Creating the Best Payment Experiences for Businesses, Payment Providers, and Merchants

Powerful Business Experiences
  • Easy-to-use platform to assist companies of all sizes, including large-scale service businesses and marketplaces
  • More payment options: all credit cards, debit cards, direct bank transfer, eCheck/ACH, eCash, digital wallet, global payments, and digital currencies
  • Payments status alerts
  • Powerful fraud protection
  • Comprehensive business reporting
Powerful Payment Provider Experiences
  • Scalable platform that enables reliable payment processing to handle thousands of merchant accounts
  • UX integration
  • Powerful fraud protection
  • Full compliance
  • Responsive support from human operator and self-service options
Powerful Merchant Experiences
  • Flexible sign-up
  • Minimal upfront data requirements
  • More payment options: all credit cards, debit cards, direct bank transfer, eCheck/ACH, eCash, digital wallet, global payments, and digital currencies
  • Powerful fraud protection
  • Responsive support from human operator and self-service options
Fast and Secure Payments

You want to give your merchants lightning fast and secure payment processing options for all their payments. You'll also want to control when and how they get paid. With Due's platform you get the best of both worlds.

We'll Help You Onboard All Your Sub-Merchants

Most payment processors use expensive and complicated solutions mostly designed for larger merchants. Due's payment platform offers various tools for on boarding sub-merchants quickly with tons of added features. You'll get fast funding options, extensive reporting capability, simplified reconciliation, and risk management. This will surely save you precious time and money.

5 Ways We Can Better Facilitate Your Payments

Simple and Efficient Onboarding

  • Compliance services for MATCH and OFAC requirements
  • Collect sub-merchant fees
  • Tools for lightning fast sub-merchant onboarding including portal entry and other imports.

Monetization and Enhancement

  • We accept all credit cards, debit cards, direct bank transfer, eCheck/ACH, eCash, digital wallet, global payments, and digital currencies
  • Authorization and Payment settlement

Sub-Merchant Support

  • Multiple-funding options available
  • Risk and underwriting assistance

Extensive Reporting

  • Chargeback reports
  • Transactional reports
  • Sub-merchant fee reports

Customer Service

  • Dedicated technical support
  • Chargeback analyst and facilitator
  • Partner account updates and management

5 Ways We Will Add More Value

Secure Mobile Point of Sale (POS)

Merchants can create custom mobile applications using Due's services like recurring payments, tokenization, and fraud detection.

Tokenization

Dramatically reduce risk associated with data theft and fraud by replacing PANs (primary account numbers) with unique and reversible number sequences referred to as "tokens."

Fraud Tool-Kit

Get access to your very own fraud tool-kit to mitigate concerns about third-party domains. These profiling technologies include configurable filters, IP geolocation, and proxy piercing.

Transaction Monitoring System

Due's merchant risk analysis tool lets you customize transaction monitoring parameters and manage cases more efficiently.

Due IQ

Sell smarter with on-demand, web-based financial data and reporting. Get realtime analysis that provides business insights for streamlining costs, managing risk, enhancing revenue, and improving overall operational efficiency.

Platform Features

Flexible Payment Processing
  • Functionality for user interaction that involves all types of monetary transactions for goods and services around the world
  • Acceptance of all major credit cards, including American Express, Mastercard, and Visa
  • Debit cards and bank accounts
  • ACH/eCheck payments with direct bank transfers
  • eCash and digital wallet functionality
  • Group payments and multi-party payouts
  • Recurring payments
  • Mobile payments
  • Digital currency payments
  • Global payments, including ACH, eCheck, eCash, and credit cards
Maximum Security Levels
  • PCI security
  • Multi-factor authentication
  • Card data tokenization
Multiple Fund Settlement Options
  • Bank account or check settlements
  • On set schedule or as payments are made
Customizable Risk Management System
  • Understanding that every business, payment provider, and merchant has unique risk needs
  • User data analysis for improved risk decisions
  • Higher fraud catch rate
  • Fewer false positives
Granular Data Reports
  • Detailed reports that deliver transaction details, including when, how, and why a card was declined
  • Full information on how money moves through the payment platform
Convenient and Easy Onboarding
  • Less upfront information required to keep new merchants and customers satisfied and confident
  • Automatic account creation for faster onboarding
  • Quick required user data collection
Variable User Experience Design
  • Adapt our payments platform to match your user experience design
  • Full control over the look and feel of all user interactions
  • Customizable options for merchant onboarding, checkout forms, email correspondence for support and confirmations, credit card statements, and mobile transactions
Versatile Mobile Solutions
  • Branded mobile card reader programs that integrate with the payment platform
  • Customizable EMV-enabled card readers that support chip and magstripe payments
  • Embeddable payment functionality for branded mobile apps
Compliance Assistance
  • Transaction monitoring to ensure OFAC and other regulatory compliance is met
  • Tax document services for merchants, including printing and mailing all 1099-K forms
State-of-the-Art Development Tools
  • Easy for developers to work with to customize the payment platform
  • Extensive documentation
  • Mobile SDKs for simpler app development
  • RESTful API
  • SDKs for programming languages that include Python, Ruby, PHP, Java and more
Ready to get started powering up your payments platform with Due?
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The Ultimate Guide to

