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Feature Articles

Several times monthly, CardNotPresent.com’s writing staff tackles subjects that merit a deeper look than our news items. Our feature articles deliver original reporting on the latest trends, issues, companies and technology impacting the CNP payments space.

Articles:

Guest Perspective: Surviving the Shifting Sands of Acquiring

By Ralph Bianco

Surviving the Shifting Sands of AcquiringDuring my 30-year career I’ve experienced payments from nearly every perspective—I’ve worked with card brands, issuers, acquirers and third-party processors for consumer, corporate and private label payment products. If this broad experience has taught me anything, it is to embrace and encourage change as a catalyst for innovation. Even I, however, am amazed at the accelerating pace of change in the past decade and what it can enable.

Several primary drivers are forcing payment companies—particularly acquirers—to think differently about their industry and their competition: the evolution of the Internet and consumer adoption of mobile devices.

The Internet has evolved from a collection of static Web pages and minimal interaction to today’s Web 2.0 characterized by dynamic page content, a high level of consumer interaction, the rise of social media and early stage mobile adoption. The evolution will continue with more sophisticated integration with mobile, new ways to interact, new business models and new disruptors. For payments, Web 3.0 means smarter artificial intelligence systems, location-based systems and data mining for better real-time purchase suggestions and more effective fraud tools.

Rapidly increasing mobile adoption will persuade more and more retailers to leverage transactional and social data, digital wallets and location-based services that support sophisticated incentive programs.

What Makes this so Relevant?

So, in light of this rapidly changing environment, what happens to acquirers? Acquiring is already the most complex part of the payment transaction. And, given the regulatory and compliance environment, processing complexity, and risk relative to where pricing is today it’s significantly underappreciated.

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Biometric Payments Online

By Tom Goldsmith, CardNotPresent.com

Biometric Payments OnlineTwo-factor authentication has been the holy grail of online payment acceptance and processing from the appearance of the first e-commerce Web sites – and like the mythical grail, a workable system has been nearly impossible to find despite been many false trails.

The two-factor concept is based on the fundamentals of authentication. A customer can verify his or her identity three ways: using something the customer knows (password or pin), something she has (a card or some other physical token), or something he is (a physical characteristic, such as a fingerprint). Combining two of these factors for authentication vastly improves the accuracy and security of the process.

There is a downside, of course. Using two-factor authentication is slower and less convenient for customers and, especially in a card-not-present environment, can discourage customer spending.

For nearly a decade, researchers and technologists have focused attention on biometrics (something the user is) as the essential second factor for authenticating identities. After all, biometric characteristics are something the user always has easy access to, are difficult or impossible to counterfeit, and unique to the user. In some face-to-face transactions, we use a crude form of biometrics when we produce photo IDs to establish our identity. In highly secure facilities, fingerprints, palm prints, eye scans, voice recognition and similar biometrics have been employed for years.

Where online payment transactions are concerned, none of those techniques have been feasible to date, but the situation may be about to change...

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Guest Perspective: Explaining Omnichannel

By Liz Gulsvig, Forte Payment Systems

Explaining OmnichannelIf ever you have found yourself scrolling through retail news on your desktop, maybe on a lonely afternoon, a hint of caramel drizzle in your beard from the frothy macchiato you so carelessly sipped, office blinds tilted upwards, your wingtip oxfords from Allen Edmonds indenting the supple leather of your reception loveseat, you may have heard it. The latest buzzword, for the merchants out there that haven’t heard it, is omnichannel.

Omnichannel is a recent trend continuing to gain momentum in the retail space. With recent endeavors from Staples, Best Buy and others, it’s been dubbed the “future of digital commerce” by Forbes and has emerged as a requirement for retailers intending to move forward with a customer-driven focus.

Omnichannel is the seamless, integrated sales experience that unifies all channels: brick-and-mortar, e-commerce, mobile, catalogs, telephone, whatever. All of it.

When a retailer employs more than one channel, such as having a Website, a catalog and a physical store, they are considered multichannel. Omnichannel takes multichannel to the next level by integrating the channels, so the retail sales experience isn’t separated or choppy. The customer should experience a single view, even though they may be using multiple channels. There should be no interruption from channel to channel. Bill Davis describes the distinction in an article published this past fall on the Brick Meets Click blog: “In omnichannel, a retailer is working toward a 360-degree view of its customers’ purchases across all channels, in multichannel they’re just offering customers a selection of channels to choose between.”

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Brian Krebs: An Uncommon Interview

The world first heard about the Target security breach this December because of Brian Krebs. At the height of the Christmas shopping season, his work led to the disclosure that the retailing giant’s POS system had been hacked and had been feeding the payment-card information of millions of Target shoppers to cybercriminals for months. After following up the Target story by breaking the news that luxury retailer Neiman Marcus also had been penetrated, Krebs was named as the source in just about every early story concerning the breaches. He was first on these stories and his ensuing coverage detailing the hows and whys has been comprehensive.

The investigative journalist has been on the Internet- and network-security beat for a decade, with the Washington Post and on his own. Even before his December scoop, his KrebsOnSecurity blog had become an indispensable source for the timeliest and most accurate information on cybercrime and the threats it presents to consumers and businesses.

With interest concerning security—and the role it plays in card-not-present fraud—running extremely hot, securing Krebs as a keynote speaker at the CNP Expo in Orlando, Fla. this May was a coup. As a preview, D.J. Murphy, the editor-in-chief of CardNotPresent.com, sat down with him recently and had him answer some questions instead of asking them. Our conversation ranged from Target and the lessons learned—or not learned—by retailers facing the threat of more breaches, to the differences between being compliant and being secure, and more.

Q&A with Brian Krebs: The First Word in Security

Brian Krebs: An Uncommon InterviewCardNotPresent.com: You occupy an unusual space in journalism. Coming from a mass media outlet, you moved to a very specialized one that provides real intel for security professionals, but that also informs consumers concerned about the security of their personal information. Who benefits more from your writing, consumers or business professionals?

Brian Krebs: It's a mix of both and I strive to create a balance. Even if I did nothing but these merchant breach stories, these are stories that affect merchants and they affect businesses. But, everybody carries credit cards and everybody shops at retailers. Sometime the message for consumers seems like a broken record: don't reuse passwords, try to use your credit card instead of your debit card, keep an eye on your credit report. But, you really can't talk about it enough.

CNP.com: I know you've broken big stories in the past. But, do you consider the Target breach the most significant story you've broken?

BK: It's not a unique story. We've seen these big retail breaches before and we've seen the fallout from it. In the past, nothing really changed. Somebody got fined, somebody paid a lot of money. But, I think the Target story has gotten legs for a number of reasons. The biggest is, there are a lot of people in law enforcement, in the response community and in the intelligence community who are getting all kinds of indicators that this is not a single incident. There are multiple groups perpetrating these breaches and they have hit a ridiculous number of merchants.

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Smartphone + Cloud Storage = Payment Security

By Greg Gresh, CEO of ZNAP North America

Smartphone + Cloud Storage = Payment Security With millions of consumers exposed to the threat of identity theft by recent data breaches at Target and Neiman Marcus, the debate about how to solve payment security problems in the U.S. continues. The outcry from concerned citizens has even prompted the government to consider regulatory action: lawmakers at a Senate Judiciary Committee hearing on the breaches recommended establishing a federal standard requiring business to notify customers more promptly in the event of a breach. As far as preventing these incidents in the first place, Target said it will upgrade the point-of-sale terminals at all of its U.S. stores by the end of 2014. The updated terminals will be compatible with EMV card technology, a more secure payment card system that is widespread in Europe. But making the switch is expensive for retailers—Target estimates its price tag around $50 million—and, more importantly, may not solve the problem.

In many cases, hackers gain access to consumer data via point-of-sale (POS) systems, which manage the terminals where information is transmitted from customer to retailer via credit or debit card. These systems are often where hackers and thieves strike. For example, PayPal president David Marcus (who uses an EMV chip card) recently speculated that he was a victim of “skimming” during a visit to the UK after which thieves used his credit card information to make fraudulent charges. Skimmers typically steal information at the point of sale using a card reader or keypad overlay that transmits data to hackers, and as David Marcus illustrates, are not thwarted by EMV security.

