Common standards are seen as a major step forward in achieving a unified market for payments

nexo (yes, lowercase n) is an international non-profit, membership-based association that is headquartered in Brussels. nexo was established in October 2014 to develop, promote and maintain open and universal next-generation card payment standards and specifications. nexo participants have a rich heritage in standards development work designed to resolve the current interoperability issues that exist today between the various European card payments markets.

Common standards are seen as a major step forward in achieving a unified market for payments that will bring benefits to all payments industry stakeholders and, in particular, to multinational retail merchants. nexo replaces the former EPASOrg organisation which has been working on this same objective since its formation in 2009. nexo is a merger of EPASOrg and the standards development work undertaken by the OSCar Consortium, on the integration of SEPA Fast with EPAS protocols, and the CIR (EMV Common Implementation Recommendations) technical working group that harmonised EMV specifications for use in a payment terminal.

nexo (based on ISO 20022 standards) have defined the main application protocols for acquirers, the terminal management systems (TMS), and the retailer’s protocols related to the point of interaction (cash register and the payment module) and ATMs.

The major European countries have developed their own card payment standards. These standards define, maintain and ensure compliance. Many of these are derivatives of the ISO 8583 norm, which has been widely used by banks and retailers for card transactions for almost 30 years. But, due to the bit map format, age and the fact that discretionary data fields have been constantly contaminated to support new card payments functionality, interoperability does not exist between countries, systems and suppliers. Also, many of these implementations are proprietary and not openly available. To further complicate matters, some are based on the 1987 version of the ISO 8583 standard with others on the 1993 version (the 2003 version being rarely implemented).

The endorsement of ISO20022 for SEPA Credit Transfer and Direct Debit transactions is seen as further positive approval on a European level. The formal governance structure, design guidelines, review processes and requirement for on-going maintenance of ISO20022 standards are impressive. A key EDC finding by working with merchants is that ISO20022 standards are the most appropriate foundation for the creation of next-generation European payment systems.

nexo has developed a series of standards that have been endorsed by ISO 20022. Many of these are of direct relevance to retailers, including the EPAS Acquirer and Terminal Management System (TMS) standards. In addition, specifications have been agreed for an EPAS Retailer standard, which defines how an electronic POS system interacts with a payment application.

The nexo standards support:

• Contact/contactless EMV (and non-EMV) chip cards
• Magnetic stripe cards
• Manual transaction key entry
• Attended and unattended acceptance environments
• Multiple forms of customer verification methods (CVM) - online PIN, offline PIN, signature and no CVM
• Single or dual message capture modes
• Online capture/batch capture by message or file
• Tokenisation
• Instant payments

nexo is the only organisation currently delivering open international standards for next generation card payment processing. Options available to retailers are to persist with yesterday’s legacy systems and their inherent weaknesses, to adopt a more modern but still proprietary/country standard, or to move to the nexo ISO 20022 standards. Based on the work that EDC has conducted across Europe, EDC believes that the majority of multinational / pan-European retailers will decide based on when the time is right to adopt nexo standards, rather than on whether to do so.

Faster time to market and deployment was cited as the single most important reason for introducing and rolling out new payments functionality. Financial savings, including cost reductions from purchasing devices, software solutions and bank processing charges, was also ranked highly. Currently, most international retailers work with multiple acquirers who often dictate how transactions are to be delivered to them – acquirer independence was another important factor for the retailers to migrate to nexo standards.

About Mark Beresford

Mark Beresford has over 20 years consulting experience in the financial services industry and payments sector. At Edgar, Dunn & Company (EDC), he is a Director based in the London office where he supports a variety of payment providers and multichannel retailers based across Europe. Mark’s areas of expertise include Merchant Acquiring, gift cards, prepaid, loyalty, mobile payments and the impact of the various European regulations such as SEPA, e-money Directive (EMD) and the Payment Services Directive (PSD).

About Edgar Dunn & Company:

Edgar, Dunn & Company is an independent global financial services and payments consultancy. Founded in 1978, the firm is widely recognised as the worlds preeminent expert in the payments industry. EDC assists organisations in developing and implementing strategies and capitalising on the opportunities that change provides within financial services.