PAYMENT PLATFORMS

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Introduction

Payments were once considered a relatively easy environment with some basic choices that focused on the framework of a financial system tied to banks and other financial institutions.

The payments offered a platform with bank accounts as the source for payments made with cash or checks. Banks also offered some electronic transactions, including wire transfers. Then, along came credit card companies and added another payment platform. Seeking to compete and offer other payment options on its platform, banks added debit cards.

However, what has really changed the payments platform system has been the Internet -- transforming how consumers and businesses buy products and services as well as how they pay for them.

The new online platform further expanded when the majority of consumers decided they liked using mobile devices for shopping and making purchases, adding the need to develop mobile payment platforms or online payments platforms that could work in both channels.

New online companies have also formed to provide different types of services, including the types of services demanded in the shared economy companies like Uber, and for use in the marketplaces of the freelance world, such as work provided by companies like, UpWork.

Other models have emerged, including crowdfunding, which has also required a payments platform to fuel its strategic goals. Additionally, more merchants have migrated to the online environment, seeking solutions that will facilitate payments and enhance the online shopping experience for users.

This online environment has also enabled freelancers, startups, and small business owners to reach out to a wider audience and generate considerably more revenue for themselves.

These online environments are much smaller than the large financial institutions and they have been the ones who have also sought affordable, easy to implement, and secure payment platforms so they can receive payment from this expansive and growing customer base.

Along with these increasingly popular business opportunities and the development of payment platforms to assist in their growth, it has also become necessary to offer the payment methods across all platforms (including mobile) for all these businesses, merchants, and payment companies.

New challenges have emerged due to what has become a complex, risky, and highly regulated environment. Increased fraud and numerous data breaches have further complicated the online and mobile payments environment.

What this means is that having a payment platform that can facilitate payments while address the risk issues is not easy -- especially when the sheer numbers of users and their expectations continue to increase

This guide to payments platform: is intended to provide insights into how to facilitate payments while expanding your knowledge about the various types of logistical, regulatory, compliance competitive and fraud challenges that continue to complicate the payments industry.

The payments platform guide: is also intended to help you understand how your business, merchant service, or payments service can address the challenges you are presented with and how to make better decisions about how you will address the payments environment you are currently in and also the environment of your customers -- and where to get the help you need.

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Payment Facilitation

Payment facilitation (commonly referred to as payfac) involves two key areas:

  • The flow of funds
  • The payments ecosystem.

The design of both determines just how easy or difficult payments will be for a business, merchant, or payment service provider.

This chapter explains: both of these areas and how the design influences payment facilitation.

There are two ways that funds can flow during the process of payment acceptance. Which one you use is based on what point in the payment process where you take ownership over the users’ funds and that determines what type of payment platform you will use.

The first option: for taking control over the users’ funds is aggregation. With this process, all funds are collected into a central account that is controlled by the platform. In this type of arrangement, the payments platform can also be referred to as a payment service provider, third-party payment aggregator, or payment facilitator. In this situation, the platform may be subject to other types of regulatory, operational, and compliance issues that are discussed later on in this guide.

The second option: does not have any of the funds going to an account that the payment platform manages. Instead, the funds that are processed go directly to the end user. Since this involves never controlling the users’ funds at any point, this arrangement most likely requires that the payment platform have a payment facilitator do the task for them.

To better understand how payments work and to help determine which of the aforementioned options to adopt, it’s important to understand the various components of the payments ecosystem.