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Bitcoin: Bubble to Bedrock? - Part IV

A case could be made that Bitcoin—its rise and fall and rise again—was the payments story of 2013. But in the early stages of 2014, the debate had shifted from volatility and concerns of illegal activity to merchant acceptance and consumer adoption. The demise of the world’s largest Bitcoin exchange, however, brought dormant concerns back to life. Recently, CardNotPresent.com embarked on a three-part series on Bitcoin and its spasmodic progress toward legitimacy. The Mt. Gox meltdown, which happened in the interim, obliges us to extend the series. So, in the spirit of author Douglas Adams, we present Part IV of our trilogy:  a look at recent upheaval and whether Bitcoin is undergoing an existential crisis or a bump in the road toward greater adoption.

Part IV – So Long and Thanks for All the Bitcoin?

By D.J. Murphy, Editor-in-Chief, CardNotPresent.com

Bitcoin: Bubble to Bedrock? - Part 4When this series of articles was conceived nearly two months ago, the environment surrounding Bitcoin was somewhat different than it is now. Mt. Gox’s difficulties were coming to light, but the complete havoc was weeks in the future. Much of the news at the end of 2013 and into 2014 was about the increasing ranks of online retailers willing to accept Bitcoin, despite the publicity around black-market Website Silk Road that trafficked in illegal products paid for by Bitcoins, which was shut down by law enforcement in September. With online discounter Overstock.com leading the way, Bitcoin was beginning to make inroads in repairing a public perception that tended to characterize the cryptocurrency as a refuge for outlaws.

If you are a fledgling currency, however, and your largest exchange stops trading, shuts down, admits to actions that could only be construed as gross incompetence or outright fraud and declares bankruptcy, hard-won stability tends to vanish quickly.

In one sense, it might seem that Bitcoin is back to square one. Elected officials and law enforcement sensing an opportunity are making noises about the current and future legality of the currency. Countries all over the world and many U.S. states are considering regulatory and statutory limits on Bitcoin. And consumers just don’t know what to think.

But, Bitcoin infrastructure and funding in Bitcoin startups is significantly farther along than it was even last fall when the Silk Road debacle cast a temporary shadow on the budding payment method. Powerful financial interests like Internet pioneer Mark Andreesen continue to back Bitcoin companies and the number of ventures trying to leverage the cryptocurrency’s growing popularity are surging.

So, have the events of the past few months—especially the loss or theft of around 850,000 Bitcoins (7 percent of the world’s supply)—irrevocably shaken the faith Bitcoin was painstakingly building? Or has that faith translated into an environment that can shake off Mt. Gox simply as growing pains?

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Crashing Waves: Security Breaches, Fraud Detection and What’s Next for CNP - Part III

CardNotPresent.com presents a three-part series stemming from a conversation with industry executives about the recent spate of massive security breaches that have exposed the payment-card information of more than 40 million U.S. consumers. The breach did not occur in a vacuum—there were warning signs. And, the story is not over. While news from Target, Neiman Marcus and Michael’s is devastating, the next 18 months could be worse. And, beyond that are even more waves that will rock the CNP industry. Part III of the series looks at the post- EMV landscape in the U.S. The POS may be protected, but the storm in CNP has just begun.

Part III – The Next Wave

By D.J. Murphy, Editor-in-Chief, CardNotPresent.com

Crashing Waves: Security Breaches, Fraud Detection and What’s Next for CNP - Part IIIThe spate of recent security breaches—in addition to creating headlines no business wants to deal with—has been an unmitigated disaster for retailers, card issuers and service providers up and down the payments value chain. Just about every one of them can point to real financial impact from the events that began unfolding in the last year and continue to threaten them into 2014.

Under the network mandates, after the liability shift for EMV comes along in October, 2015, the hope is news of this sort will slow down and the pressure on many of those companies will ease somewhat. But, for merchants that accept card-not-present payments and the companies that support them, the forecast could be not only continued unsettled conditions, but a full-on storm to rival what the industry at large just went through.

In Part II of this series we looked at the next 18 months and the prospect that the security breaches of recent months could become even more frequent as fraudsters race to gather information at the POS before the EMV standard becomes prevalent in the U.S. But, then what?

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Bitcoin: Bubble to Bedrock? - Part III

A case could be made that Bitcoin—its rise and fall and rise again—was the payments story of 2013. But in the early stages of 2014, the debate has shifted. While attention still is being paid to its volatility as an investment, increasingly, the focus is on merchant acceptance and navigating what could be a thorny regulatory environment (though recent events may introduce significant turmoil into the Bitcoin ecosystem that could claw back some of the hard-won gains in positive perception from the past few months). CardNotPresent.com presents a three-part series on Bitcoin and its spasmodic progress toward legitimacy. In Part III, we look at the merchants that have already made the decision to accept Bitcoin. Why are they taking part in this unproven experiment at this stage?

Part III - ‘The Question We Asked is Why Wouldn't We?’

By Katie Flood

Bitcoin: Bubble to Bedrock? - Part IILike any currency, Bitcoin is valuable because people agree to value it. Unlike most currencies, however, Bitcoin has been around for only five years, is unregulated and unbacked by any government, and has no tangible, physical form. At this stage of the game, even the most optimistic Bitcoin enthusiasts acknowledge that it is a risk. So why would a business accept Bitcoin before it becomes . . . well . . . accepted?

One of the largest and most prominent Bitcoin adopters is online discount retailer Overstock.com, which began accepting the currency in January 2014. Director of Communications Judd Bagley says that for their company, adopting Bitcoin was partly a philosophical decision. CEO Patrick Byrne sees Bitcoin as having some of the virtues of gold, and he wanted to show support for a currency that is not government-controlled but rather peer-to-peer, with a mathematical limit to the amount in circulation. Accepting Bitcoin also makes business sense: As a discount merchant, Overstock.com has only about a 2 percent profit margin on items they sell, so credit-card processing fees are a significant cost. Bitcoin transactions allow the company to avoid these fees. At this point, Overstock.com is immediately converting its Bitcoin back into dollars through Coinbase, since its suppliers do not accept the currency. Though Bagley declined to give a number, he assured us that the exchange rate with Coinbase is “quite a bit less” than the fees credit card companies charge.

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Guest Perspective: Unlocking the Riddle of Cardholder Authentication—Mobile Payments Opens the Way

By Bill Clark, President and CEO, Spindle

Unlocking the Riddle of Cardholder Authentication—Mobile Payments Opens the Way It used to be that the consumer signature was the primary authentication tool used at point-of-sale. You transacted a purchase by card, you signed a slip of paper, and the clerk matched your signature, on the spot, with the one on the back of your card, thus authenticating your identity. Have you—or has anyone you know—made such a purchase lately? Most clerks don’t even look at your signature, let alone match it to the scribble on the back of the card. Instead, they sometimes ask consumers to present a driver’s license for identification during the transaction; and, in some cases, CVV numbers are even being asked for at point-of-sale. It’s all in an effort to ensure a cardholder’s identity, which is a process more easily and flexibly handled on a secure mobile payments platform.

Authenticate the Cardholder, Not Just the Card

Today, there is a growing concern among merchants that the need to improve authentication is paramount, but the extra steps they seem to be taking are hardly airtight measures for reliably verifying consumer identity. In reality, such market-wide inconsistency and basic lack of procedural discipline in authentication has rendered credit-card purchases nearly as non-restrictive and unprotected as regular cash purchases, with no one effectively verifying that the true cardholder is the person who is actually present and holding the card.

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Crashing Waves: Security Breaches, Fraud Detection and What’s Next for CNP - Part II

CardNotPresent.com presents a three-part series stemming from a conversation with industry executives about the recent spate of massive security breaches that have exposed the payment-card information of more than 40 million U.S. consumers. The breach did not occur in a vacuum—there were warning signs. And, the story is not over. While news from Target, Neiman Marcus and Michael’s is devastating, the next 18 months could be worse. And, beyond that are even more waves that will rock the CNP industry. Part II of the series examines what’s in store for the next year and a half and what’s driving a continued spike in card-not-present fraud attempts.

Part II – EMV a Culprit in Breaches?

