Nuvei Looks to Boost Card Authorizations for North American Merchants

With merchants growing more heated in their opposition to card-acceptance costs, processors are looking for strategies that could help sellers gain from improvements in card authorizations. An example emerged early Thursday with news from the big Canadian processor Nuvei Corp. that it has introduced a pair of technologies it says could boost card-authorization rates for North American merchants by as much as 3.5 percentage points.

The two services, PINless debit and least-cost routing, “bypass traditional card rails in favor of lower-cost debit networks,” says Nuvei, which is making the services available now in the U.S market. “These enhancements give merchants access to debit networks that can deliver both higher approval rates and lower processing costs,” said Philip Fayer, Nuvei’s chairman and chief executive, in a statement.

The company, which deploys what it calls a “smart routing engine” that depends on artificial intelligence and machine learning, says it looks to route transactions “through the best-performing banks or card network.” For debit cards, the system seeks to send transactions through what the company calls “lower-cost” networks, though resort to Visa and Mastercard is available if needed. Debit cards now account for more than 53% of online card volume in North America, Nuvei says.

Regulation in the U.S. market in recent years has aimed at enhancing merchant choice in network selection, with the aim of introducing  competition that can reduce costs. One such regulation, the Durbin Amendment, which applies to debit cards, became law in 2010. Similar legislation for credit cards, the Credit Card Competition Act, is still under consideration in Congress and would require that processors offer merchants a choice of networks, though at least one of the choices can’t be Mastercard or Visa, the dominant systems.

Debit networks have been seen by some experts as entities that could play a larger role in handling credit card transactions, though network officials typically avoid comment on the subject.

Experts also point to companies not often seen as direct competitors to Visa and Mastercard as alternatives that could offer enough competition to reduce merchant costs. “What’s coming, instead of Visa debit, how about Venmo or RTP serving just fine but cheaper?” suggests Cliff Gray, principal at the payments advisory Gray Consulting. “They shouldn’t be ruled out as other, lower-cost routes.” Venmo is a peer-to-peer payments network owned by PayPal. RTP, or the Real Time Payments network, is part of The Clearing House Payments Co., a system owned by some of the nation’s largest banks.

While most proposals depend on network competition to cut transaction costs, merchant savings from Nuvei’s initiative is difficult to project, experts say.