This case study explores the requirement of Desjardins to harmonise its payment acceptance infrastructure to support the international requirements of members and clients, lower development costs, stimulate the development of innovative payment solutions, and promote a standardised approach to interoperability for all payment acceptance stakeholders globally.
Desjardins Group is the leading cooperative financial group in Canada and the sixth largest in the world, with assets close to $268 billion. Founded in 1901, it has one of the highest capital ratios and credit ratings in the industry. Desjardins works for the economic and social betterment of its members and clients together with the economic and operational development of the wider global financial services industry. In Canada, with the support of close to 48,000 employees and some 4,500 elected officers, Desjardins serves over seven million members and clients by providing a full range of products and services for individuals and businesses through its extensive distribution network, online platforms and subsidiaries across the country.
The group has designed its payments infrastructure to enable merchants to adopt a long-term payment acceptance strategy, minimising charges and focusing on delivering gains in operational efficiency. As a financial institution that prioritises the greater good over the commercial benefit of shareholders, it is in Desjardins’ DNA to support the wider payments ecosystem by enabling open and unmitigated adoption of the technology platforms it develops.
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In this regard, the firm has demonstrated a long history of leadership in payment acceptance innovation. It was the first organisation globally to develop a full ‘end-to-end’ payment data encryption solution, for example, and was also the first to enable an integrated ‘pay-at-the-table’ acceptance solution for restaurants. This utilised an integrated payment solution that enabled payment acceptance data from the POS terminals to be fed directly into the centralised cash register management system, enabling a new level of payments insight and data alignment for the sector.
To serve and protect the interests of its merchant members and clients, Desjardins sought a way to simplify its exchange of card payment acceptance data, both domestically in Canada and beyond in international markets. To support their international expansion and their ability to trade with foreign partners, Desjardins’ members and clients needed a payments infrastructure that would facilitate the fast and simple acceptance of card payments. Crucially, Desjardins sought to accomplish this without setting up a tailored payment network infrastructure for each trading country and without having to adapt its system every time a card scheme requests a change.
Driven by the proliferation of new regulations and payment types and the global growth in e-commerce, Desjardins also sought a way to ‘dematerialise the payment acceptance terminal at the point of sale (POS)’. Card payments are increasingly being performed remotely or via innovative mobile payment solutions. By establishing a standardised way of exchanging all forms of card payment data, consistency, interoperability and cost efficiencies could all be realised for Desjardins’ members.
As a payment service provider (PSP), Desjardins also identified that it was spending too much time and money managing the integration of new payment solutions with high maintenance legacy infrastructures. Desjardins recognised this as an industry-wide problem, one that was causing integration headaches worldwide and, as a result, significantly hampering innovation.
In an effort to address these challenges, Desjardins decided to implement a model that had already proven hugely successful in the development of the internet: to develop and deploy messaging protocols that would standardise how its payment acceptance information was exchanged globally.
To realise this ambition Desjardins developed a proprietary payment application designed to support the full range of card payment formats, including EMV* chip and PIN, EMV contactless card payments and mobile NFC payments. The application is sufficiently flexible for it to be integrated with the back-end payments infrastructures of acquirers, PSPs and merchants. This capability enabled Desjardins to assume the role of each of these stakeholders and deliver full end-to-end payment acceptance services to its members.
Conventionally, to be able to operate in multiple countries, Desjardins (and its merchant members and clients) would need to negotiate the variance in payment messaging protocols in each country they operate in, together with country-specific data security and privacy requirements.
Basing the payment application on international standards and messaging protocols was a prerequisite for its success.
In 2013, Desjardins became a member of industry association nexo standards. nexo standards develops messaging protocols and specifications, which adhere to ISO 20022 standards and enable fast, interoperable and borderless payment acceptance by standardising the exchange of payment acceptance data between merchants, acquirers, PSPs and other payment stakeholders.
When developing the payment application, Desjardins has adhered to nexo FAST specifications. These specifications are based on EMV chip and PIN technology and provide an unambiguous description of how a payment application should be designed to enable global interoperability and to comply with the SEPA Cards Framework of the European Payments Council.
