HyperSense: AIOps for Payments Observability

Introduction

Last few weeks we have been building Juspay HyperSense, our AIOps for Payments. This post will focus on HyperSense’s capabilities in payment cost observability.

HyperSense is designed to ingest unstructured, diversified payment reports from multiple sources and formats, transforming them into a structured, actionable output as analysis and trends. Merchants can analyze cost elements in detail, down to the most granular level-individual transactions.

HyperSense enables merchants to audit every aspect of their payment processing costs and optimize them through key features such as anomaly detection, automated root cause analysis (RCA), and a conversational interface to interact with HyperSense for insights. The platform will help merchants monitor trends, detect cost fluctuations, and take corrective actions, ensuring transparency and efficiency in managing payment expenses.

Problem

Guessing the payment processing fees & not knowing how to improve it.

As enterprises scale, most transition from paying a blended fee for payment processing to adopting an interchange fee model with their payment processor or acquirer. This shift is expected to reduce processing costs. However, in practice, 80% of growing enterprises report paying more than anticipated as their Payment Processing fees. Even after adopting interchange-plus pricing, businesses could still save 7-10% on their overall payment costs by optimizing their processing strategies with existing PSPs.

One of the biggest challenges these companies face is understanding their true payment processing costs and why those costs fluctuate month-to-month.

Large merchants typically address this complexity by employing in-house experts or building specialized tools to analyze and optimize their payment costs. Other enterprises often either accept the higher costs as a business expense, attend industry forums across the US and Europe for insights, or appoint a third-party specialist.

To grasp why interchange fees are so complex, it’s important to understand the key dimensions involved.

There are three primary components of interchange pricing: interchange fees (which account for 80-90% of total costs), scheme fees (10-15%), and acquirer fees (around 5%). Each of these cost components has its own subcategories, rules, and penalties-often detailed in the 900-page rulebooks provided by each card network (Visa, Mastercard, etc.). These rulebooks are regularly updated twice a year, with changes specific to different regions.

Interchange fees vary across 100+ programs, depending on the merchant’s business type (MCC), the card type used (consumer credit, signature, infinite, etc.), the payment scheme, and adherence to 7-10 qualifying criteria. Adherence to the qualifying criteria helps merchants qualify for a good interchange fee. Merchants that fail to meet these criteria risk higher fees (downgrades) and penalties, which vary in severity depending on the infraction.

Scheme fees are divided into 50+ categories, including mandatory, international, feature-driven, and bad behavior fees. A single transaction can incur anywhere from 3 to 10 of these fees (or more), depending on its nature.

When calculating monthly payment processing fees, acquirers and PSPs present the data through multiple reports, each with its own format and structure. Common cost reports include Interchange and Scheme Fee Reports, Settlement Fee Reports, and Payment Fee Reports. While some reports provide granular details on costs, others may require explicit requests for access. Now, if a merchant has more that one payment provider or acquirer the above complexities grow multi-fold since they would now need to not only analyze the costs individually, they’ll also need to bring them together using common semantics and be able to analyze and drill-down on them

Lastly, the merchants need to constantly navigate these complexities, refer to multiple sources, experts and teams to stay on top of these components and work with internal and external teams to streamline payments.

Solution

Knowing the payment processing fees, auditing and optimizing it.

HyperSense provides businesses with a streamlined yet powerful solution to review and optimize their payment processing costs. By offering deep visibility into key components, it helps organizations identify trends, anomalies, and opportunities for optimization. The platform comprises three core components:

• Observability/Monitoring System: Tracks trends across cost categories such as interchange fees, downgrades, scheme fees, and acquirer fees, allowing businesses to spot anomalies and inconsistencies over a customizable time frame (from 1 to N months).
• Auditing System: Detects inconsistencies in payment costs, including PSP errors, invoice mismatches, and other discrepancies that can result in overcharges or missed savings. This usually doesn’t require any engineering effort to realize the savings.
• Optimization Recommendations: Provides actionable insights and tooltips on maximizing interchange qualification savings, as well as reducing scheme fees and penalties.

Merchants will attach their existing PSPs or acquirers with HyperSense, allowing the platform to process various payment reports in their native formats, without disturbing anything on the transaction flow. HyperSense will standardize these diverse data inputs, normalize them and apply its intelligence algorithms. The primary dashboard, as shown below, provides merchants with a comprehensive overview of their total processing costs, broken down across multiple dimensions.

In the example shown, you can see an overview of the total processing costs, further dissected into different cost categories and card types, along with key trend insights. This enables merchants to gain visibility into the specific components driving their payment expenses and track cost changes over time.

The tool will also allow merchants to drill down into any cost components, such as the interchange fee, to identify anomalies. From there, the merchant can choose to either audit or optimize the interchange fee.

Auditing will help answer critical questions such as: Am I being charged correctly? Are the rates applied as per standard guideline? Are the discounts passed on accurately? These insights provide a clearer picture of potential discrepancies or errors in the fees being charged.

Optimization, on the other hand, will help merchants identify potential reasons for increased costs and offer insights into possible areas of improvement, helping them take action to reduce expenses effectively.

Engagement

With HyperSense we assist businesses in obtaining the right set of payment reports with the necessary depth of information. These reports will then be analyzed, and we’ll present insights along with the potential optimizations that can be achieved. Once HyperSense is live, we’ll also enable merchants to access these insights, trends, and drill-downs in a self-serve manner through the HyperSense dashboard. The platform will support various user personas, ensuring that everyone in the organization-from the CTO and CFO to data analysts-can view the data from their unique perspectives and derive actionable insights.

The HyperSense dashboard will provide merchants with full transparency into their payments data, allowing them to take action through either the Audit or Optimize features. Within Optimize, when we reach the recommendations phase, the HyperSense team will collaborate with the merchant to gain a deeper understanding of how specific payment processes are engineered and provide suggestions for improvements and implementations. Leveraging our 12-years of expertise in payment processing and our ability to handle transactions at scale (125 million transactions per day), all engineering recommendations come with the confidence and reliability that only extensive experience can bring. Our team will also work closely with the merchant’s engineering and product teams to share transaction engineering insights and assist with implementing those changes in a controlled and reliable manner.

Innovations designed into “Observability” while managing complex Tech systems is already mainstream across industries. However, for business systems managers, like those at a payments operations center, the gap is large. The vision is for HyperSense to be the mission control center and the observability platform – for building a world-class payments operations center of excellence, that meets & exceeds the scale and quality demands of digital enterprises.