Building the National Payments Ecosystem in Bahrain

Bahrain aims to become a cashless society by 2030 and is fast emerging as a key payment innovation hub in the Gulf Cooperation Councili region. Established in November 1997, Bahrain’s National Electronic Network for Financial Transactions (BENEFIT) operates the county’s POS and ATM switch. Committed to advancing the Kingdom’s digital vision, the company has made continual investments in building core infrastructure to advance the adoption of digital payments. In 2020, BENEFIT selected FSS’ white-labeled E-commerce Payment Gateway to offer a cost-efficient, central payment processing capability to member banks to accelerate the growth of digital commerce in the country.

Bahrain is rapidly moving toward a cashless society, as more people become digitally savvy and confident about using digital payment systems. E-commerce and m-commerce continues to grow and diversify its impact across the country. Between 2015 and 2020, Bahrain’s payment revenues grew by 23% to reach US$256 million. Furthermore, industry reports predict that the Kingdom will record sustained growth over the next decade. A recent report by the Boston Consulting Group states that Bahrain’s payment revenues will nearly double to US$485 million by 2030, while the number of transactions will increase by 128%, from approximately US$126 million to US$228 million.

Bahrain’s National Electronic Network for financial transactions (BENEFIT) has been at the center of this transformation. Established in November 1997 by 13 commercial banks, BENEFIT operates the National ATM and the Point-of-Sale switch and has laid the foundation for digital payments in the country. Through its network, BENEFIT provides electronic payment services to member institutions to drive digital payments growth in an efficient, inclusive, and sustainable way.

To further the growth of Bahrain’s digital economy, BENEFIT has extended its initial vision beyond ATM and card services to include new age payment products. A key strategic objective is to capitalize on growing internet and mobile usage in the country to support businesses, particularly small and medium enterprises, to establish a digital presence, gain access to new markets and accelerate the development of the e-commerce sector.

In line with its vision, BENEFIT Bahrain wanted to establish an on-soil payment processing infrastructure to encourage consumers to shop online and to strengthen commercial links within the economy.

BENEFIT needed a reliable and scalable technology foundation capable of meeting the processing needs of the market in an agile, flexible, and cost-effective manner. Debit cards are the most widely used payment instrument in Bahrain, accounting for 70% of total transactions in the country. Specifically, to encourage consumers to shop online, the customer was looking to:

Deliver scalable, high-performance payment services

As the central payment processing infrastructure for e-commerce transactions for all member banks in the country, the solution needed to support constant growth in payment throughput without any detrimental impact on transaction latency and performance. Additionally, the system needed to be flexible to meet evolving demand for added value service capabilities from its large merchant base.

Enhance infrastructure accessibility

Micro small and medium enterprises are an important pillar of the country’s economy and contribute an approximate 30% to Bahrain’s GDP. BENEFIT is committed to bridge the digital gap between large enterprises and small businesses by offering convenient, easy to use payment acceptance tools to small merchants.

Safeguard online transactions

To win confidence of acquiring institutions and their consumers and merchants when making and accepting payment for everyday purchases, the central infrastructure needed to support counter-fraud safeguards that guarantee a secure and seamless transacting experience.

Facilitate rapid market expansion via affordable services

Through the central infrastructure enable acquiring banks gain access to the latest solutions and technology with zero investment in Capex, de-risking growth and freeing them to focus on rapid merchant expansion. For merchants a national payment gateway potentially rationalizes the cost of processing transaction via optimal routing of transactions between participant institutions.

To meet these objectives, BENEFIT carried out a major upgrade of its E-commerce Payment Gateway platform in 2020. The company partnered with FSS for a state of art e-commerce solution that would help banks acquire debit card transactions and create efficient business models to optimize value chains.

BENEFIT Bahrain selected FSS white-labeled E-commerce Payment Gateway to modernize its national payments infrastructure. The choice was driven by FSS’ three decades of global experience in processing e-commerce payments combined with extensive experience in setting up national payment infrastructure for central banks and payment consortiums in the GCC region.