By D.J. Murphy, Editor-in-Chief, CardNotPresent.com

Crashing Waves: Security Breaches, Fraud Detection and What’s Next for CNP - Part IIA few weeks after we flipped the calendar to 2014, while security still dominated the headlines, the FBI quietly circulated a report among retailers warning them to prepare for the worst. The law enforcement agency said attacks like the ones disclosed in December (and subsequent intrusions at arts-and-crafts retailer Michael’s and White Lodging Services, a hotel management company that runs Hilton, Marriott, Sheraton and Westin hotel properties nationwide) “will continue to grow over the near term, despite law enforcement and security firms' actions to mitigate it.” The FBI estimated in the report that there are at least 20 undisclosed security breaches funneling data into the hands of cybercriminals waiting to profit from it.

In Part I of this series, we detailed how an antifraud technology provider was able to see sharply growing amounts of fraudulent transaction attempts on its e-commerce merchants that indicated the availability of high-quality stolen payment-card information flooding the black market. While they did not know the source of the information, this turned out to coincide with the massive breaches at Target and Neiman Marcus. And, when news of the FBI report became public, fraud and risk-management executives were not surprised by the headline number.

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Bitcoin: Bubble to Bedrock? - Part II

A case could be made that Bitcoin—its rise and fall and rise again—was the payments story of 2013. But in the early stages of 2014, the debate has shifted. While attention still is being paid to its volatility as an investment, increasingly, the focus is on merchant acceptance and navigating what could be a thorny regulatory environment. CardNotPresent.com presents a three-part series on Bitcoin and its spasmodic progress toward legitimacy. In Part II, we look at efforts to change the perception of Bitcoin from outlaw currency to trusted medium of online exchange. Some companies are betting big on Bitcoin, what are they doing to allay the fears of consumers and regulators?

Part II – Putting a Shady Past in the Rearview Mirror

By Carl Brown

Bitcoin: Bubble to Bedrock? - Part IIDespite some recent slippage in traction related to illicit activity and concerns that it has little or no regulation, Bitcoin appears to be making slow progress toward becoming a legitimate digital currency. Several businesses are convinced that this is the universal currency of the future that happens to be experiencing growing pains right now.

One of those businesses is BitPay, an Atlanta-based startup founded in May 2011 that’s providing infrastructure for the virtual money. The company announced in December it had processed more than $100 million in transactions in 2013. BitPay handles transactions for approximately 14,000 companies across 200 countries, with about half of those firms located in the United States.

Bringing legitimacy to the Bitcoin world is going to take time, concedes Stephanie Wargo, BitPay's vice president of marketing.

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Buy Now! Converting Shoppers to Buyers and Buyers into Sales

By Tom Goldsmith

Race between Technologies Clouds Future of Mobile Payment Nearly every online merchant has experienced the frustration of seeing how little Web site traffic actually translates into sales. The trick, of course, is to convert the curious browser into a shopper, the shopper into a buyer and a buyer into a completed sale.

Merchants spend a tremendous amount of energy and resources to the art of transforming browsers into shoppers and then into buyers. There are many ways to do that, and they’re typically familiar and well-tested. Friendly site navigation, sparkling marketing copy and great customer service will take a merchant so far, but getting a buyer to complete a sale requires an entirely different strategy.

Ralph Dangelmaier, CEO of Waltham, Mass.-based BlueSnap, which bills itself as “a smarter payment gateway,” says that while the statistics on buyer conversion aren’t very good, in part because it’s difficult to separate true buyers from window shoppers, the challenge is real. And, he views his company’s mission to help merchants tackle it.

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Crashing Waves: Security Breaches, Fraud Detection and What’s Next for CNP - Part I

CardNotPresent.com presents a three-part series stemming from a conversation with industry executives about the recent spate of massive security breaches that have exposed the payment-card information of more than 40 million U.S. consumers. The breach did not occur in a vacuum—there were warning signs. And, the story is not over. While news from Target, Neiman Marcus and Michael’s is devastating, the next 18 months could be worse. And, beyond that are even more waves that will rock the CNP industry. Part I of the series will examine the increase in fraudulent activity in advance of the breach disclosures—what some knew, when they knew it and how they came by the information.

Part I – The Storm before the Calm

By D.J. Murphy, Editor-in-Chief, CardNotPresent.com

Crashing Waves: Security Breaches, Fraud Detection and What’s Next for CNP - Part IWhen news of the Target security breach first reached the ears of the public, it confirmed rumors that many in the security community were hearing and what Boise, Idaho-based antifraud technology provider Kount had been seeing for months. There had been a huge uptick in e-commerce transactions the company was able to identify as fraud, but that were utilizing very high-quality information that would confound most fraud filters and rules-based engines. As they moved into the holiday season, what Kount was seeing made it apparent that a huge breach had occurred. They weren’t, however, able to identify where the tsunami of data causing these fraudulent transactions were coming from, just that their merchant clients were at risk.

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Bitcoin: Bubble to Bedrock? - Part I

A case could be made that Bitcoin—it’s rise and fall and rise again—was the payments story of 2013. But in the early stages of 2014, the debate has shifted. While attention still is being paid to its volatility as an investment, increasingly, the focus is on merchant acceptance and navigating what could be a thorny regulatory environment. CardNotPresent.com presents a three-part series on Bitcoin and its spasmodic progress toward legitimacy. In Part I, we present a pessimistic view that has endured despite the hype. Will Bitcoin’s volatile changes in value hinder its effectiveness as an online currency?

Part I - Determining the Value of Bitcoin as Currency

A CardNotPresent.com Editorial

Bitcoin: Bubble to Bedrock? - Part IAlthough Bitcoin is primarily a form of currency, providing a source of value used as a medium of exchange within a transaction, people have a number of interests in Bitcoin that extend beyond this use.  However, for the card-not-present payments industry, the question is can we extract the value of Bitcoin that comes from these secondary uses of the product, subsequently allowing an analysis of Bitcoin’s value that is derived purely from its use in monetary transactions?

Beyond payments, Bitcoin has two major sources of value.  The first is as an investment.  Speculation in currency is certainly nothing new, but the rapid rises and crashes in the price of a Bitcoin has made this a particularly interesting investment.  Recently, Bitcoin hit an all-time high, each selling at just over $1,200.  When compared to its value only 12 months ago—under $15—it is easy to see why Bitcoin’s investment potential has garnered such attention.  However, while it is certainly possible to argue that this increase in price is based on Bitcoin’s value as currency for payment, CardNotPresent.com is interested in the source of that value, not the result.  Whether or not buying and holding Bitcoins is a sound investment is irrelevant to us and to the e-commerce industry in general.  Rather, we are focused on the value of buying and using Bitcoins.

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Race Between Technologies Clouds Future of Mobile Payment

By Patrick Peterson, CardNotPresent.com

Race Between Technologies Clouds Future of Mobile PaymentThe competition has narrowed between quick-response (QR) codes and near field communication (NFC) chips. Many retailers expect a winner to emerge and claim a majority of the market enabling consumers to use their smartphones to make purchases. But the winner might not arise quickly and might not arise at all, because neither technology seems to have a clear advantage in the contest.

"There is so much disruption and uncertainty that (merchants) don't want to spend a dime developing into one of these because it could be a completely wasted effort," said Marc Castrechini, director of software development for Merchant Warehouse, a Boston company that provides payment systems for online and brick-and-mortar retailers.

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Q&A with Nuno Sebastiao, CEO, Feedzai


Q&A with Nuno Sebastiao, CEO, FeedzaiAs a supplier of cutting-edge fraud prevention technology to the payments ecosystem, Nuno Sebastiao, CEO of Feedzai, has been front and center as the industry begins to leverage mobile technology to evolve past the traditional credit-card/banking infrastructure.

Feedzai is riding the wave of Big Data, providing fraud protection to retailers and payment providers based on the real-time processing of exponentially increasing volumes of data. The San Mateo, Calif.-based company’s technology creates consumer profiles based on a constantly updated transaction and information history that can be compared to each new transaction.

Experts and observers like to talk about “disruption.” From his ringside seat, Sebastiao says it looks more like evolution. Regardless, it’s change. Merchants have been increasingly adversarial with the card networks and issuing banks because they feel the costs of card acceptance are spiraling out of control.

