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Case Study: Credit Cards Merchant Acceptance

A Fortune 50 bank re-engineered its charge processing system, thereby reducing over $500 million in costs and increasing revenues by over $300 million.

Merchant Acceptance is an integral part of the Credit Card Business in India for all large banks. With increasing competition in this field, the merchants had become more demanding with respect to turnaround times for payment and accuracy in charge processing The existing Merchant Charge Processing system was a Batch processing system with a lot of manual intervention required at various stages. Turnaround times for processing of charges ranged from 1-3 days depending on the number of interventions required. Chargebacks were also high due to payments being made to Merchants without validations to keep up with competition.

The Online Charge Processing System, also called Merchant Express, was developed to move from batch to on-line processing of charges without compromising on the charge validation process. The system automated the manual processes of the earlier system and with the ability to process on-line reduced the turnaround time to a few minutes. At the same time it ensured that all charges were validated before payments and hence reduced charge-back volumes to only customer disputes. Apart from increased customer satisfaction with turnaround times and processing accuracy, the system resulted in annualized savings of 493$M from reduced Merchant Overdraft and funding cost saves, reduction in incoming chargebacks from 199$M to 22$M, and increase in revenue of 332$M. The system was also nominated for Global Quality Recognition Award and recognized as the highest revenue generating process improvement project in this large Fortune 50 bank worldwide for 1999.

Technology Used