Through the partnership, FSS brings its globally trusted Payment Gateway to process domestic debit card transactions. A multi-tenanted, multi-institutional set-up, the Gateway interfaces with acquirer banks to accept transactions and the BENEFIT Switch for routing to issuer banks for payment authorization. Logical data segregation guarantees privacy of customer data.

The BENEFIT Payment Gateway solution incorporates rich functionality to offer superior digital payments experience to acquires and merchants. This includes:

• Accelerated speed-to-market for merchants by offering flexible integration modes – REST APIs, hosted payment acceptance page, shopping carts.
• Off-the-shelf, low-cost digital payment acceptance tools for small merchants including QR codes, Link Payments, Pay Buttons.
• Comprehensive risk controls – transaction controls at per merchant and terminal level, and tokenization to safeguard sensitive card data.
• Advanced risk-based authentications tools compliant with EMVCO 2.1.0 guidelines to 
  increase the volume of ‘genuine’ transactions and to reduce loss from fraud.
• Automatic transaction retries for declined transactions boosting overall transaction success rates and volumes
• Complete insights into aggregate and per merchant transaction trends to uncover new growth opportunities 

With the national rollout by BENEFIT, FSS Payment Gateway is helping to transform payments in Bahrain. BENEFIT is now a household name familiar to customers all over the country and enjoys a position of trust as an online payment gateway. By bringing together BENEFIT’s deep local expertise, and FSS extensive global footprint and superior technology, the entire ecosystem benefits in multiple ways.

Growth in Transaction

The latest available data from BENEFIT indicates online transactions have recorded significant growth. The pandemic further accelerated this trend. Consumers forced to work and spend most of their free time at home reframed their spending habits, resulting in the emergence of the contactless ‘at-home’ payments economy. Post-deployment, BENEFIT’s earnings from fee revenue have recorded 2X growth.

According to the Central Bank of Bahrain, merchant fees levied by local acquirers on debit card transactions is capped at 0.8%. The fee is distributed between the transacting entities as follows:

• 0.35% to the acquirer,
• 0.25% to the issuer, and
• 0.2% to BENEFIT

Rationalizes Costs for Acquirers

The Payments-as-a-Service model offered by BENEFIT enables acquirers to adopt an asset-light model for payment processing, eliminating Capex as well as OPEX associated with functional and technology upgrades, regulatory compliance, security certification.

Deliver Secure, Customer-Centric Experiences

BENEFIT Payment Gateway introduced several innovations in the market including Universal Faster Checkout to improve transaction security and convenience and deliver an optimized checkout experience. Online shoppers can store their card details on file such as card number and expiry date. The Payment Gateway maps customers’ card details to the mobile number and stores the information in an encrypted format.

For future transactions at any affiliate online store, the Payment Gateway displays saved card details, requiring customers to enter only their PIN to complete the transaction. This eliminates the need to enter card number, expiry date, card holder name, incentivizing consumers to use their cards, with complete peace of mind that their transactions are safe and secure.

Additionally, member financial institution and merchants can support innovative customer-centric journeys. This includes

• Link-based payments – Send payment link to customers to redirect to the hosted payment page.
• Split payments – Enterprise merchants can make a single payment to multiple suppliers. For example, a single payment could be made to a travel house which in turn could be segmented among multiple suppliers. As an example -- airline, insurance companies
• Pay online in-store via QR codes,
• Pay Now buttons that can be inserted on merchant’s social media sites enabling them to capture more orders

Currently, the partnership is focused on processing and managing debit card transactions. In the future, the partnership may scale to include other digital payment environments. BENEFIT continues to innovate, to help financial institutions support emerging digital value chains and new payment streams. For other countries that are looking to accelerate digital payments, Bahrain BENEFIT is a stellar example of how to bring accessible, affordable payment processing infrastructure to acquiring banks. To learn more about FSS white-labeled Payment Gateway, just ask.