Enabling Merchant Payments Acceptance in the Digital Financial Ecosystems

May 1, 2016

Enabling merchant acceptance of digital payments is increasingly seen as a key element of the overall development of the DFS ecosystem. Broad merchant acceptance will help achieve digital liquidity by enabling poor consumers to spend a meaningful amount of the money they receive or deposit into digital wallets, eliminating or reducing the need to incur cash-out costs.

Countries throughout the developing world, however, are finding that there are considerable challenges in attaining merchant acceptance of digital payments. This Report provides an analysis of some of the challenges, and provides insight into some of the solutions in merchant payments. The first section of the report defines and describes the merchant payments value chain. This section also provides a definitive categorization of merchant segments, and recognizes that the needs of each merchant segment are quite distinct. Various economic models for the provision of merchant acceptance are defined and discussed, and policy considerations for regulators are noted. The second section of the report looks at various business models and structures used by providers of merchant services, and includes an extensive list of those services that are currently in the market.

The first part of this Technical Report was written by Allen Weinberg, as well as the following reviewers and contributors: Dan Salazar, Charles Niehaus, Ashwini Sathnur, Carol Coye Benson The second part of this Technical Report was written by Dan Salazar, Rebecca Aguilar and Joel Lasko, MasterCard International.

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