Page 166 - The Digital Financial Services (DFS) Ecosystem

ITU-T Focus Group Digital Financial Services
Ecosystem

2 The Payments Acceptance Value Chain

There are a number of different terms for those entities that enable merchants to accept electronic transactions.
In the card-centric world, these entities are commonly known as "acquirers", "merchant service providers",
and other terms. In the context of digital wallets, merchant service providers could be MNOs, banks, or other
non-bank financial services providers. These entities, and perhaps others in a typical DFS ecosystem, perform
a variety of functions, many or all of which are required to enable merchants to accept transactions. It is
important to note that some functions, such as underwriting, may be optional, depending on the payment
system design and rules.

There are no hard and fast rules about what types of entities are better positioned to perform the various
merchant service functions, although the goal would be to have a robust, competitive merchant services
marketplace in order to drive down costs and facilitate innovation. Having said that, there are a number of
guidelines that should be considered in evaluating the merchant services value chain.

Figure 1 – Merchant Services/Payment Acceptor Value Chain

2.1.1 Merchant Acquisition

This function focuses on the sales and marketing processes by which merchants are solicited and signed up
to accept payments in one or more payment systems. In many parts of the world, merchants will sign up to
accept transactions from a number of often competing payment systems, all through a single provider. In
other cases, a provider will only sign up and enable the merchant in one, or just a subset of available payment
schemes in that market.

Given that assumption, and also assuming that it would not be cost-prohibitive and operationally acceptable to
do so, merchants would like to take all popular forms / brands of digital payments. Accordingly, it would make
the most economic sense that the sales forces calling on merchants are able to enable multiple, competitive
products. Those sales forces could be those of banks, MNOs, and other entities. As noted, merchants should
not be required to sign exclusivity agreements for any given payment scheme.

2.1.2 Merchant Underwriting

This can be an optional function, depending on the design and rules of the system. Having said that, merchants
can affect the overall quality and integrity of the payment scheme, and thus must be vetted in some fashion.
The depth and breadth of that vetting process can vary widely depending on the particular characteristics

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