The Nexo protocol: a new initiative to standardise cashless payments

15 September 2021

The world of cashless payments is characterised by a range of standards, technologies and protocols – especially when it comes to cross-border transactions. The Nexo Standards consortium has taken on the task of advancing the interoperability of technologies for cashless payments. To do this, the organisation has developed its own standards.

But who is behind the consortium? How important are these Nexo protocols today, in particular when it comes to connecting POS terminals to POS systems? What potential does the Nexo protocol offer? And what are the limitations? treibauf provides expert and independent information.

Content of the article

Nexo Standards: the organisation behind the Nexo protocols

Nexo Standards is an open consortium of different companies from the field of cashless payments that aims to develop, establish and disseminate international standards for payment technology. All of the organisation’s developments comply with the technical ISO 20022 standard.

The companies behind Nexo Standards

The Nexo Standards consortium includes many industry leaders, which together bring great importance to both the organisation and the Nexo protocols it has developed.

The consortium membership is divided into two categories: «Principal Members» and «Associate Members». The table below gives an overview of the best-known Nexo Standards members:

Principal Members Associate Members
American Express Payment Europe S.L. ACI Worldwide
Ant Group Co., Ltd. Adyen
BNP Paribas Banque Edel
Credit Agricole Payment Services Barclaycard International
Discover Financial Services Diebold Nixdorf
Euro Kartensysteme GmbH Epay Euronet
Frenchsys Hitachi-Omron Terminal Solutions
JCB International (Europe) Ltd. Interac Association
Market Pay Monext
Mastercard Moneycore
Poste Italiane Novelpay SP. Z O.O.
Saudi Payments PayCert
TOTAL Energies PayTec AG
Unionpay International Co. Ltd. Salzburger Banken Software
Verifone Systems France SAS Schwarz IT KG (SIT)
VISA Subway
Worldline NV/SA UL

This is just a selection of the best-known members. The Nexo Standards website contains a full list of members and observers.

What does Nexo Standards want to achieve?

The primary aim of Nexo Standards is to develop a series of state-of-the-art standards that meet the requirements of the EFTPOS sector. These open standards should be made accessible free-of-charge and are seen as an important step towards a standardised payment market from which all stakeholders can benefit, especially multinational trading companies.

The Nexo standard: the key Nexo protocols at a glance

Nexo Standards is seeking to standardise, at an international level, all technical interfaces used in cashless payments through state-of-the-art, open protocols. We have briefly listed and explained these key protocols here for you:

The Nexo Acquirer Protocol

The aim is for this protocol to become a standard, international interface between acceptors and acquirers. The standard allows for both a direct connection between traders and acquirers as well as the traditional version via a Payment Service Provider (PSP). This should simplify Multi-Acquiring strategies and enable greater compliance across national borders.

The Nexo Retailer Protocol

The Nexo protocol for traders defines a whole series of interfaces between payment terminal and the POS system. This provides for clear separation between the ERP and the payment process, supports different payment and customer loyalty programmes and offers a uniform approach to different technical environments.

The Nexo TMS Protocol

This open protocol serves as an interface between a Terminal Management System (TMS) and a payment system. The new interface supports the configuration and management of all terminals and should mean that traders are no longer bound to certain manufacturers due to lock-in effects.

ISO 20022: the technical standard that forms the basis for all Nexo protocols

The ISO 20022 standard was developed as a common standard for the finance industry to bring uniformity to the communication of information across various segments of the sector.

The logic behind this standard is based on a strict separation between the basic principle of how information is portrayed (the actual standard) and the actual portrayal of the information in a programming language (the syntax). This makes standards such as the Nexo protocols independent of any coding conventions. ISO 20022 therefore forms an important basis for the interoperability of different systems in the field of cashless payments.

However, as this allows for differences in the specific software implementation, a change can still entail significant complexity and expense.

The Nexo Retailer protocol in detail

The integrated operation of the payment terminal requires communication between the POS device and the terminal, in which the POS device informs the payment terminal of the transaction type and the amount. Upon completion of the payment process, the terminal returns the results to the POS device. This communication takes place via a defined protocol.

