This is episode three in the Transit Payment series of articles. In the first article I ran through 10 key questions and in the second I focused on the challenges associated with processing tPAN and debt recovery transactions. In this third installment I focus on aggregated transactions and how it impacts the parties involved.
An aggregated transaction is where a single transaction is generated from multiple tap records. Each tap (or tap pairing in a tap on / off scenario) represents a single journey. When a customer first taps on with their payment card, a deferred authorisation will be generated. On successful authorisation, the merchant will have chargeback protection up to a certain threshold amount (eg, $20) and for a number of days from the time of the initial authorisation (eg, 10 days).
The Merchant aggregates each journey and prior to the threshold limit being reached for amount or settlement period, will send a settlement message to the Acquirer. The cycle is repeated when the payment card is subsequently re-presented following the last settlement.
The business rules will generally be centred on the following considerations:
• The chargeback protection amount and elapsed settlement period.
• The Scheme may enforce different business rules depending upon whether the payment card is a Credit, Debit or Prepaid product.
• Some schemes may insist on an Authorisation request for a minimal amount and others may insist on a validation request only.
• Dual Message System (DMS) will need to be supported as the aggregated transaction amount will not be known until after the journey(s) have been taken.
It will take all parties some getting used to. Take for example the following scenarios:
- The infrequent use customer that queries a transit charge from weeks ago.
- The frequent use customer that queries how the fare was calculated for multi journey, multi day travel.
- The merchant transit provider may need to provide information to customers on how their fare was calculated.
- There may be a need for changes to Issuer systems to handle aggregated transactions and settlements.
- There may be changes required for acquirer systems.
Although aggregated transactions may introduce some complexities, there are significant benefits including reducing merchant fees and the volume of low value authorisation transactions. Education is required for customers so that the number of calls to the Merchant and Issuer call centres are minimised.
Aggregated transaction processing has already been introduced successfully in some transit jurisdictions. Players should look to prepare their systems and processes to embrace the impending opportunities triggered from opening transit payments across mass transit hubs.