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Escardgot: Leading the Charge for Universal Cards

By D.J. Murphy, Editor-in-Chief, CardNotPresent.com

Escardgot: Leading the Charge for Universal CardsAs mobile wallets continue to evolve—and as what were formerly considered breakthrough technologies fail to gain traction as quickly as hoped—pundits and opinion makers are beginning to ask, “what consumer problem do they really solve?”. For everyone who believes it just isn’t that hard to pull a card out of a real wallet, a new movement has begun to take shape: the introduction of universal cards. The cards combine a form factor with which consumers are incredibly comfortable and the ability to access several payment methods and/or loyalty cards in one device.

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Riskified: Fraud Free, Guaranteed

By Katie Flood

Riskified Fraud Free, Guaranteed When the founders of Riskified, an Israel-based risk management company, sat down to work out their business model, their goal was to achieve safer, more profitable e-commerce for their merchant clients. According to co-founder Eido Gal, they realized that merchants are losing money on card transactions in three ways: through chargebacks, declining good sales, and the expense of their anti-fraud system itself, whether external or in-house. Gal recalls that these profit-loss points “were the points we envisioned [addressing] when we started Riskified and how we decided on our business model: To be the turnkey solution that takes the transactions and approves or declines them, and guarantees transactions that we approve.

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What's in Store for 2014?

Predictions2014 As the calendar turns over yet again and we near the middle of the decade, the issues surrounding the card-not-present space continue to evolve. Mobile payments, security breaches and the continuing shift to true omnichannel experiences continue be top of mind for CNP merchants and the companies that serve them. We’ve invited several of our readers, including retailers and service providers, to make predictions or pass along their thoughts about the coming year. What issues will dominate the list of concerns for those engaged in the CNP payments space? Our experts tell us what’s on their mind.

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Contact Solutions: From IVR to Antifraud

A mountain of data enables new line of business for call-center company

By Katie Flood

Michael Boustridge “Operator...operator...OPERATOR!” If you’ve ever found yourself on a phone call to customer service that sounded like this, you’re not alone. Many inept interactive voice response (IVR) systems leave frustrated customers begging to speak with a real person who can solve their problem. Such phone calls represent a huge cost to companies, both because they have to pay customer service agents to handle them, and because many customers choose to drop their company altogether out of frustration with poor service.

Enter Contact Solutions, whose aim is to help businesses provide such excellent self-guided service that their customers never feel the need to talk to an operator. Over the last ten years, their IVR platform has provided billions of calls to their clients. They also recently launched My: Time™, a mobile customer care solution that allows customers to access a business’s customer service from their mobile devices at their convenience and in the manner of their choosing, whether by voice, text, email, photo or even video.

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Guest Perspective: Peak Preparation

By Coby Montoya, Associate Manager, Americas Risk, PayPal

Peak PreparationHaving worked in e-commerce for 10 years now, I find myself using the word “peak” more often than “Christmas” or “the holidays” to describe the time between Thanksgiving and Christmas. Retailers—offline and online—make the bulk of their sales during this short time frame. Whenever I browse articles about e-commerce peak preparation, they tend to focus on the threat of fraud and reminding e-tailers not to let their guard down because the fraudsters are sneaking in with the good customers. I think this is the wrong message. Ecommerce companies need to do the opposite. Let your guard down but in a calculated way.

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Cortex MCP: Connecting Merchants and Consumers in New Ways with Mobile

By D.J. Murphy, Editor-in-Chief, CardNotPresent.com

phoneIn March of 2013, veterans of the payments industry brought Cortex MCP, a mobile payments technology provider, out of stealth mode with a platform it intends to use to “flip commerce on its head.” Co-founders Shaunt Sarkissian, the company’s CEO, CTO Michael Arner, and Rob Stringer, vice president of product development, hail from mPOS pioneer ROAM Data and credit their experience in payments at the physical point of sale with providing them a holistic understanding of payments they say many executives running mobile wallet companies lack.

“In the mobile wallet space I think there are a ton of people who come from other verticals who might not understand the intricacies and interconnectedness of the payments space,” says Sarkissian, who also spent time at CyberSource and founded Sarkcom Corporation, whose patents form the basis of Cortex’s platform.

As a result, he says, there is a disconnect between the available technology and what merchants and consumers actually need it to do.

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EmailAge: Leveraging Email Addresses to Reduce Fraud

Accertify Partnership Shows Way Forward for Phoenix Company

By D.J. Murphy, Editor-in-Chief, CardNotPresent.com

EmailAgeNot quite two years ago, Rei Carvalho and several other founders—a group with deep experience in payments and fraud mitigation—sensed an opportunity in the space to attack card-not-present fraud using a data point that nearly every consumer has, but no company yet had leveraged: email. They developed a proprietary algorithm for evaluating an online identity based on the email address a consumer provides when making a purchase at an e-commerce site or filling out a loan application and used it to launch EmailAge. The company—entirely self-funded—decided to focus on analyzing email addresses because, in many cases, they are more closely tied to an individual than a phone number and no one else was doing it, according to EmailAge CEO Carvalho.

“There are lots of tools out there to validate a physical address, telephone and SSN numbers or device ID, but the one thing that’s common to everyone is an email address,” he says. “There wasn’t anything in the marketplace that did a good job of validating or verifying the credibility of that email address. Our customers are finding that analyzing email addresses is a very effective way of identifying potential fraud and are using our solution as an additional layer of security to help reduce their overall fraud risk.”

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Guest Perspective: Who Can You Trust in Retail Transactions?

Establishing a new standard of trust in the digital age

By Ori Eisen, Chief Innovation Officer, 41st Parameter & TrustInsight, a part of Experian

Ori EisenThe world is dominated by digital. Consumers have grown accustomed to the convenience of technology and are addicted to the devices that provide every day necessities and on-demand entertainment right at their fingertips. Meanwhile businesses are struggling with how to move quickly and adapt to this digital revolution while maintaining safe business practices. Today, more than half of all U.S. consumers use smartphones, and have become increasingly comfortable using all kinds of devices for a wide range of activities like purchasing their morning latte, transferring funds into their savings account, booking travel and even purchasing big-ticket items. Banks and retailers know that offering their services digitally—especially through mobile—is becoming the primary way to foster closer ties with their customers.

But still, there remains a common (and tenuous) thread in the digital world that enables peace-of-mind for legitimate transactions between consumers, banks and retailers: trust. Trust is much easier to establish in the offline world where consumers are recognizable and goods are transferred physically, but extremely difficult to replicate in the digital world.

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The Card-Acceptance Conundrum: ISO or Gateway?

Where Do Growing CNP Merchants Turn for Merchant Services?

By CardNotPresent.com Staff

conundrumEvery day, many small merchants reach a tipping point. They’ve outgrown their current method for accepting payment and it’s time to figure out how to accept major credit cards. For many merchants—especially online entrepreneurs—figuring out how to take that next step is a challenge.

“A small merchant is focused on building a business, getting customers, creating products,” says John Rante, chairman and CEO of BluePay Processing, a company that focuses on technology-driven payment solutions. “They’re often surprised at the all the things they have to consider when they reach the point where they’ve outgrown the micro-payment or third-party solutions like PayPal, or Square.”

One of the first considerations for most merchants is cost, but paying for card processing services shouldn’t be a road block.

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Guest Perspective: Avoiding the Five Fatal Mistakes of Mobile Payment Systems

The secret to earning wide acceptance by consumers and merchants

By David Pipe, Chief Marketing Officer, MPayMe

Five Fatal MistakesOne of the great things about my career for the past 20 years is that I get to travel the world. This has provided me a unique perspective on the developing landscape allowing consumers to make financial transactions with their smartphones. I’ve noticed the same five mistakes are being made in multiple markets around the world.

Virtually all competitors in the space are moving in the wrong direction. The five mistakes are: limiting the function only to payments, using single-channel solutions, trying to replace the consumer's wallet, not looking beyond retail and missing international opportunities.

A significant amount of money is being invested and these investments could be put at risk by the five mistakes, which are easy to avoid by expanding your company's view of the market and broadening your goals.

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Report: 93% of Online Merchants Experience Cross-Border Profitability

By D.J. Murphy, Editor-in-Chief, CardNotPresent.com

Payvision/CNP.com SurveyAs the Internet evolved into a selling tool, its potential to allow retailers to reach international markets they never before thought of selling into became apparent. The ultimate promise of e-commerce became a world without borders. In reality, there’s no such thing. Differences in currency, culture, communication and regulation make operating an e-commerce business across borders daunting. But, the opportunity to sell their goods and services to new markets made up of billions of potential new customers can make navigating those challenges worth the effort.