The nexo FAST specifications have enabled Desjardins to develop a universally interoperable application, mitigating the need to redevelop it according to the specific needs of each domestic payment acceptance infrastructure.
The nexo messaging protocols supported by the application follow the same principles. To ensure the application can seamlessly communicate with terminal management systems, acquirers, and merchants’ payment systems globally, it was built to support the nexo acquirer protocol, the nexo retailer protocol, and the nexo TMS protocol.
- The nexo acquirer protocol allows the use of real time or batch submissions and supports direct connections from merchant to acquirer or via a payment service provider intermediary.
- The nexo retailer protocoldefines a set of interfaces between a card payment application and a retail point-of-sale system. It offers new innovative features such as a clear separation between sale and payment, the provision of a complete series of payment and loyalty services as well as a common approach for all types of architectures and environments.
- The nexo TMS protocol provides an interface between a terminal management system (TMS) and a payment system. It supports the functions for configuring, managing and maintaining the application’s parameters, as well as the software and the security keys of a payment system.
There are numerous advantages to this development. Desjardins can now easily parameterise the payment application for each country so the terminal can communicate with cardholders in their native language, while remaining internationally interoperable. Desjardins has already deployed the same terminal and payment application in Canada, France and Portugal, supporting French, English and Portuguese languages, together with the Canadian dollar and Euro currencies.
As Desjardins’ cooperative ethos aims to serve the international payments ecosystem as well as its own members and clients, Desjardins made its payment application available to a wider market, enabling other financial institutions and merchants to realise the same benefits that Desjardins has to date.
Desjardins, together with its members and clients, has experienced a variety of benefits following the adoption of nexo’s standards:
Lower implementation costs
- As Desjardins’ acceptance messaging infrastructure is now fully interoperable and harmonised globally, the development, roll out and management of new payment solutions can now be done quickly and cost effectively, with the guarantee that all transactions are secure end-to-end. This has reduced implementation costs by as much as 20%.
- Desjardins’ merchant members and clients that support nexo standards are now free to expand their operations internationally, unconstrained by their card payment acceptance infrastructure. Desjardins can now deploy enhancements to its payments applications six to eight weeks faster than previous deployment timeframes.
Global partnerships and fuel for innovation
- A cross-border payments infrastructure that is globally interoperable, future-proofed and secure, empowers merchants to select best-of-breed suppliers on a global basis. This encourages collaboration, mitigates vendor lock-in, facilitates innovation and increases the merchant’s powers of negotiation. Vendor costs are therefore significantly reduced by tapping into a potentially global base of vendors and suppliers, enabling greater choice and competition.
Added value for members and the embodiment of Desjardins’ cooperative ethos
- Desjardins’ members and clients benefit from first-mover access to the new global payment acceptance infrastructure. Moreover, the international payments ecosystem also benefits from Desjardins’ open ethos; its vision of payment solutions is based on the principles of cooperation and partnership, and emphasizes human values in business practices.
- In keeping with Desjardins’ collaborative ethos, supporting nexo’s specifications and messaging protocols gives Desjardins and its members and clients the flexibility to assume different roles within the acceptance transaction chain, according to their prevailing strategies. Desjardins is empowered to deliver the whole payment acceptance service on behalf of its merchant customers (from POI to acquirer and back again). Similarly, should they wish to do so, merchants are empowered to perform the acquirer’s role (i.e., managing the process of exchanging payment data with the acquirer).
Desjardins continues its efforts to develop payment solutions for the benefit of its members and clients and the greater good of the industry. The financial institution is currently working with France-based bank, CréditMutuel, to develop Monetico, a common payments platform. Monetico is a jointly owned payment solutions brand, which is registered in over 60 countries.
Key to Monetico’s success has been its utilization of the open and international payment acceptance specifications and messaging protocols of nexo standards. By using nexo to standardise its exchange of payment acceptance data, Monetico has been able to integrate the technical complexity of domestic and international acceptance systems. Thanks to nexo, Monetico can interoperate on a standardised global level, in adherence to ISO 20022.