Here are some important terms and components of the payments ecosystem:

  • The buyer is also known as the cardholder. They agree to have their bank send money to a merchant or other type of business to purchase goods or services.
  • The merchant, seller, or business is the recipient of the buyer or cardholder’s money. They are also referred to as a user of the payments platform because they accept the payment from the buyer through this platform.
  • The payments platform connects the buyer and the seller.
  • The payment facilitator is legally responsible for the funds, taking control of them to transfer from the buyer to the seller.
  • The payment gateway is the channel that moves data between payment facilitators and financial institutions like banks or card networks.
  • The acquirer is a bank that underwrites the payment facilitator and uses APIs to connect the payment facilitator with financial institutions or card networks.
  • The card association (American Express, Discover, Visa and Mastercard in the U.S.) is a private network that facilitates transactions and settlement between issuing and acquiring banks of those parties that are involved in a transaction.

With so many components involved in the payments ecosystem, it’s easy to see why payments become so complex. However, this is just the first layer of complexity because regulations, compliance, and other issues add to the difficulty of payment platforms.

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Regulatory Issues

Regulatory issues are really nothing new in the payments industry, but what has changed is the number of regulations surrounding transactions. Starting in 1976 with The Electronic Fund Transfer Act, the regulatory environment has only increased in an attempt to monitor electronic payments.

The amount of regulatory pressure varies by the type of transaction and the risk that is associated with it. For example, payment facilitators experience more regulations because they are in the middle of the transaction and have one set of regulations when charging customers while another regulation for disbursing those funds to merchants.

The regulatory requirements for payment facilitators become even larger when the transactions involve overseas merchants. Because of the complexity of the regulatory framework, many payment facilitators have to hire specialized talent that understands all the regulations and can assist with regulatory compliance.

This guide: in no way can cover every type of regulatory issue that now exists for payment platforms.

Here are some of the main types of regulations that a payment platform must comply with:

  • The Bank Secrecy Act (BSA) of 1970 requires that regulated companies that handle financial transactions must have a BSA Anti-Money Laundering (AML) compliance program in place.

Since its initial entrance into the regulatory framework, the BSA has been amended several times, including being folded into the USA PATRIOT Act of 2001, which states that companies must provide information on any potential financial transactions that could involve terrorist financing.

This requires developing Customer Identification Programs (CIP) that can also help to identify and prevent other criminal activity, including financial fraud, identity theft, and money laundering.

  • All companies that deal in payments and financial transactions must comply with the rules established by The Office of Foreign Assets Control (OFAC), which is connected to the U.S. Department of the Treasury. Compliance involves developing and enforcing specific procedures that ensure no individuals or organizations on the OFFAC list are using the services provided or are involved in sanctioned activities.
  • A payments platform and any company that is in the money services industry must register with the U.S. Department of Treasury through the Financial Crimes Enforcement Network (FinCEN). If you don’t register, you could be putting your business at risk for criminal and/or civil penalties. As part of this responsibility, you must also file Suspicious Activity Reports (SAR) if you suspect any type of criminal activity related to financial transactions.
  • Finally, you must also register your company as a Money Services Business (MSB) in the state where you are headquartered. Doing so puts you at the mercy of that state, which also has its own unique compliance requirements that can be complicated, time-intensive, and expensive, including potentially requiring a Money Transmission License (MTL).
  • Tax reporting is the last (but not least) area where the regulatory environment impacts your payments platform. In 2011, the Internal Revenue Service (IRS) introduced Form 1099-K, which is intended to report funds movement. As a payments platform, you determine how much to report in terms of how much of the funds represent taxable income.

Payment facilitators must issue a Form 1099-K to each merchant that processes more than $20,000 and 200 payments in a calendar year. The form must include the merchant’s legal name, address, tax identification number and total transactions for the year.

If the form is filed incorrectly, is incomplete, or is late, the result could be huge fines.

And, this is a list of just the major regulatory issues. There’s even more, depending on what aspects your payments platform is involved in within the financial transactions industry. Next up is compliance.

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Compliance

Almost larger than the regulatory environment is the compliance framework established by credit card associations, namely Visa, Mastercard, American Express and Discover. The list of compliance areas only continues to grow each year, leaving payment facilitators like payments platforms with significant challenges.