A new report based on a recent survey describes the current environment facing cross-border aspirants in each of the major regions worldwide and confirmed the notion that, for companies that make the leap, cross-border e-commerce is very profitable. Dutch PSP Payvision partnered with CardNotPresent.com to poll nearly 500 online merchants, acquirers, MSPs, ISOs and PSPs to gauge their experiences and perceptions about cross-border e-commerce. Significantly, half of the survey’s merchant respondents already engage in cross-border e-commerce. And, for more than 93 percent of those merchants, the strategy has proven profitable. In addition to the headline number, the paper’s analysis concluded that the road to cross-border e-commerce profitability depends on partnering with a global acquirer.

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Taking Account Takeover Protection to the Next Level

By Garient Evans, Director of Identity Risk Solutions, ID Analytics

GTSA consumer’s email address, phone number and home address associated with their credit-card account just changed in your processing system. Did the consumer initiate the request or did a criminal just take over their account?

Account takeover is a persistent issue that costs companies millions each year. It will continue to grow with the proliferation of publicly available personal information, the increasing number of data breaches and an increasing number of online black markets for private data. Moreover, the increased adoption of EMV payment technolo­gies intended to thwart card-present fraud at the point of sale is expected to actually accelerate the migration of fraud activities towards exploiting weaknesses associated with a company’s e-commerce and other self-service offerings.

With more fraudsters determined to commit account takeover, and a growing availability of sensitive data to perpetrate the crime, organizations are looking for ways to shore up the gaps in their account takeover defenses.

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Why MCX Should Focus on CNP, Not POS

CardNotPresent.com editorial

MCXMany of the problems that stalled the Google and Isis mobile payment solutions still exist, and likely will affect MCX.  Particularly significant, merchants are generally not yet equipped with the hardware necessary to accept mobile payments at the POS.  These merchants are willing to support the technology, but don’t have the (relatively expensive) equipment necessary to do so.  Also, very few consumers are actively seeking an alternative to card-based payments at the POS.  This means that even though the technology is useful to consumers, it will take a significant amount of work to convince them to adopt it.

At the POS, these problems are significant enough to potentially derail the program.  However, both of these problems are easily overcome if MCX decides to initially focus on card-not-present (CNP) e-commerce solutions. In addition to avoiding these problems, focusing on CNP transactions would offer a number of unique opportunities for MCX and the merchants that implement its solution.

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Report: Fraud Rates Declining but Cost of Fraud Growing

By D.J. Murphy, Editor-in-Chief, CardNotPresent.com

While fraud as a share of revenue is declining, its cost to merchants—especially online and mobile merchants—continues to rise, according to a new report from antifraud technology provider LexisNexis Risk Solutions. Rather than simply total up the replacement costs of goods lost to fraudsters, for the past five years, LexisNexis and its research partner Javelin Strategy and Research have tried to assess the full range of costs involved when merchants fall victim to fraud.

LexisNexis

In 2013, for every dollar lost to fraud, it cost merchants $2.79, up from $2.69 last year and $2.32 in 2011. For online merchants, however, every $1 in fraud cost $3.10—a frightening thought for fraud and risk managers who have seen fraud in other countries explode in card-not-present channels after they implemented EMV, which the U.S. is on course to do in the next few years. As Jim Van Dyke, CEO of Javelin, puts it: “So, the space that’s been hit the hardest is going to actually get hit harder yet in the next year or two.”

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Guest Perspective: Who Really Needs Visa and MasterCard? (Reprise)

By Ralph Bianco, Payments Industry Veteran

Ralph BiancoAs a senior vice president at MasterCard in the late ‘90s and early aughts, I had a ringside seat for the rapid and significant consolidation of U.S. financial institutions and payment processors. At the time, to create a sense of urgency within the company and a call to action in response to the rapid changes in the payments industry, I wrote a thought piece titled “Who Needs MasterCard?” In it, I wondered if MasterCard was really focused enough on the underlying business and the opportunities and challenges that our ever-changing environment presents.

More than a decade later, we continue to bear witness to change in the industry, whether it’s driven by new technology, consumer demand, competition or regulation. Whatever the reason, change is continuous, but my question from all those years ago still stands (albeit from a different perspective). Are the card brands responding effectively and appropriately to a changing environment?

In a new era, with new challenges and new opportunities, the question is no longer “who needs MasterCard?” It’s “who needs MasterCard or Visa?” To be clear, I am not suggesting that no one actually needs these payment brands. Over the years I have worked for and/or very closely with MasterCard and Visa. I have the highest regard for their products, capabilities, brand strength and global reach. I am suggesting there is some value in looking at these institutions in light of the current business environment, from a global perspective and within the context of the worldwide and real-time processing capabilities that exist today.

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Avoiding Whack-a-Mole: How to Stay Ahead of Online Gaming Fraudsters

By Katie Flood, CardNotPresent.com staff

whackamoleIn most massively multiplayer online role-playing games, players pay to maintain an account and they may also pay to purchase currency within the game, which typically comes in the form of points, coins, skills, power, or weaponry. Most gaming companies offer a free-to-play option for beginners, but to create an ongoing game or to advance within the game, players must sign up for a paid account. Gaming merchants’ revenue thus depends on consumers’ interest in playing the game and their willingness to purchase currency within the game in order to progress.

So, when it comes to risk management and fraud prevention for the companies that create and run online games, practices that degrade the game pose as much of a threat as those that scam gamers. Bert Wolters is director of Risk and Fraud Mitigation at Adyen, an online payment solutions company that works with a number of online gaming companies. Wolters recalls one client whose game was invaded by Chinese hackers who were intermittently shouting “Buy Viagra!” at other users over their headsets. This sort of in-game spam is a serious problem, Wolters explains, because “we want to give players true, immersive experiences in the game, not trashy spam.” Most users aren’t going to put up with this random screaming for long, and once they leave the game, it’s hard to bring them back.

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Cracking the Cashless Vending Code: Telkey Solutions

By D.J. Murphy, Editor-in-Chief, CardNotPresent.com

vending machineBefore 2007, Swedish mobile payments company Telkey Solutions was nothing more than a few patent applications and an idea to enable consumers to use their mobile phones to make purchases at vending machines, car washes, laundromats and a host of other self-service machines and kiosks. Founders of the company, based in the Stockholm suburb of Täby, had a notion that devices equipped with NFC would be widely available in a few short years, but “we were way too early,” according to CEO Niklas Magnusson.

Luckily, the company’s patent pending technology didn’t (and still doesn’t) rely solely on NFC to transmit information between devices. Telkey, and its CoinCode product, can use a number of mobile technologies—including SMS, Bluetooth or WiFi—for its mobile temporary access codes (mTAC) to work in the coin-operated machine space. Magnusson says, while it was early days for mobile payments, the vending industry in Sweden at the time was ready for CoinCode becauseconsumers were beginning to pay for transit using SMS. Awareness that you could use your phone to pay for things was growing. And, the company offered an easy hardware upgrade for machine operators. Simply installing an inexpensive PIN pad on the machine enabled it to accept payments via text message.

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Shopify Simplifies Credit-Card Acceptance for E-Commerce Merchants

By D.J. Murphy, Editor-in-Chief, CardNotPresent.com

Louis KearnsSince its inception as an e-commerce platform in 2006, Shopify’s goal has been to make the experience of selling online simpler for its merchants. On Monday, the Canadian company launched Shopify Payments, which integrates credit-card acceptance directly into the platform. So, a merchant that builds its online store using Shopify no longer has to outsource the payment function to a third party. Tightly integrating payments into its e-commerce platform has been a goal of Shopify’s for some time, according to Louis Kearns, director of payments at Shopify.

“It was always something that our founders and executive team had in the back of their mind to provide a better overall payment experience to our customers,” Kearns tells CardNotPresent.com. “As Shopify grew, we were trying to make commerce simpler and better across the board. Payments is just one of those things our customers expect to be taken care of for them when they create a Shopify account.”

To accomplish the integration and ease the headache for their merchants of applying for merchant accounts or setting up their own gateways, Shopify had to become a Payment Service Provider (PSP) with its own banking and processing relationships.

