The Role of a Processor in FinTech: Simplifying Financial Transactions

In the fast-paced world of financial technology (FinTech), processors play a crucial role in simplifying transactions. By harnessing cutting-edge technology, processors streamline payment procedures, ensuring efficiency and reliability all while being connected to the BIN Sponsor. In this article, we will delve into the definition of a processor in the FinTech sector, explore their responsibilities, and highlight the importance of their role in the industry.

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Unlocking Financial Innovation: Understanding the Role of a BIN Sponsor

In keeping with our other articles on what FinTech is and what a programme manager does, this one will define what a BIN Sponsor is.

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As promised, at E-Pay Space we are committed to empower you with key terms in the FinTech industry. Our last blog tackled the definition of FinTech and why it is crucial to advance in this complex market. If you missed it, you can always check it out here.

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Neobanks, online transactions, financial inclusion… There are words we use every day that many people may find vague or difficult to understand. No matter how numerous these terms are, there is only one name: « FinTech ». At E-Pay Space, we look forward to sharing with you key concepts of the industry, so you can remain up-to-date with crucial topics.

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Has your child grown up and you want to give him some pocket money? You want to introduce him to managing a budget, teach him the value of money and things, but also allow him to have money at all times when needed. Pocket money is also a way for him to show his independence in front of you and to meet his daily expenses on his own, a cinema with friends, transport, a meal, clothes… It is also a good way to show him that he is no longer a child and to empower him.

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Each year, expense reports represent more than 30 billion euros for companies. According to an analysis report by Oversight Systems, a company loses 5% of its revenue each year due to fraud; 89% of this loss is linked to expense reimbursements! In addition to a significant loss of income, the automation of these expenses for the company is not commonplace since today, 59% of employees would not be equipped with an expense report software ( knowing that on average, it takes an employee 27 minutes to complete a note: a considerable loss of working time and therefore productivity for companies).

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The explosion of contactless payment

Néo-banques, transactions en ligne, inclusion financière... Ces termes utilisés régulièrement peuvent sembler abstraits et difficiles à saisir pour beaucoup. En réalité, ils ne sont que les facettes d'un même sujet passionnant et en constante évolution : la « FinTech ».

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The explosion of contactless payment

According to a Mastercard study, contactless transactions have increased by 97% in Europe. In France, growth would be 156% between January 2017 and August 2018! While Asia, with China as a precursor, had already adopted the service for years, a lagging Europe is (finally) seeing this use, which has hitherto been shunned, grow.

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83% of French people do not know what Fintech is and yet ...

For this article, we might as well start at the beginning: what is a FinTech? This word is the contraction of the words "Financial" and "Technology". Invented by our Anglo-Saxon friends, it can be translated into French as “Financial Technology”.… But still?

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What is a Program Manager in the Fintech market? What is a company that does the Programme Management in the financial sector?

10 years ago, new players appeared with the introduction of the new status of electronic money institution (EME) in Europe. The new concept of « Programme Manager » emerged. The new European directive (reinforced by the reform of the single market for payments in euros) authorizes the issuance of electronic money without the need for bank support. Providing payment services then becomes accessible for organizations that are not banks. As a result, companies obtain regulated statuses and can issue means of payment, such as prepaid cards, under certain conditions. This opens up an ocean of possibilities.
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But before talking about Program Management or Program Management, let's talk about program.
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Finally, what is a payment program/programme?

Let’s take the simplest example: rechargeable payment cards or prepaid cards which have seen their use explode in Europe. A card programme includes:

  • The issuance of electronic means of payment on the basis of a BIN number (Bank Identification Number: the reference code of the issuing account which can be seen on the first 6 digits of your card code). A BIN Sponsor intervenes here, which is an establishment with the regulated status of issuing electronic money, it may be a bank or any other similar organization.

  • The processing of payments includes operations and transactions between payer / paid / and payment medium: the organization managing this part is called a Processor

  • A payment network or more commonly referred to as a "Card Scheme" is the most well-known part of the system since it concerns global networks such as Visa, Mastercard, CB, Union Pay or American Express. Network members (especially merchants) accept payments within one or more networks.

  • A Bureau: quite simply the manufacturer who encodes and personalizes the means of payment. For example for the card: usually plastic, it is produced according to strict standards, from the chip to the numbers through to the magnetic strip. New Bureau are offering more and more original payment media such as metal or ceramic cards but also wearables such as connected jewelry).

  • A supervisory authority: in France, it is the ACPR (prudential control and resolution authority) which plays the role of regulator. This organization backed by the Banque de France supervises the activity with the aim of protecting users and ensuring the stability of the financial system. *A trust account is an account managed by an independent and trusted third party that allows money to be processed on behalf of another person or entity. It is often the banking institution represented by the Bin Sponsor that manages it.

  • An infrastructure: platform that supports the entire system and communicates with the various players. It secures and centralizes exchanges and must be certified by a third party as to its robustness against cybercriminal attacks.

