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Where money goes when your credit card is swiped

Zooz’s payment platform makes it easier for merchants to lower transaction their costs

Illustrative photo of credit cards. (Avatar)
Illustrative photo of credit cards. (Avatar)

What happens when customers swipe their credit cards at a cash register, or input their credit card data on a website to make an online purchase? To the buyers, it doesn’t make much of a difference; all they know is that their bank is going to send them a bill at the end of the month.

But the fate of that payment makes a great difference to the recipient of the funds. The money is sent on to an acquirer, a bank or financial institution that processes payments, and then deposited in the account of the store or website – less fees, of course.

It’s those fees that are a great matter of contention between merchants and acquirers. Different institutions have different fees, with significant differences in the amount charged for varying types of transactions. Merchants generally don’t have an opportunity to choose the best institution for the deal, unless, that is, they use the Israeli-developed Zooz platform, according to the company’s CEO Oren Levy.

The Hebrew word for “move,” Zooz is dedicated to moving money around the world in as efficient and inexpensive manner as possible.

“We don’t acquire payments,” said Levy. “We’re not a bank and don’t wish to be one. What we do is check out all the rates for acquiring banks everywhere in the world and search out the best deal for each transaction. The more choice a merchant has in working with an acquirer, the better the deal they can make.”

It turns out that customers who pay for products and services with their credit cards are not, as many believe, forwarding a payment request to the bank that issued their credit card.

Visa, MasterCard, American Express and all the other credit card companies work with a large network of banks, and they distribute payments for transactions around the network based on their own (private) criteria. Merchants can make choices on which banks to work with, how to route a payment, which currency to pay in, etc.

Oren Levy (Photo credit: Courtesy)
Oren Levy (Photo credit: Courtesy)

All these factors can work to make payment acquisition more expensive – or cheaper, and Zooz uses a big data solution to gather information on what banks are charging for their acquisition services.

“Sometimes acquirers run ‘specials’ to attract business, and sometimes it’s cheaper to pay via acquirers in foreign countries because of exchange rate issues, to name just two factors,” said Levy. “There is no way a merchant is going to be able to navigate the jungle of data that will get them the best deal, and that’s what we’re here for.”

A good example of how Zooz helps retailers involves a UK site that had a lot of Chinese customers. The transactions were being processed by British banks, which were suspicious of the Chinese credit card numbers the merchant was sending them, so many of the requests for payment were denied.

“We worked with the merchant to reroute the acquisition requests to Chinese banks, and the credit card decline problem was solved,” said Levy. “If you want to sell internationally today, you have to have a lot of flexibility, and this is what we provide merchants with.”

The tech developed by Zooz – the only company in the world doing this kind of work with the major international banks and credit card companies – has become popular, and the company has found itself on a hiring spree, picking up over 100 new workers just this year. The company also recently picked up a $12 million round of investment led by Blumberg Capital.

“There is clearly a need for an advanced payment technology that can help businesses stay ahead of their competition through optimization and technology differentiation, and that is where Zooz excels,” said Alon Lifshitz, Partner at Blumberg Capital, who will be joining Zooz as a board member. “We have been very impressed by their innovations and rapid growth in the global payments market.”

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