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Guest Perspective: Integrating NFC and the Cloud in a Mobile Commerce World

By Robert Martin, Ph.D., Senior Vice President and General Manager, Attended Merchant Solutions, Apriva

Rob MartinThroughout the history of technology, there have been significant debates between opposing factions advocating a particular philosophy or approach—be it hardware- or software-based—as the be-all and end-all solution for that particular market. In the mobile commerce space, the perceived need to back a victor seems to be just as passionate. In one corner are the supporters of NFC (Near Field Communication). They support the idea of keeping payment credentials stored in a secure element on the device, and fervently believe this technology offers merchants and consumers the best possible option to accelerate adoption rates among retailers, merchant services providers and consumers.

On the other side of the equation sits the pro-cloud crowd. They are equally supportive of their approach to mobile commerce and can offer up very compelling proof points in terms of flexibility, ease of deployment, and lower operating costs. But, while each side makes a strong case, there really shouldn’t be any debate at all.

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Mobile Fraud: Basic Data Still in Short Supply

By CardNotPresent.com Staff

Mobile Survey 2013While users of mobile devices routinely express concern over the security of mobile payments, the data that might confirm or alleviate their fears is tough to come by.

Security experts and even the Federal Trade Commission (FTC) have issued warnings and offered up various likely fraud scenarios, from intercepted Web traffic to stolen phones. And, although experts are trying to get a handle on the level of payments fraud committed using mobile devices, right now that’s difficult if not impossible.

“The truth is that most merchants don't have the ability to determine whether a given transaction originates on a mobile device,” says David Montague, president and lead consultant with The Fraud Practice, based in Sarasota, Fla. “That makes it very difficult to identify what, if any, trends might be surfacing with regard to mobile payments fraud.”

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Bitcoin: Speculative Investing Fad or Real E-Commerce value?

By D.J. Murphy, Editor-in-Chief

bitcoinLast week, over an astonishing few days, the exchange rate for Bitcoin, the decentralized virtual currency that had been enjoying a run up in value for several months, went crazy. So crazy, in fact, that comedian Stephen Colbert devoted an entire segment to the issue on his Comedy Central show on Wednesday night, entering Bitcoin in the mainstream pop-culture zeitgeist.

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Staples Velocity Lab: Ideation to Innovation at Warp Speed

By D.J. Murphy, Editor-in-Chief, CardNotPresent.com

Staples Velocity LabYou may not know it, but Staples, the big-box office-supplies chain that introduced us to the “easy button,” is an e-commerce juggernaut. In fact, the company ranked second on the most recent Internet Retailer list of the top 500 U.S. e-commerce retailers, trailing only Amazon.com in online sales. But, as focused as Staples is on reaching customers through the online channel, sales in its brick-and-mortar locations still account for 60 percent of its total sales revenue.

That relative balance means the company believes it is uniquely positioned to understand and leverage all of its assets—technological and traditional—in omnichannel efforts that are beginning to define retailing.

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MasterCard’s Digital Wallet Reaches Next Stage of Evolution with MasterPass

By D.J. Murphy, Editor-in-Chief, CardNotPresent.com

MasterPassAt the recent Mobile World Congress summit in Barcelona, MasterCard unveiled the next generation of its digital wallet. The company has rebranded its PayPass Wallet Services as MasterPass and enhanced the service to give merchants a flexible way to offer the omnichannel shopping experience they want to deliver to consumers, according to Ed Olebe, group head of MasterPass Services for MasterCard.

Olebe calls MasterPass an evolution of PayPass Wallet that saw the service morph from a wallet enabling e-commerce or in-store checkout to a service that looks at digital commerce “more holistically.” He notes a dichotomy that emerged between MasterCard’s merchant partners and issuer partners that were leveraging PayPass Wallet.

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Guest Perspective: The Future of Payments - We Need a Paradigm Shift

By Bill Deichler, Manager, Payment Methods, Murphy Oil USA

Cutting Credit Card CostsWe are all very familiar with the history of plastic for payments—first credit and then debit cards. Historically payment cards were a financial institution play to help merchants expand both the frequency and the amount of its customers’ purchases. It has rolled along pretty smoothly for a number of decades.Then came the rapid increase in product pricing (interchange)—especially in the petroleum sector—and the cost of those card purchases grew to unacceptable levels.

To handle this unfair expense, merchants, one of the most entrepreneurial segments of our economy, went begging for regulation. And they got it. But, now where are we? It's time to reimagine the cost structure of the payments world and it looks like it will be up to merchants to lead this effort.

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W.net Brings Women in Payments Together

By D.J. Murphy, Editor-in-Chief, CardNotPresent.com

W.netOnly a few days after a massive blizzard blanketed the northeast United States with up to three feet of snow, a group of professionals navigated the partially plowed streets of Boston to mark the expansion of an organization dedicated to supporting women working in the electronic payments industry. W.net (Women Networking in Electronic Transactions) was founded in 2005 to give women working in the male-dominated payments workforce access to and support from highly successful trailblazing women who had come before them.

The networking group runs what it calls LINC (Local Interest Network Circle) events in seven geographical regions where payments professionals can gather in person to socialize, network and inspire each other in an environment they might not experience on a daily basis. Since the organization’s genesis, W.net LINCs have sprung up in Atlanta, Chicago, New York, Northern California, Phoenix and Texas.

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After the Dust Settles: N.J. Fraud Ring Raises Questions for Acquirers, Merchants

By D.J. Murphy, Editor-in-Chief, CardNotPresent.com

U.S. Attorney Alan FishmanWhen news broke recently about a massive credit-card fraud ring based in New Jersey, the headlines screamed about the $200 million in losses that U.S. Attorney Paul J. Fishman said could grow as knowledge of the extent of the sophisticated scams grew. Instead of targeting consumers and buying big-ticket items with stolen credit card information, however, the 18 men charged in federal court mostly defrauded financial institutions, getting tens of thousands of credit cards issued to more than 7,000 false identities.

Even more problematic, the thieves allegedly created dozens of completely fictitious businesses that were able to receive merchant accounts and card-acceptance capability, highlighting what some in the industry are calling “woefully inadequate” underwriting coupled with market conditions in which shrinking margins are ratcheting up the pressure to onboard merchants quickly.

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George PeabodyGuest Perspective: Another Run at 3-D Secure and Issuer Liability in E-commerce

By George Peabody, Payments Innovation Road Trip

Recently, I spoke with Mark Nelsen, Visa's head of risk and authentication product development, who is responsible for the new Visa Consumer Authentication Service (VCAS). Announced November 26, it is a service targeted toward issuers but, in my view, the larger potential beneficiaries are the e-commerce and m-commerce merchants, although some integration work will be required on their part to take advantage of the service. A skeptic might call VCAS "son of 3-D Secure." It appears to be a big improvement, though, on its parent's shortcomings.

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Ring in the New: CNP Ruminations for 2013

2013 PredictionsAs 2012 has given way to 2013 we at CardNotPresent.com thought it was time to turn some space over to the many constituencies that comprise our readership. The priorities, challenges and opportunities for the year ahead vary widely for the merchants taking card-not-present payments and the medley of service providers that support them. We’ve invited several of them to make predictions or pass along their thoughts about the coming year. What issues will dominate the list of concerns for those engaged in the CNP payments space? What’s in store for e-commerce and mobile payments in 2013? Our experts tell us what’s on their mind. 

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Multi-Channel Retailing Ushers in New ERA for D2C Marketers

  By D.J. Murphy, Editor-in-Chief

Multi-Channel RetailingThe Electronic Retailing Association (ERA) has evolved in the more than 20 years of its existence from a television-centric group lobbying Washington in the face of increased regulatory scrutiny to a professional trade organization addressing the concerns of direct-to-consumer (D2C) marketers in the midst of a shift—like many other retail segments—to a multi-channel sales environment. Direct-to-consumer marketing traditionally is defined as a retailer using primarily audio/video to tell compelling stories that drive consumer response and sales. Initially, this meant infomercials persuading consumers to pick up the phone and place an order through a call center, according to Julie Coons, president and CEO of ERA.

“About ten years ago, the National Informercial Marketing Association (NIMA) became the Electronic Retailing Association,” Coons says. “As time went on, these traditionally television-centric companies that sold product through long- or short-form infomercials began using more channels including radio, e-commerce and now mobile applications on phone or tablets." 

