
It turns out that the agent bank has the ability to offer card products to its customers, and at the same time not keep this entire technical zoo together with a pool of specialists. For this, he pays with higher commissions (or a monthly fee - here's how to agree with the sponsor). Because, in addition to the usual transaction fees of the payment system, he pays money to the sponsor. The sponsor receives an additional source of income, the agent saves on infrastructure. Everyone is good, in principle.
By the way, the payment system itself also offers services for processing card transactions. Well, why not? A huge organization, with a huge staff and technical weapons. Can be not only an intermediary, but also perform transaction processing. If I remember correctly, this is called Stand-in Processing (STIP). You can google this name if you're interested. By the way, different options are possible there. For example, a payment system processes all transactions. Or maybe the bank has its own processing, but for greater reliability, if suddenly banking processing is not available, the payment system will pick up and process the transaction.
But there is such a moment that the balances on the card account are still kept in the bank. In this case, that the payment system, that the sponsoring bank will either request the current balance in the bank's ABS (automated banking system), or be guided by some kind of transaction limit.
It is clear that the payment system takes money for the Stand-in processing service, and the money is good. But in general, this is a common question facing a business: which is more cost-effective - to save on one thing and pay higher commissions for another, or to invest in your infrastructure and save on external costs. The answer is ambiguous and strongly depends on the bank's business processes.
In general, we have so far considered situations where one bank played two different role-playing games. He is a publisher, an acquirer, then both at the same time. And in one role there is profit, and in another. But it happens that there are banks "purely publishers". And there are banks "purely acquirers".
It looks like this. The bank is a purely publisher and purely issues cards and issues purely to its customers. But it has neither its own terminals, nor its own ATMs. Customers use either ATMs of any other banks, or ATMs of partner banks. In the first case, a purely publisher bank comes up with some interesting conditions for its customers, so that they would be interested in using the cards of a purely publisher. In the second case, contractual relations with partners are simply built so that both partners will benefit and the publisher will receive preferences. In fact, this option can be viewed as a special case of the agent-sponsor relationship, but this is not certain, because a purely publisher may have its own processing. It's just that we don't have our own acquiring network.
By the way, there is an interesting bank, let's call it Pen-kof, which operates according to a unique business model, in which there is not only an acquiring network, but even bank offices. A unique and innovative phenomenon. All work is done purely through the website. The cards are delivered by couriers. According to my information, there are no analogues in the world. But it is not exactly.
There is also an option when the bank does not issue cards at all. And it has only an acquiring network. A network of ATMs, POS terminals, Internet terminals (payment site). As an extreme variant of a pure-acquirer, there is also such a market participant who, by analogy with pure-processing, is not a bank at all, i.e. does not have a banking license. It simply maintains and maintains an acquiring network (a network of ATMs and terminals), and sells its services to banks.
There are also separate collection services to the pile. They generally do not conduct any activities similar to banking. They are engaged in the collection of merchants and ATMs. The bank may then not create its own collection service, but simply conclude an agreement with such a collection organization.
In general, as you can see, technologically the entire banking business is perfectly divided into parts of arbitrary sizes. However, as far as I know, this is also happening in the financial and economic part of banking. Well, in these abstract matters I am not strong. Here are brutal cryptography, banknotes, information technology - I can tough it. And the higher ephemeral financial matters - here I pass. Well, except that I can figure it out in my pocket
And today I will talk about how all these seemingly indivisible entities can technically be separated.
Generally speaking, participation in a payment system (Visa, MasterCard, JCB, etc.) is generally very expensive pleasure. The bank needs to have quite expensive technical equipment, appropriate communication lines, rather expensive software, personnel who serve all this, etc., etc. Plus, you need an acquiring network (ATMs, POS terminals, etc.). Plus to this - participation in the payment system (or, more correctly, in the card association) is very paid. For example, BIN (Bank Identification Number) - the first digits on cards issued by the bank - is also purchased from the payment system. It is clear that you have to pay commissions as well. Plus, you need to have a solid deposit in the bank of the payment system (I already wrote that payment systems have special banks through which all mutual settlements between financial institutions are made). All in all, it all pours out in a round sum. If the bank is small, it can become completely overwhelming for him. And the times are now such that the card business does not bring profit to the bank (!). Often even losses. But a bank that works with retail and does not provide card access to the account is nonsense. Well, in a sense, the theory admits, but it's like Bigfoot - it seems to exist, but personally I have not seen it.
What are small banks to do?
In payment systems, there is such a concept as an agent bank and a sponsor bank. A sponsoring bank is already a large bank that has its own equipment, software, an agreement with a payment system, and deposits in relevant banks, etc. The small agent bank negotiates with the sponsoring bank, and the sponsoring bank processes all card transactions at its processing facility. But despite the fact that the card of the agent bank does not belong to the sponsoring bank, the sponsoring bank is directly responsible for the activities of its counterpart to the payment system. If suddenly there are any disputable situations, or any violations, the sponsoring bank bears full financial responsibility. For the payment system, everything looks almost as if all these cards belonged to the sponsoring bank. Almost, because in fact the payment system knows that this particular bank is a sponsor. No problem, this is your business, be responsible for yourself and that guy. But if you please meet higher technical requirements.It turns out that the agent bank has the ability to offer card products to its customers, and at the same time not keep this entire technical zoo together with a pool of specialists. For this, he pays with higher commissions (or a monthly fee - here's how to agree with the sponsor). Because, in addition to the usual transaction fees of the payment system, he pays money to the sponsor. The sponsor receives an additional source of income, the agent saves on infrastructure. Everyone is good, in principle.
