5 Reasons you need a gateway for POS payments and 5 reasons you dont_ACCEO

1. 5 Reasons You Need a Gateway for POS
Payments and 5 Reasons You Don’t
Anand Goel, CEO – Optimized Payments

3. • Understand a framework for evaluating gateways and non-
gateways
• Understand features and benefits provided by gateways and
non-gateways
• Understand the economics of gateways and non-gateways
Actionable Takeaways from this session:

4. • About Optimized Payments
• Defining Processors
• Defining Gateways and Non-Gateways
• 5 Reasons You Need a Gateway
• 5 Reasons. You Don’t Need a Gateway
• Summary
• Q&A
Outline

5. • Niche consulting firm with 12 years of card payments
experience
• Helped over 50 Fortune 1000 firms evaluate and implement
gateways and other components of payments infrastructure
• Helped our clients save over $220 million in card related
fees
• Independent and trusted payments partner
About Optimized Payments

6. • Connects a merchant to the card networks – Visa, MasterCard,
Discover and American Express for authorization and/or settlement.
Also connect to gateways, if used.
Defining Processors (Merchant Acquirers)
• Provide other
products;
including
gateway,
security, gift
cards, fraud
• Provide funding,
reporting,
service

7. • A payment gateway is a service provider that connects a merchant’s
POS/ERP/shopping card to the payment processors for authorization
and settlement
• Many gateways will connect to multiple processors, while offering
functionality to simplify connectivity and enhance security
• In retail channel, gateways are also referred to as switches, semi-
integrated solutions and ‘non-gateways’*
• There are hundreds of gateways in the marketplace. The quality,
services and benefits of each may vary significantly
Defining Gateways and Non-Gateways
*There are architecture and on-prem vs. cloud deployment differences between traditional gateways, switches, semi-integrated solutio
and ’non-gateways’.

8. 1. Best of Breed Solution (features not offered by acquirer)
2. Simplified Architecture (connection to multiple processors)
3. Security & Tokenization (“omni-tokens”)
4. Business Flexibility (ability to change processors, test auth rates
between processors)
5. Economics Favoring Mid-Market Merchants
5 Reasons You Need a Gateway

9. Homegrown Solutions
•Many of the largest
enterprises build direct
connectivity to their
payment processors
and payment networks.
•This requires a high
level of sophistication
and IT resources but
allows for in-house
technology and
support.
Switches
•Payment connectors
that pass transactions
with limited
functionality.
•Benefits of a switch
would be for speed
•This appeals to the
largest retailers and
grocers.
Middleware/Non-
Gateways
•Some payment
providers support all
the functionality of a
gateway but provide
on-premise integration
into the POS and direct
to processor
connectivity.
•Benefits of these
solutions are the
reduction in “hops” in
the transaction.
•Great for large, high
volume retail and
restaurants.
Alternatives to Gateways
While many consider any connection between two points (merchant and
processor) a gateway, there are alternative options to traditional gateways:

10. 1. Economics Favoring Large Merchants
2. Increased Flexibility (combination of building components
inhouse, selecting some components from processors)
3. Want End to End vs. Point to Point Encryption (acquirer tokens)
4. Reduce Hops (on prem vs. cloud gateway solution)
5. Estate Management Solution
5 Reasons You Don’t Need a Gateway

11. • Scenario 1: Retailer with 10,000,000 annual transactions
• Vendor A = $0.04 per transaction ($400,000/YR)
• Vendor B = flat monthly fee totaling $300,000 annually
• Vendor B provides $100,000 in savings, and does not increase as processing volumes
grow
• Scenario 2: Retailer with 1,000,000 annual transactions
• Vendor A = $0.06 per transaction ($60,000/YR)
• Vendor B = flat monthly fee totaling $180,000 annually
• Vendor A provides $120,000 in savings, much lower than the flat monthly fee
• Make sure you are accounting for all types of fees and review your offers carefully
• Additional implementation, encryption/tokenization, per location, monthly support, P2PE,
routing, account updater, authorization optimization, fraud management, etc. fees could
add up quickly
Business Model Comparisons

12. Evaluating Gateways Based on Channel & Size
Merchant
Size
Annual
Txns
Channel
Needs
Recommendation Perspective
Small 100K CP Square Register, First Data
Clover, PayPal Here
Gateway built into POS
Small 100K CNP Paypal, Stripe, Braintree No separate fees for gateway services, bundled
with core processing
Small 100K CP + CNP Square, PayPal No separate fees for gateway services, bundled
with core processing
Medium 1M CP Freedompay, Cayan Genius Strong competitive solutions with origins in retail
Medium 1M CNP CardConnect, Acquirer
Gateways
Acquirer gateways offer competitive pricing
Medium 1M CP + CNP Freedompay, Cayan Genius Offer competitive omni-channel solutions
Large 10M CP Tender Retail, ACI PAY.ON Competitive pricing, charge monthly fees instead of
per transaction fees
Large 10M CNP Cybersource, CardConnect
Acquirer Gateways
Established solutions
Large 10M CP + CNP Tender Retail, ACI PAY.ON,
Aurus, Freedompay
Strong omni-channel solutions while being
processor agnostic

13. • Identify your needs and budget for a gateway or non-gateway
• Conduct a gateway RFP if choice isn’t clear
• Utilize a consulting firm if you need help
Summary
Anand Goel
anand@optimizedpmts.com
404-542-8520