The status quo: internationally different protocols

Within Europe, each country has its own predominant communication protocols. In Germany, for example, the ZVT protocol is an example of an attempt at national standardisation. However, a whole range of other protocols are also used in addition to this. What’s more, some acquirers also develop their own, new POS interfaces.

This makes it very costly and complex for traders to switch terminal (and thereby change acquirer). The lock-in effects that this leads to for traders are explained in our article about multi-acquiring.

The Nexo POS interface: an attempt at international standardisation

The aim of the Nexo protocol for communication between payment terminal and POS is to make it easier for traders to switch between terminals from different providers without problems – meaning they are no longer bound to specific acquirers.

Although the Nexo protocol is relatively new to the market, it already offers users a very wide range of functions. As it is based on the ISO 20022 standard, it also enables both the range of functions and the communication sequence to be changed in a later version without affecting existing systems.

How widely used is the Nexo Retailer protocol?

To date (as of August 2021), the Nexo Retailer protocol is still considered to be a niche protocol, that is to say, it is currently not really widespread.

Yet its state-of-the-art, open design together with the fact that the Nexo Standards organisation brings together many sector leaders suggests that the Nexo protocol will play an increasingly important role in future.

How is the Nexo protocol for communication between payment terminal and POS device structured?

Each message exchanged between the payment terminal and the POS device via the Nexo Retailer protocol follows a strict structure:

  • Message header
  • Message content
  • Security section

How are the data packaged in the Nexo protocol?

The Nexo protocol is deliberately designed to be very open and allows for three different options for the format of the data used:

How are the packaged data sent in the Nexo protocol?

The Nexo protocol also allows for three different options for the transfer protocol:

What does this Nexo protocol openness mean for traders?

Acquirers and terminal integrators can choose which data format or transfer protocol they want to use. On the one hand, this openness may, of course, help to accelerate the spread of the Nexo protocol.

But for traders, this also means that one Nexo option is not the same as another, as the different implementation options often prevent plug & play capability when changing terminal. The complexity and expense when changing can quickly become (almost) as high as with other communication protocols.

Nexo protocol: benefits for traders

  • The Nexo protocol has enormous potential for the future as Nexo Standards has brought together the biggest companies in the sector.
  • The protocol’s state-of-the-art design provides a large range of functions that cover all the latest sector requirements (mobile payment, bonus systems, etc.).
  • Its open design makes it possible to expand the protocol at any time to incorporate future functions.
  • With the right choice of data format and transfer protocol, the Nexo protocol is cloud-compatible.
  • With the right choice of transfer protocol, the Nexo protocol can be used securely for a transfer via the public internet.

Nexo protocol: disadvantages for traders

  • The openness of the Nexo protocol also has one critical disadvantage: there is large scope for interpretation when implementing the protocol in a specific software program.
  • This also leads to acquirer-specific, proprietary protocol extensions for the Nexo protocol that make switching complex and costly for traders and run counter to efforts to achieve interoperability.

The benefits of universal POS interfaces

So, what are the alternatives if the new Nexo protocol cannot guarantee absolute interoperability and flexibility?

The answer is a universal interface that is compatible not only with over 150 different communication protocols, but also with all common interpretations and expansions that go beyond the standard version of those communication protocols.

This interface, called Pepper, makes it really quick and easy to connect new terminal models (or POS interfaces) both domestically and abroad. Furthermore, it gives retail companies greater flexibility and independence in terms of which acquirer to work with.

Summary: the Nexo protocol

  • Currently, the Nexo Retailer protocol is not yet very widespread, although this is likely to change in the coming years,
  • as the consortium behind the Nexo protocols, the Nexo Standards organisation, is bringing together some of the biggest companies in the sector.
  • The Nexo protocols have been newly developed on the basis of the ISO 20022 standard and offer all the state-of-the-art functions and features.
  • Thanks to its open design, the protocol can be expanded at any time to incorporate future functions.
  • However, the scope for interpretation of the protocol that comes with this does give rise to acquirer-specific, proprietary protocol expansions which may make it more difficult for traders to change terminal easily.
  • Universal interfaces, such as Pepper from treibauf, are compatible with all standard communication protocols (including the Nexo protocol) and thereby make it easier to connect new payment terminals.
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