BIN sponsorship: How to get it right
BIN, or Banking Identification Number sponsorship is an easy shortcut for businesses who wish to get their proposition to market overseas as well as domestically. It allows companies to process payments through an intermediary that is a direct scheme member.
But why wouldn’t a company choose to go direct?
Becoming a member of the direct scheme is a very time-consuming, complex and often costly process. After registration, companies also have to adhere to regular reporting and regulatory responses.
So, BIN sponsorship is a great solution. But, you must make sure you get it right.
Explaining the product
Outlining the obstacles and objectives is vital because BIN sponsorship may necessitate rigorous project management. While issuers will adhere to a service level agreement and many deadlines for completion are scheme-driven, there are times when prospective customers are promised service benefits and implementation times that are practically unrealistic. That might cause promises to be broken and cause market disruption.
We’ve spoken to Noel Smith, Business Development Director at Transact Payments to find out more.
“There’s a fine line between promising ambitious and excellent customer service and bending the truth of the situation,” said Smith. “I’m open and transparent when it comes to telling a business if they can or can’t do something. At Transact Payments, we have always taken this approach to prevent clients being left disappointed when timeframes are not met”
Know the jurisdiction
Companies from outside wishing to expand into EU markets may use the same approach that has worked well for them in other international markets without giving it the proper thought.
“Some international companies don’t appreciate that each member country has a different set of rules and regulations,” says Smith, “and that a blanket approach to their product which may have worked elsewhere, simply won’t cut it in Europe.”
And it’s not just scheme rules that firms need to consider: “Scheme rules generally do not change,” says Smith, “but local laws do, and they can have an impact on a client or product.”
External political circumstances can potentially unexpectedly affect BIN sponsorship in terms of product viability. Companies have modified their business models and depended too long on the money from the interchange rate. The EU’s decision to lower interchange rates for consumer goods across the board had a significant impact.
“Some companies’ business models relied on interchange, and their profit margins were severely affected with the interchange reduction,” Smith points out.
“The US for example, has more preferential interchange rates and some business models still heavily rely on this income. A lot of US companies I have spoken to have decided against European expansions due to the low interchange rates.
Rule updates
Similar to most laws, changes and additions to the scheme rules frequently mean the difference between compliance and non-compliance.
Increases in scheme upfront and continuing fees, which are already higher than in other international jurisdictions, can have an equally negative effect on company, particularly if such costs are connected to particular sorts of transactions.
“Say they increase costs on cross border transactions, that would affect travel products considerably, as those types of transactions are always non-domestic,” says Smith.
Schemes can also modify their regulations in response to market conditions, particularly now that the crypto product has emerged.
Challenge brings opportunities
Given the size of the EU market and the need to provide more user-friendly, cost-transparent, effective solutions to customer segments, there are a ton of opportunities. These segments include the requirement to provide services to the underbanked consumer and business sectors, both of which receive meager or unsatisfactory take-it-or-leave-it solutions from present incumbents or, in some cases, are simply uninterested in receiving them. TPL only focuses on payments, which enables the company to offer flexibility and support to partners in the delivery of creative solutions with an emphasis on adhering to strict regulatory and scheme standards while delivering solutions that are enticing to customers.
