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The payment landscape is rapidly evolving and is poised for even faster innovation in future. Traditional cash and card payments will remain in use, augmented by contactless and mobile payments such as Apple Pay and Samsung Pay. Innovation related to the instant settlement and availability of these funds to support efficient merchant cash flow will become a focus.
However, the introduction of alternative sources of customer funds is challenging merchants to enable these options across all channels (POS, kiosks, eCommerce) and, in particular, to manage the reconciliation of these transactions and settlements. Key among these new payment methods are various wallet payments, Buy Now Pay Later (BNPL) offerings, and the forthcoming introduction of Payshap as a merchant payment mechanism.
In addition to these diverse payment options and methods, merchants also utilise various value-added services (VAS) such as gift cards and loyalty programmes and commodity VAS such as prepaid airtime. This article explores the dynamics of managing multiple payment types and VAS transactions, the necessity of efficient transaction and settlement reconciliation, and strategies to ensure settlement integrity and customer satisfaction.
All payment and VAS services are enabled in retail environments via online message processing between the merchant channel, switching providers, and provider processing platforms. In some cases, this may extend to messaging between the provider and mobile applications on customer mobile devices.
Disruptions to the message processing, whether due to network or power failure, system unavailability, application defects, or human interruptions, may result in exceptional conditions. A well-integrated solution should be able to automatically recover from almost all exceptions, though this process may take days in some scenarios. Implementing robust network and power redundancy significantly reduces the likelihood of such exceptional conditions.
Exceptional conditions typically result in either financial impact (such as no settlement to the merchant and related cashflow challenges) or customer impact (such as double debits or reserved funds that cannot be spent elsewhere, etc). Therefore, it is critical to ensure the required transactional and settlement reconciliation processes are in place to identify exceptions, resolve them, and eliminate their causes.
For example, a new POS application version might contain defects that cause exceptions in previously stable systems. Effective transaction reconciliation solutions would detect this rapidly and are therefore critical to have in place. Additionally, utilising reconciliation solutions when testing end-to-end payment integration into channels is another valuable practice.
Merchants often service customers via multiple channels, including physical stores, online platforms, and mobile applications. The key is to ensure common functionality and customer experience across all channels, including payments and VAS.
Different technologies and platforms are often used to integrate the same payment service across different channels, leading to exceptional conditions unique to certain channels. For optimal efficiency, it is critical to use a single transactional and settlement reconciliation platform to manage exceptions across all channels.
Providing excellent customer service is vital for merchant success. Efficient transaction reconciliation plays a significant role in this, as transactional exceptions can lead to customer dissatisfaction. Ensuring transactional integrity means that all transactions are completed to the same final status from both a merchant and payment provider perspective and are accurately recorded. Transaction reconciliation solutions provide the tools to always ensure this, thereby maintaining high integrity of transaction input into settlement solutions.
Cash and payment provider payments to merchants are the lifeblood of any business. While transaction reconciliation ensures that the source transactions used for settlement are correct, settlement reconciliation ensures that merchants are paid accurately and as fast as possible. From a cash perspective, this ensures that all cash payments received are accurately accounted for in the merchant’s bank account.
Merchants typically pay fees and commissions, specific to each payment type. Calculating these fees can be very complex, and merchants often struggle to perform these calculations accurately. A settlement reconciliation solution should ideally offer the ability to calculate fees.
New payment types are rapidly increasing, with customer demands for merchants to accept them. Where merchants lack efficient transactional and settlement reconciliation solutions, adoption is often delayed or not initiated.
Most merchants currently handle transaction reconciliation manually, which is time-consuming and prone to errors. To ensure efficiency and encourage the adoption of new payment methods, merchants need to leverage technology to automate the reconciliation and settlement process.
Settlement processes can be simplified via the use of payment aggregators. Aggregators can consolidate all transactions and settlements from multiple payment providers, as well as cash, into a single settlement to the merchant, with supporting reports or journal entries.
Using an aggregator can significantly simplify administrative processes and ensure faster settlement, while ultimately promoting early adoption of new payment innovations with positive impacts on customer service and turnover.
As the payment landscape continues to evolve, merchants must adopt new payment methods and providers while ensuring efficient transaction reconciliation processes. By embracing automation provided by transaction and settlement reconciliation solutions, merchants can enhance their operational efficiency, maintain settlement integrity, improve cashflow and provide excellent customer service.
These solutions should offer the following capabilities:
Discover the benefits of adumo’s reconciliation solution today – contact us on sales@adumo.com
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