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Affinity Oversees Evolution of Card-Linked Offers

By D.J. Murphy, Editor-in-Chief

Affinity Solutions

In the early years of the new millennium, New York City-based Affinity Solutions—a company that had been providing loyalty solutions to retailers since 1998—saw an opportunity to leverage ever-increasing amounts of transactional payment card data into a shift from traditional reward programs funded mainly by credit-card issuers to a new paradigm reliant on the retailers themselves for funding. Merchant-funded rewards were born and Affinity Solutions was a pioneer in the space. In the intervening years, as the model morphed and became known as card-linked offers, Affinity has partnered with more than 4,000 financial institutions providing data for marketing programs driving increased traffic to more than 25,000 retailers. 

The road from merchant-funded rewards to card-linked offers was not a quantum leap. It was a process during which both issuers and retailers had a lot to learn, according to Jonathan Silver, president and CEO of Affinity Solutions.

“For us it’s been a continuum,” Silver says. “It hasn’t been a bright line between merchant-funded rewards over here and card-linked offers over here. It’s been the gradual evolution of banks recognizing that in order to deliver enough value to the marketer, they had to make the channel access more dynamic and more fluid."

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FreeMonee Makes 2013 the ‘Year of the Gift’

Optional Language Choice: Spanish Spanish | French French

By D.J. Murphy, Editor-in-Chief

FreeMonee2A three-year old startup is harnessing the power of big data and no-strings-attached cash to drive more traffic and more spend to online and brick-and-mortar retailers. Merchants spend hundreds of millions of dollars each year on consumer incentives designed to bring more shoppers through the doors, but they’re not spending that money as efficiently as they could be, according to Jim Taschetta, chief marketing officer for San Mateo, Calif.-based FreeMonee. 

Taschetta says one can look no further than gift cards for an incentive that works better than any other—especially coupons, which are the primary incentive vehicle currently used by retailers. 

“There is a product already on the market retailers use that’s incredibly effective at drawing consumers in the door—the gift card,” he says. “When retailers use gift cards they find they’re ten times more effective than anything else they can do to bring customers in the door.” 

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WhitePages PRO Taps Phone Data and More to Identify CNP Fraud

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By D.J. Murphy, Editor-in-Chief

WhitePagesIn the Internet stone age of 1997, when Alex Algard founded a Website that put a national phone directory online, he appropriated the generic name WhitePages to evoke the old phone book that showed up periodically on front porches, at the end of driveways and in mailboxes. Fifteen years later WhitePages.com and its sister Websites (411.com, Address.com, PeopleSearch.com, PhoneNumber.com and Switchboard) comprise one of the largest repositories of consumer and business contact information on the Web. The company counts 40 million unique users  and performs approximately 2 billion searches each month. 

 As time went by, those billions of searches began to reveal some interesting information about those millions of users and what, exactly, they were trying to accomplish. Algard, the company’s CEO in addition to being its founder, says analysis showed many cases of multiple searches originating from a single IP address. 

“We noticed time and time again that certain users were conducting up to dozens of searches in a day,” Algard says. “We researched where these searches were coming from and it turned out that e-commerce merchants were using Whitepages.com as an improvised, ad hoc solution to prevent fraudulent transactions. They were doing searches on phone numbers to verify addresses and reverse lookups to match phone numbers to names.” 

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FICO Identifies Growing Threat of CNP Fraud 

By D.J. Murphy, Editor-in-Chief

FICO StormcloudsFor nearly 20 years, predictive analytics firm FICO has gathered information on millions of payment card transactions per year to form a picture of card fraud in the U.S. In an analysis of credit- and debit-card losses in 2011, FICO, the company that set the standard for measuring consumers’ credit risk, found that overall fraud ticked up, but fraud in card-not-present transactions increased significantly. FICO found in a recently released fraud study that CNP-fraud losses increased at twice the rate of counterfeit-card losses.

While the same trend has been attributed in other countries to the introduction of Chip-and-PIN cards, in the U.S.—where the EMV standard has yet to be implemented—other factors are at work, according to Doug Clare, vice president of product management at FICO. Prominently among them is the explosion of debit use, even online where consumers traditionally have been reticent to pay with debit.

“We’ve been seeing this shift for a while,” Clare said. “Clearly there are more transactions, especially on the debit side. Debit transactions have increased pretty significantly as consumers have gotten more accustomed to using debit for darned near everything.”

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Merchant Groups Aiming to Speed up Process in Interchange Settlement Battle

Objecting merchants can sign on with unusual move

By D.J. Murphy, Editor-in-Chief

Last week, home improvement mega-retailer Lowe’s became the most recent influential merchant to go public in its opposition to the proposed settlement of a class action suit accusing Visa, MasterCard and more than a dozen credit-card issuing banks of violating federal antitrust rules in the way they set interchange rates.

Public statements are only the first salvo, however, in a battle to derail the settlement agreement—nearly seven years in the making—before it ever leaves the station. Large retailers and national merchant trade associations are now in the process of trying to convince a federal judge to end the legal fight before the agreement receives preliminary approval; a tactic attorneys on both sides agree is exceptionally uncommon.

According to the settlement agreement made public in July, members of the class have the right to object to the settlement in a written statement to the court “within the Class Objection Period.” (180 days after the judge grants preliminary approval and 90 days after the last official notification to members of the class). In the vast majority of cases, once a settlement agreement has been negotiated, this is the process the parties use to register dissatisfaction with the settlement.

Not this time. Several plaintiffs from the original lawsuit, including NACS—the trade group representing U.S. convenience stores and gas stations that was one of the first groups to object when the settlement was revealed in July—are spearheading a movement to circumvent the usual process and bring it to an end quickly.

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The Devilish Details of the Interchange Settlement Proposal: What’s a Merchant to Do?

By D.J. Murphy, Editor-in-Chief

DJ MurphyThe settlement proposal in July between Visa, MasterCard and several top credit-card issuers and the class of merchant plaintiffs that sued them over credit-card interchange fees initially was hailed as a compromise that would end a long-running battle over fees most merchants feel are excessive and set in violation of antitrust law. Merchant opposition, however, has mounted in subsequent weeks and an Oct. 19 deadline now looms for merchants in the class (or, rather, classes—more on this later) to decide if they want to officially notify the court they object to the proposal.

Should retailers take the money and run or should they reject the proposal? And if they oppose the settlement, how should they proceed? The answer will be different for different merchants, but details of the settlement proposal that have not received much visibility are important for merchants to know if they are to stake out an informed position.

Initial media reports focused mainly on the size of the total payout and merchants’ ability under the proposal to surcharge customers who pay with a MasterCard or Visa credit card. Opposition to the proposal has coalesced mainly around the release of the defendants from any future legal action, but there are other concerns—and opportunities—for merchants contained in the settlement.

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Semafone Turns CNP Industry’s Attention Back to the Telephone

Optional Language Choice: Spanish Spanish | French French

By D.J. Murphy, Editor-in-Chief

Stu CartyIn the CNP payments firmament, e-commerce shines brightest. But payment via telephone is entrenched firmly in CNP’s DNA and a U.K. company has introduced patented technology that helps merchants that operate call centers reduce fraud and PCI scope associated with taking payments over the phone, which still accounts for billions of dollars in potential revenue each year, according to Stu Carty, sales manager in North America for London-based Semafone.

Semafone formed in 2009 when a team of call center professionals began looking into solutions to address PCI compliance but couldn’t find any.

“As they started to embrace the PCI compliance standards, they were feeling the pain of those standards,” says Carty. “They recognized a need, looked around in the market and saw there was nothing available. They developed some technology internally, then realized they could take the technology to market.”

The company has received several rounds of financing, including from noted London investment company Octopus Ventures. The most recent in 2012 added nearly $3 million to Semafone’s coffers. Since then, the company has built up a strong customer base spanning multiple markets including government, finance, retail, insurance, debt recovery, OSP, travel & leisure and broadcast with Rupert Murdoch owned satellite broadcaster Sky.  Business up to now has been predominantly in the U.K. and Europe with inroads being made in North America. Semafone’s most significant milestone, however, came just last month when the company secured a U.K. patent on its technology.

