There is a whole lot more that goes on that is not seen by a shopper from the moment he or she authorises a payment using a Point of Sale (POS) or uses a card to pay online to a merchant. It is called the payment card process and over the weekend, Flutterwave, one of the major payment processing companies in Nigeria, attempted to clarify the process.
Flutterwave collects money from over 170,000 merchants many of which are in Nigeria. And while it may not keep the collected monies because that is legally the exclusive reserve of financial institutions like banks, Flutterwave is an important player in the payment value chain.
Recently, clients on the company’s platform took to social media to complain that they were being debited multiple times. One client even threatened legal action.
In a later response, Flutterwave said the problem originated from the technology provider of one of its bank partners. Left unaddressed, clients started receiving multiple debit alerts for previous transactions. While some clients said it was not the first time the issue has happened, Flutterwave said it has resolved the multiple debit issue and its bank partner has commenced the refund of funds.
In a post on its website, Flutterwave explained the multiple ways a payment could go wrong. Below are three things we learnt from the post.
Merchants don’t get it easy
The majority of the POS transactions and online transactions often go smoothly for shoppers at least. For instance, data from the Nigerian Interbank Settlement Exchange (NIBSS) show that about 90 percent of POS transactions on a daily basis is without hitches.
But this is not often the case with merchants.
Flutterwave is primarily a business-to-business (B2B) payment firm, which is why nearly all its clients are mainly merchants.
In its post, Flutterwave explains the two sides to every payment, the customers making payment and the merchants receiving the payment. Every card issued to a customer is connected to a bank account. That makes the bank the card issuer. However, the bank got the card from a card scheme such as Mastercard, Visa, and Discover Global Network. Card schemes manage the cards issued on their network globally.
The merchants’ side of payment is actually the more complicated as it involves so many hoops that must be completed before the transaction is deemed successful and completed. The hoops ultimately end up with another bank. This could take more than 24 hours in many cases.
The middlemen
The number of hoops to jump could range from the visible to the invisible players. For instance, while banks, card schemes and payment processors are visible on the chain, internet providers and technology providers are invisible but still a very important part of the chain.
The POS for instance is issued by banks but they need a technology provider to keep it working optimally, the same goes with most of the infrastructure that ought to keep the process seamless.
Banks hold the ace in payment
Every strand of the payment process ultimately requires a bank sign-off to be successful.
When a customer approves a payment at a retail shop, he or she is actually telling a bank – not Flutterwave, or any other fintech firm – to credit the retailer’s bank account. The retailer’s account is domiciled in a bank.
Anything can go wrong between both banks involved. First approvals are still heavily dependent on bank staff -. As Flutterwave noted, if the payment processor’s bank partner (acquirer) fails to send the instruction to debit your account when they should, you might get a late debit.
Also if due to some technical error or some other reason, the payment processor’s bank partner (acquirer) sends the instruction to your bank to debit your account twice, you will get a double debit even though you only paid once.
Finally, Flutterwave also points out that the bank partner’s decision to outsource the process to a company that’s known for switching with a backlog of requests from other acquiring banks could lead to mistakes when you are trying to ask your bank to debit you and that can result in a double debit.
NIBSS daily monitoring of POS transactions shows that apart from customers’ error, acquirer bank error is the second most likely reason a transaction was not successful. Processor errors and issuer bank errors are the third and fourth most likely cause of the transaction failure.
“When we say the world of payments is built on partnerships, we really do mean it. We, as a payment processing company, are able to plug into the different payment methods and wallets on behalf of our merchants, receive payments, send to our acquiring bank and then settle our merchants,” Flutterwave noted.
