Vending Infrastructure: a multi-application payment network for utilities

The sudden proliferation of new payment and pre- payment options has been driven by the never-ending advance of technologies like smartcard, wireless and the Internet, as well as added revenue opportunities at the point of sale, such as bill payment and other prepaid services such as prepaid cellular airtime. This sometimes bewildering cornucopia of offerings, facilitated and evangelised by the card associations, banks, retailers, governments and new entrepreneurial start-ups, requires an intimate understanding of payment and prepayment protocols, platforms, delivery mechanisms, cryptography, financial institutions and, most importantly, a track record of successful implementations.

Any token-based commercial transaction, whether in the virtual or physical world, includes at least four discrete parties – the buyer, the seller, the acquiring bank and the issuing bank. The transaction between these parties follows a chain that we can call the ‘Circle of Commerce’.

Fig 1

Real world application of advanced technology-driven payment solutions has led to the bridging of the gulf between the physical and virtual worlds, as the communication networks have expanded into communities through telephone, radio and GSM wireless channels. Payment points are now found at the local store, the supermarket, petrol station stores and many other convenient places.

PAYMENT NETWORKS MOVE CLOSER

This growth of payment channels has caused the payment networks used by the utilities and the FMCG (fast moving consumer goods) market to move closer together. In many instances, these networks now overlap each other. There are many examples of multiple payment points for different services competing for space on limited counter-tops. This over-capitalised network of point-of-sale (POS) terminals and computers has raised the all-important question of how the multi-application vending network can be implemented and managed more efficiently and cost-effectively.

When planning the establishment or con-solidation of a vending network, the following points should first be considered:

• Will the POS include EFT debit/credit solutions and service-based offerings?
• What mix of transaction value-added services will there be – ie 3rd party bill payment, prepaid cellular and/or prepaid electricity?
• Will there be prepaid dynamic token generation or are there voucher inventories?
• Has there been due consideration of secure key management and distribution services?
• Does the customer service need to include multi-channel delivery platforms including POS, kiosks, the Internet and/or mobile telephone?
• Does the utility need to contract for transaction switching products and services?
• Will there be smartcard and SIM originated payment transactions?
• Will the utility permit the use of an electronic purse product offered by a bank, or will there be a private purse with an associated loyalty scheme?
• Does the environment favour online and offline vending architectures?
• Will there be GSM/IP (GSM Internet Protocol) and private network bearer integration issues?
• Finally, what commercial model does the utility wish to use to finance the vending infrastructure – ie transaction fee based or capital intensive, end-to-end technology based?

A typical network of payment services is shown in the diagram. A utility vending system network is often offline, where transactions are transferred in batches to a central point (shown by the dotted connecting lines). The commercial model for the utility is usually capital expenditure based for financing the vending network.

Online transactions that take place in realtime are transacted on vending terminals that are connected to a central server system (shown by the solid connecting lines). This allows virtually instantaneous transactions to be completed, and the commercial model of the utility can be based on a ‘per transaction fee’ to finance this vending infrastructure.