Abstract
This report focuses on Account-Level Processing (ALP), alternately known as
Account-Level Management (ALM), which has the potential to revolutionize the
payments landscape by optimizing the value that inherently exists within the
data created by card-based electronic payments, thereby fundamentally changing
the way consumers and merchants transact, as well as the way the general card
payment services industry functions. What Account-Level Processing
encompasses is, at its core, network-level instructions on how to treat
individual bankcard accounts and transactions at each step of the payment
process. What all of this means is that consumers will get to keep their card
number no matter what type of credit account they hold at the card issuer, but
also that issuers and acquirers are no longer constrained by handling card
numbers at the aggregated level.
A very high-level, but fundamental interpretation of the concept would be that
ALP is a decoupling of product definition and transaction data routing, the
two of which have been heretofore inextricably tied. In the old environment,
Bank Identification Numbers (or BINs) and their product code suffixes, the
coded digits that begin all of an issuer' s cards "of a feather," both
identified the card' s product features and defined routing and handling
instructions for all touch-points. They act as coordinates that serve to
navigate transaction data through the appropriate channels and get them where
they need to go. The limitation of defining card products by BIN are
significant, given that issuers must lump cardholders together in a portfolio
that offers no chance for differentiation between them, and it restricts the
issuer to a complex, and expensive process for graduating cardholders when
needed. Since the networks' recent upgrades to systems using 64-bix
microchips transmitting data on broadband cables, the amount of information
that can be "stuffed" into the "transaction envelope" has grown. Coded
intelligence, or data with a duality of meaning, has been expanded on (while
simultaneously being subverted as old codes gradually lose meaning) due to the
flexibility that is afforded by greater differentiation within the transaction
message. Since more robust technology affords capabilities for passing more
data in the data set, the inclusion of non-financial data is facilitated, such
as SKU-level itemization for Level 3 data in B2B transactions or IIAS for
healthcare transactions.
Highlights of the report include:
- 1. Account-Level Processing is positioned to change the entire payments
industry landscape, from the way that issuers obtain, manage, and retain
cardholders, to the way that merchants obtain, manage, and retain customers.
- 2. The bankcard networks, with recent upgrades to their processing
infrastructures, have begun to implement strategies that can theoretically
enhance the value of card payments to all participants in the payment chain.
- 3. Issuers stand to greatly increase interchange revenue as they convert
their non-rewards card portfolios to higher tiered card product platforms.
Acquirers should also anticipate the lift in discount revenues.
- 4. Merchants will also feel a lift at the point of sale, as targeted
rewards engage the most valuable cardholders to increase spend while their
loyalty to the merchant is reinforced.
- 5. Consumers can come to expect greater value from the payment experience
too - value that may have a material economic impact on a national, if not
global scale.
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