By the way, the payment system itself also offers services for processing card transactions. Well, why not? A huge organization, with a huge staff and technical weapons. Can be not only an intermediary, but also perform transaction processing. If I remember correctly, this is called Stand-in Processing (STIP). You can google this name if you're interested. By the way, different options are possible there. For example, a payment system processes all transactions. Or maybe the bank has its own processing, but for greater reliability, if suddenly banking processing is not available, the payment system will pick up and process the transaction.
But there is such a moment that the balances on the card account are still kept in the bank. In this case, that the payment system, that the sponsoring bank will either request the current balance in the bank's ABS (automated banking system), or be guided by some kind of transaction limit.
It is clear that the payment system takes money for the Stand-in processing service, and the money is good. But in general, this is a common question facing a business: which is more cost-effective - to save on one thing and pay higher commissions for another, or to invest in your infrastructure and save on external costs. The answer is ambiguous and strongly depends on the bank's business processes.
Other market participants
Generally speaking, there is another interesting participant in the market. It's called ... well, I don't know ... purely processing. This is not a pure bank. Moreover, processing may not even have a banking license. This is just a kind of data center in which the usual banking software is installed. Such a data center processes banking transactions, keeps all the necessary records, provides all banking information services to customers. But he does this not on his own behalf, but on behalf of the client bank. Clients do not even notice that there is some kind of separate processing. This is an interesting business model. Indeed, in one processing (data center) computing power is concentrated, the necessary software has been purchased, all the necessary specialists are available. The effect of the scale effect of production: all resources in one place, and the processing company can distribute them more efficiently and flexibly among its clients. The bank, as a client of processing, pays money for the provision of services, for renting software, for maintaining the system, etc. The clerks of the client bank have remote access to all necessary information systems, can set up, configure the allocated capacities, etc. In general, they can do whatever they want (within the framework of the contract and the criminal code), as if it were their personal processing. But at the same time, you do not need to keep the infrastructure, accompany it, have staff, etc. It is clear that it costs money. But in each specific case, you will not immediately understand which is more profitable. The clerks of the client bank have remote access to all necessary information systems, can set up, configure the allocated capacities, etc. In general, they can do whatever they want (within the framework of the contract and the criminal code), as if it were their personal processing. But at the same time, you do not need to keep the infrastructure, accompany it, have staff, etc. It is clear that it costs money. But in each specific case, you will not immediately understand which is more profitable. The clerks of the client bank have remote access to all necessary information systems, can set up, configure the allocated capacities, etc. In general, they can do whatever they want (within the framework of the contract and the criminal code), as if it were their personal processing. But at the same time, you do not need to keep the infrastructure, accompany it, have staff, etc. It is clear that it costs money. But in each specific case, you will not immediately understand which is more profitable.In general, we have so far considered situations where one bank played two different role-playing games. He is a publisher, an acquirer, then both at the same time. And in one role there is profit, and in another. But it happens that there are banks "purely publishers". And there are banks "purely acquirers".
It looks like this. The bank is a purely publisher and purely issues cards and issues purely to its customers. But it has neither its own terminals, nor its own ATMs. Customers use either ATMs of any other banks, or ATMs of partner banks. In the first case, a purely publisher bank comes up with some interesting conditions for its customers, so that they would be interested in using the cards of a purely publisher. In the second case, contractual relations with partners are simply built so that both partners will benefit and the publisher will receive preferences. In fact, this option can be viewed as a special case of the agent-sponsor relationship, but this is not certain, because a purely publisher may have its own processing. It's just that we don't have our own acquiring network.
By the way, there is an interesting bank, let's call it Pen-kof, which operates according to a unique business model, in which there is not only an acquiring network, but even bank offices. A unique and innovative phenomenon. All work is done purely through the website. The cards are delivered by couriers. According to my information, there are no analogues in the world. But it is not exactly.
There is also an option when the bank does not issue cards at all. And it has only an acquiring network. A network of ATMs, POS terminals, Internet terminals (payment site). As an extreme variant of a pure-acquirer, there is also such a market participant who, by analogy with pure-processing, is not a bank at all, i.e. does not have a banking license. It simply maintains and maintains an acquiring network (a network of ATMs and terminals), and sells its services to banks.
There are also separate collection services to the pile. They generally do not conduct any activities similar to banking. They are engaged in the collection of merchants and ATMs. The bank may then not create its own collection service, but simply conclude an agreement with such a collection organization.
In general, as you can see, technologically the entire banking business is perfectly divided into parts of arbitrary sizes. However, as far as I know, this is also happening in the financial and economic part of banking. Well, in these abstract matters I am not strong. Here are brutal cryptography, banknotes, information technology - I can tough it. And the higher ephemeral financial matters - here I pass. Well, except that I can figure it out in my pocket