  • A management website or mobile application for end users and program administrators. The so-called "visible" part of the iceberg since it formalizes in the form of screens a user experience that processes information from the entire program (for example: the balance available on a card, past transactions, amounts loaded etc.). Now that the notion of program is clarified and all the stakeholders in the system are known, let's get back to our heads.

Where does the Programme Manager intervene? What is his role in all of this?

By definition, the Program Manager manages the Program. Its role is to design, develop and manage the platform that will support the payment program and its services. Let's take an example. A company specializing in expense report management for SMEs wants to launch a program for its clients that manages professional expenses. To make its program attractive with a fluid and digitized experience, the company decides to provide employee badges that also serve as payment cards. Ideal for centralizing expense reports. The project seems completely feasible. But the company does not have the technical, human and financial resources to develop its own solution. The company does not have the bank approvals to issue cards and would like a program quickly implemented. Going through your traditional bank to create this service would take years. Knowing the ins and outs of such a program and then making contact yourself with all the stakeholders in the creation of a program (Bin Sponsor, Processor, Office ...) is a colossal job and it is not his heart of job. This is where the Program Manager comes in. Calling on a Program Manager means minimizing the number of contacts, minimizing risks, delays, regulatory burden but also costs! The Program Manager is an aggregator who coordinates and controls the different entities involved in providing the solution for the client. He develops the platform so that it is operational for the customer, secure and legally compliant. He is the customer's sole point of contact and the architect of the solution.
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Prepaid cards programme diagram

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What is a Program Manager in the Fintech market? What is a company that does the Programme Management in the financial sector?

10 years ago, new players appeared with the introduction of the new status of electronic money institution (EME) in Europe. The new concept of « Programme Manager » emerged. The new European directive (reinforced by the reform of the single market for payments in euros) authorizes the issuance of electronic money without the need for bank support. Providing payment services then becomes accessible for organizations that are not banks. As a result, companies obtain regulated statuses and can issue means of payment, such as prepaid cards, under certain conditions. This opens up an ocean of possibilities.
===
But before talking about Program Management or Program Management, let's talk about program.
===

Finally, what is a payment program/programme?

Let’s take the simplest example: rechargeable payment cards or prepaid cards which have seen their use explode in Europe. A card programme includes:

  • The issuance of electronic means of payment on the basis of a BIN number (Bank Identification Number: the reference code of the issuing account which can be seen on the first 6 digits of your card code). A BIN Sponsor intervenes here, which is an establishment with the regulated status of issuing electronic money, it may be a bank or any other similar organization.

  • The processing of payments includes operations and transactions between payer / paid / and payment medium: the organization managing this part is called a Processor

  • A payment network or more commonly referred to as a "Card Scheme" is the most well-known part of the system since it concerns global networks such as Visa, Mastercard, CB, Union Pay or American Express. Network members (especially merchants) accept payments within one or more networks.

  • A Bureau: quite simply the manufacturer who encodes and personalizes the means of payment. For example for the card: usually plastic, it is produced according to strict standards, from the chip to the numbers through to the magnetic strip. New Bureau are offering more and more original payment media such as metal or ceramic cards but also wearables such as connected jewelry).

  • A supervisory authority: in France, it is the ACPR (prudential control and resolution authority) which plays the role of regulator. This organization backed by the Banque de France supervises the activity with the aim of protecting users and ensuring the stability of the financial system. *A trust account is an account managed by an independent and trusted third party that allows money to be processed on behalf of another person or entity. It is often the banking institution represented by the Bin Sponsor that manages it.

  • An infrastructure: platform that supports the entire system and communicates with the various players. It secures and centralizes exchanges and must be certified by a third party as to its robustness against cybercriminal attacks.

  • A management website or mobile application for end users and program administrators. The so-called "visible" part of the iceberg since it formalizes in the form of screens a user experience that processes information from the entire program (for example: the balance available on a card, past transactions, amounts loaded etc.). Now that the notion of program is clarified and all the stakeholders in the system are known, let's get back to our heads.

Where does the Programme Manager intervene? What is his role in all of this?

By definition, the Program Manager manages the Program. Its role is to design, develop and manage the platform that will support the payment program and its services. Let's take an example. A company specializing in expense report management for SMEs wants to launch a program for its clients that manages professional expenses. To make its program attractive with a fluid and digitized experience, the company decides to provide employee badges that also serve as payment cards. Ideal for centralizing expense reports. The project seems completely feasible. But the company does not have the technical, human and financial resources to develop its own solution. The company does not have the bank approvals to issue cards and would like a program quickly implemented. Going through your traditional bank to create this service would take years. Knowing the ins and outs of such a program and then making contact yourself with all the stakeholders in the creation of a program (Bin Sponsor, Processor, Office ...) is a colossal job and it is not his heart of job. This is where the Program Manager comes in. Calling on a Program Manager means minimizing the number of contacts, minimizing risks, delays, regulatory burden but also costs! The Program Manager is an aggregator who coordinates and controls the different entities involved in providing the solution for the client. He develops the platform so that it is operational for the customer, secure and legally compliant. He is the customer's sole point of contact and the architect of the solution.
===

Prepaid cards programme diagram

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