Here are some of the main issues faced by these payment facilitators:

  • When the payment platform is the merchant of record for the funds involved in a transaction, these platforms are known as aggregators and become vulnerable to more risk than those that don’t accept and disburse the payments to third parties.
  • Compliance requires registering with the card associations. Serious penalties like fines and the termination of their merchant account could be the result of not registering. This registration must include sponsorship from an acquirer, which would be a bank or financial institution that accepts card payments for merchants.
  • Additional compliance includes merchant agreements, types of merchants you can work with, information collected, how information and processing data is reported, policies and procedures that are developed, information disclosed to cardholders and merchants, customer service provisions and operating regulations.
  • One of the most important areas to emerge in recent years is the Payment Card Industry Data Security Standard (also known as PCI DSS). This is a set of requirements that has been established to standardize how companies process, store, or transmit credit card information with the main goal of protecting this information at all costs. The card associations set up the Payment Card Industry Security Standards Council (PCI SSC) to administer and manager this standard. Payment facilitators get additional compliance in this area, including the need to register with the card associations as a Level 1 PCI DSS-Compliant Service Provider that involves undergo rigorous checks, including vulnerability scans by an Approved Scanning Vendor and compliance among the merchants that operate on the payments platform. As part of this compliance, payment platforms must report data breaches or any suspicions related to unauthorized access, theft, or misappropriation of cardholder information.
  • The card associations also have rules for how and when merchants are allowed to charge for transaction fees, which is a primary revenue stream for payments platforms. Merchants cannot prioritize one payment method over another by applying extra fees on certain payment method that they want to discourage use. However, card associations to allow for certain types of convenience fees, which vary between those within the card association network. Typically, what is the same is the requirement to disclose all fees prior to payment.
  • Lastly, card associations have compliance related to restricting merchants from doing anything that may harm or dilute the card network brands. There are certain ways that card association logos must be displayed. Payment facilitators must also work with their merchants to ensure they have established and conveyed policies related to customer service, disclosures, returns and refunds that are aligned with the operating regulations developed by the card associations.

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Chargebacks, Fraud, and Data Breaches

The biggest concern that payment platforms and those they serve -- such as businesses, merchants, and other payments companies -- is the risk for fraud, as well as the numerous large-scale data breaches that have hit all types of companies.

Most of the existing fraud prevention measures are made for the card-present environment, while online card transactions have been tougher to stay on top of. The ever present criminal loves to dream up various types of fraud and data breaches.

Primarily related to fraud is the increase in chargebacks. This has become a real sticky issue for companies that sell products and services online and in physical locations.

Chargebacks can occur when a cardholder disputes a charge with the bank that issued their credit card and then that bank reverses the payment to the merchant and refunds the cardholder

While this is intended to protect the cardholder from any card theft and illegal charges by someone other than the authorized cardholder, many criminals and dishonest individuals use this caveat as a means of fraudulently getting their hands on goods and services without having to pay for them.

At first intended to help the average card holder avoid fraud on their care, this practice can become a costly proposition for a payments platform as well as the merchant involved with each chargeback -- especially if the payment facilitator -- like the payments platform has signed an agreement that makes them responsible for these chargebacks.

There are four categories of risk related to fraud that have been identified that are important for you to understand as a payments platform, business, or merchant:

  • Merchant identity fraud: is where a criminal gets a merchant account through what appears to be a legitimate business and then uses this account to charge numerous stolen credit cards that they have acquired before disappearing with the money and leaving cardholders with unauthorized transactions. This is one of the most common types of fraud to occur in the payments industry because it has become much easier to create a false identity or even just steal someone else’s identity. The problem is that all the people involved in this type of fraud are difficult to identify, including determining the true identity of an online merchant that has opened one of these accounts.
  • Merchant credit risk: involves a legitimate merchant that defaults on its obligation to fund chargebacks. This tends to be riskiest among newer, less-established businesses, including crowdfunding platforms and online marketplaces. These new models of business tend to rely on payment facilitators because acquirers may view these businesses as too high risk for their liking. The problem is that the payment facilitators become liable for these chargebacks when the merchant decides to default on them.
  • Buyer identity fraud: involves a fraudulent customer that has a stolen credit card that they then use to purchase a product from a legitimate business. When the discovery is made by the cardholder that someone purchased products with their stolen card, it’s usually too late because the criminal already has their products. While the cardholder is usually off the hook for this type of transaction, the merchant is not so fortunate, because they are typically liable for the cost of the order fulfillment. The revenue from the sale of the product, and the fees related to the chargeback initiated by the cardholder all fall back on the merchant.
  • Friendly fraud: is similar to friendly-fire -- it still produces a kill -- but the perpetrator doesn't usually see it this way. The fraud is similar to buyer identity fraud in that the merchant is financially hit, but this time the fraud is actually conducted by the cardholder themselves, rather than by someone who has stolen the credit card. The cardholder authorized the payment, but then reverses the transaction after they have received the product or service. This action is still stealing, still fraudulent, and still criminal. It means that the customer gets a free (stolen) product or service while the merchant takes the hit and incurs all those charges listed under buyer identity fraud. This is a very difficult type of fraud to detect and there is no way for the merchant to prove that the cardholder - was the thief - or was involved.

