In the dynamic world of digital payments, a constant quest for innovative solutions to streamline transactions and foster interoperability has led to the creation of Nexo Standards.
Established in 2014, NEXO Standards is a non-profit organization that seeks to address the challenges posed by fragmented standards and proprietary protocols. This open-source protocol aims to provide a common ground for payment stakeholders worldwide, transcending geographical and technological barriers.
In this article I will present the most important concepts and components of Nexo standards that will give you an initial understanding of its different components.
Components of NEXO Standards
Nexo Standards provides a set of messaging protocols that enable communication between different elements of the payment ecosystem, POI terminals, TMS, and acquirers and optionally Retailer’s POS systems. The protocols cover various aspects of the payment process, including initiation, authorization, and settlement, ensuring a standardized and secure flow of information.
nb : Nexo standards describe an ATM protocol, which will not be treated in this article
Nexo relies on the ISO 20022 messaging protocol (CAPE Message definition) to ensure interoperable payment acceptance. It’s a common, state-of-the-art, XML based, rules and specifications used within the financial industry (used for SCT and SDD among other).
As far as security is concerned, CAPE (Card Payments Exchanges) messages embed their own security data components and structures to ensure an adequate security in the transmission of the information.
in that regards, it uses DUKPT and UKPT as key derivation mechanism for PIN Encryption, Card Data Encryption and MAC protection.
Nexo Fast and POI communication protocols
The Nexo Implementation Specification Package serves as a comprehensive guideline for developing solutions that comply with Nexo standards. It provides all the necessary documentation for creating nexo-compliant payment acceptance solutions. This package outlines the required interactions with an Acquirer Host, a Terminal Management System (TMS) Host, or a Sale System using the nexo FAST Specification and nexo Protocols.
- Nexo FAST (Financial Application Standard) implements the communication between the terminal and payment cards. It’s designed to communicate with any Acquirer, TMS or POS protocols thanks to the different interfaces listed below.
- TMAP (Terminal Management Application Provider) is the interface responsible for exchanging information with the TMS implementing the Nexo TMS Protocol.
- HAP (Host Acquirer Protocol) is the interface facilitating interaction with the acquirer host implementing the Nexo Acquirer protocol.
- SCAP (Sale System, Cardholder, and Attendant Protocol) is the interface managing communication between the terminal and the sale system, as well as interactions involving the cardholder and attendant protocols.
By adhering to these standards and implementing the recommended protocols, Nexo compliant payment systems can operate smoothly and reliably, ensuring seamless transactions between terminals and various systems. These standardized processes and protocols contribute to a more efficient and secure payment ecosystem.
Nexo Acquirer Protocol
Nexo Acquirer protocol implements ISO 20022 acceptor-to-acquirer and supports agent to acquirer setup, useful for intermediary centralized systems. it manages the different transactions like authorization, pre-authorization, refund, cancellation and rejection of card transactions and also ensures their financial clearing and reconciliation.
Nexo TMS
Nexo TMS protocol supports the functions for configuring, managing and maintaining the application parameters, the software and the security keys from a terminal management system (TMS) to points of interactions (POI) — or terminals- .
Nexo Retailer
The Nexo Retailer protocol manages the exchange of messages between point of sale systems and the payment terminal (card payment application).
The protocol uses Sale to POI Protocol ISO 20022 and is designed to be flexible and rich, which enables it to handle different functionalities such as loyalty and cashback and different configuration such as a direct connection between POS/POI, clusterd systems or distributed systems.
Benefits of Nexo Standards
Nexo standards were designed to be interoperable with other systems, modular and standardized in way that streamlines wide adoption globally.
One of the primary advantages of Nexo Standards is its interoperability. By providing a common language for different elements of the payment ecosystem, Nexo enables seamless communication between stakeholders, eliminating the barriers posed by proprietary protocols and regional variations.
In addition, Nexo Standards incorporate robust state of the art security mechanisms and protocols, which made more efficient by Standardizing communication protocols across the functional domains it covers.
Challenges faced by Nexo Standards
While Nexo Standards has made important advancements in fostering collaboration, industry cooperation is essential for its continued success. Stakeholders must actively engage in the standardization process and contribute to the development of new protocols to address evolving payment technologies.
In addition, to adopt Nexo Standards and fully understand its benefits, there is a need for widespread education and awareness within the payment and retail industries.
Merchants, developers, and regulators must understand the value proposition and actively participate in the adoption of these standards.
Conclusion
Nexo Standards offer significant value to the retail and payment sectors through open, modern standards covering multiple use cases. While its purpose is evident to stakeholders, articulating the ROI in terms of costs and benefits is crucial for broader adoption, ensuring the standard’s survival and growth.