This type of fraud and the rising costs of chargebacks have led to numerous strategies that are intent on minimizing chargeback risk. Detecting merchant identification fraud can be a very complex issue. That’s because there is such a large amount of data involved to collect and analyze in a rapid way in order to prevent the fraud before it goes too far and leads to those chargebacks.

Even if it is possible to give each identity a given probability of validity or fraud, there are issues that arise, like false positives in which a valid merchant has been identified as fraudulent, or a false negative where a legitimately fraudulent merchant has been allowed to process transactions.

Making mistakes here with identity can lead to writing off a tremendous number of transactions as losses. Criminals often work together to test a payment platform’s weaknesses in order to go after multiple accounts, get what they want, and leave the payment facilitator with huge losses.

The main problem here is that even if the safeguards against chargeback fraud work effectively to slow down the criminals, they also slow down the transaction and funding processes. This tends to put a damper on the user experience plus leads to much lower cash flow for everyone involved.

What becomes even more difficult is the ability to identify merchants, fradulent or otherwise. Without doing credit checks, verifying bank account balances, auditing financials, and reviewing processing history, it’s still very difficult to assess the credit risk of various merchants who want to work with your payments platform. Some of the ways to address this complexity have been setting a process and withdrawal limit until trust is established This process requires that merchants post some kind of collateral, or a holding of a percentage of the merchant’s payments.

It’s important to remember that it is simply impossible to get rid of all risk and fraud completely in an environment that involves money. However, a payments platform can establish specific policies and procedures on how they will recover funds from merchants or pursue legal action.

As part of the process, payment platforms must also implement processes that determine how they will manage and resolve any disputes that arise between buyers and sellers that, in effect, could preempt chargebacks.

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Technical Issues

There are additional complexities related to the technical aspects involved in processing payments. This is especially true if a payment facilitator wants to process payments directly to their end merchants and will not be able to get by solely on what a payment gateway offers them.

Payment gateways reduce: the number of technical aspects involved in the process, but there are still specific technical components to address to make sure that the merchant can be uniquely identified and onboarded into the payment process.

The technical aspects that handle how the payment platform sends their instructions to the bank -- in terms of where the merchant’s money is located and how this will be transferred -- also needs to be addressed.

Additionally, technical components must achieve specific accounting and reconciliation requirements, especially when money is coming into the payment platform from numerous financial institutions that involve various settlement processes.

Even with today’s technology, standardizing this process has become one of the biggest challenges for payment platforms, including when global payments and varied financial institutions get involved.

There are different fees and regulations: that must be tracked and recorded to ensure they are withdrawn correctly. Even simple credit card transactions involve three sets of API interactions, including authorization, capture and settlement.

All the other aforementioned requirements plus connectivity problems, data integrity, and the need to meet specific timing and compliance factors while also ensuring low risk and your payments platform has become highly complex.

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Conclusion

This guide on payments platforms: includes how these platforms work and the challenges faced by performing in this complex environment. The guide explains about the involvement of a global audience along with high risks encountered dealing with fraud and data breaches. Further explanations are given about the complicated compliance and varied regulations that are involved with a payments platform. And last, but not least, are the very complex and urgent demands of the customers with increasingly high expectations.

However, having a payments platform that provides solutions for merchants and businesses doesn’t have to be an insurmountable or overwhelmingly challenging feat if you work with a partner that understands all the issues presented in this guide.

When working with someone possessing the expertise, technology, and experience to deliver a scalable, robust, secure and compliant payments framework, it will help you be able to expand your own ability to process payments of all types – from in-store and online payments to global and mobile payments.

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