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MeS Acquisition Driven by Technology not Geography

By D.J. Murphy, Editor-in-Chief

Kevin GallagherUntil very recently, Redwood City, Calif.-based merchant acquirer and processor Merchant e-Solutions (MeS) was a 300-person company serving 70,000 U.S. merchants—most of which tally between $10 million and $100 million per year in credit card volume. E-commerce merchants account for about half of MeS’s client base, according to Kevin Gallagher, general manager of e-commerce for MeS.

When the company was founded by Bank of America Merchant Services veterans 13 years ago, it was with the idea that MeS could build a state-of-the-art platform that would be more feature-rich and flexible than many of the existing legacy systems. And, Gallagher said during an interview at the recent CNP Expo in Orlando, Fla., the organization has spent the intervening years adding features and functionality that have enabled it not only to compete with larger legacy providers, but to exceed them in many ways. As a smaller, nimbler company, Gallagher said MeS could make changes and enhancements to its platform sooner than other larger acquirers (MeS began offering tokenization, for instance, nearly five years ago). He proudly noted at the time that 100 percent of the company’s technology and 100 percent of its service and support—front-end authorization platform, payment gateway and back-end settlement services—were in house.

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Q&A with Adyen’s Roelant Prins and Peter Caparso

Optional Language Choice: Spanish Spanish | French French

By D.J. Murphy, Editor-in-Chief

Roelant PrinsCardNotPresent.com sat down with Roelant Prins, Adyen’s chief commercial officer, and Peter Caparso, the company’s North American president during the CNP Expo to talk about growth, serving a new type of merchant and how mobile is leading to a convergence of the online and POS channels.

CardNotPresent.com: How, in the past year or so, has the type of merchants you’re working with changed?

Peter Caparso: We originally worked with a lot of video gaming and digital content companies, but now we find, in addition to them, we’re working a lot with retailers, software download companies and some travel companies. We continue to sign and board significant merchants. Not necessarily big merchants, but medium-sized companies, cool tech companies etc.

Roelant Prins: When we started five years ago, people very much liked our story but quite a few prospects said it was not the right time or they really like the solution but the company doesn’t have a lot of experience. So, we started with these tech companies that didn’t mind how young we were. We were in the same phase and they really liked our technology so it was easier. At some point, the larger companies began to recognize we were still out there and heard a lot of good stuff about us.

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GlobalCollect Eyes Expansion in Latin America

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By D.J. Murphy, Editor-in-Chief

Thomas Staudt Earlier this month, e-payment service provider GlobalCollect acquired Buenos Aires-based e-commerce processor Sub1, expanding its presence in South America with an eye on beefing up operations in the entire Latin American region. The Dutch CNP processor, which enables merchants to sell via the Internet to consumers in more than 200 countries, specializes in offering a wide array of local and global payment methods for online purchases. Sub1 will enable GlobalCollect to leverage a familiar and proven platform in the region to serve consumers in a burgeoning e-commerce market—especially Brazil, according to Tom Staudt, GlobalCollect’s CEO since January 2011.

“Overall, e-commerce is growing 30 percent-plus annually throughout Latin America and the largest area of growth is Brazil,” Staudt tells CardNotPresent.com. “Brazil represents upwards of 50 or 60 percent of the overall e-commerce marketplace in the region, with Chile, Peru, Mexico, Argentina and Colombia being the other predominant markets.”

The payment environment in the region, Staudt notes, is not dramatically different from North America, with American Express, MasterCard and Visa establishing themselves as strong payment brands in Latin America along with a growing list of alternative payment types.

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Dwolla Provides Fast Access to Cash at Low Cost

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By D.J. Murphy, Editor-in-Chief

Ben MilneThe month of February capped off a stunning year-plus for payments startup Dwolla. Early last month the company, which was founded in 2008 but didn’t launch publicly until December 2010, announced it had secured $5 million in new funding. For a company that began because its founder, Ben Milne, simply wanted to run his online business without paying so much interchange to credit card issuers, it’s heady stuff. But, Milne, who is also Dwolla’s CEO, says the company will succeed based on adherence to a coherent philosophy:

“On any device that connects to the Internet, we believe you should have access to your cash and be able to exchange it in a very fast way at very low cost to everyone involved in the direct action,” Milne tells CardNotPresent.com. “In a world where money doesn’t physically move any more—the ownership of it just kind of shifts—there’s really no reason technically why that shouldn’t be possible.”

What Milne envisioned was a cash-based system that worked along the same lines as the Automated Clearing House (ACH)—an electronic network that facilitates transactions to and from users’ bank accounts—but that overcame the some of the issues most admit ACH needs work on.

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Chase Paymentech Eyes Holistic Approach, Mobile

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While fraud, chargeback and reversal rates are important measures, implementing an anti-fraud solution for CNP merchants requires an enterprise-wide perspective, according to Casey Bullock, vice president and general manager of fraud solutions for Chase Paymentech. Bullock, on the job with Chase for about two years now, says the company’s international scope and broad client base puts the company in excellent position to fight fraud now and gives it the wherewithal to spot and leverage important industry trends such as the coming wave of consolidation and the explosion in mobile commerce as both consumers and merchants become increasingly comfortable with the technology.

Wider Perspective

To find the right anti-fraud solution, Bullock explains it’s important to have a holistic view of the client.

“It starts with defining what you’re ultimate risk exposure is,” he says. “Most of the merchants I work with tend to think about fraud in absolutes: What is my chargeback rate? What is my reversal rate? There is a more effective way to view a merchant’s fraud landscape.”

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Moving Beyond the Device: Three-part Executive Summary

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Device ID Part IIIPart III

Device Identification—an online fraud prevention tool that only recently has begun to gain mainstream acceptance—establishes a unique ID for a device attempting to access a Website. Devices are assigned tokens that can be tracked across multiple user transactions, providing a unique identifier that makes it possible to differentiate one entity from all the other entities accessing the site. A new white paper from Sarasota, Fla.-based e-commerce payments consultancy The Fraud Practice describes methods required to integrate Device Identification into an overall fraud solution. CardNotPresent.com will offer an executive summary of the detailed document in three parts. Today: Part III.

Three Logical Areas for Device ID Integration

Because device identification is just one tool within your overall solution, it’s important to understand the methods you can employ to move beyond the device. There are three logical areas to employ Device Identification within your overall fraud solution: authentication, profiling and blocking.

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Moving Beyond the Device: Three-part Executive Summary

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ShoppingPart II

Device Identification—an online fraud prevention tool that only recently has begun to gain mainstream acceptance—establishes a unique ID for a device attempting to access a Website. Devices are assigned tokens that can be tracked across multiple user transactions, providing a unique identifier that makes it possible to differentiate one entity from all the other entities accessing the site. A new white paper from Sarasota, Fla.-based e-commerce payments consultancy The Fraud Practice describes methods required to integrate Device Identification into an overall fraud solution. CardNotPresent.com will offer an executive summary of the detailed document in three parts. Today: Part II.

The Limitations of Device Identification

The technology behind Device Identification is by no means fool-proof. No fraud prevention technology is.

Device Identification’s strength lies in detecting patterns after repeat visits. It provides limited-to-no-value when it comes to fraud prevention for true first-time consumers. The method ­ simply provides a unique token ID for that user. There will be no way of knowing whether or not the user is trustworthy.

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Moving Beyond the Device: Three-part Executive Summary

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David MontaguePart I

Device Identification—an online fraud prevention tool that only recently has begun to gain mainstream acceptance—establishes a unique ID for a device attempting to access a Website. Devices are assigned tokens that can be tracked across multiple user transactions, providing a unique identifier that makes it possible to differentiate one entity from all the other entities accessing the site. A new white paper from Sarasota, Fla.-based e-commerce payments consultancy The Fraud Practice describes methods required to integrate Device Identification into an overall fraud solution. CardNotPresent.com will offer an executive summary of the detailed document in three parts. Today: Part I.

Overview of Device Identification

Device Identification—also known as device authentication, device fingerprinting and device ID—is a technique used to establish a “fingerprint” of a user’s computer or other web access device in order to track their activity and determine linkages between other devices. Device Identification has grown into a very sophisticated science, with active and passive versions, both of which have the ability to be deployed so that they are completely transparent to the end user.

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ThreatMetrix: Fighting Fraud with Device Identification

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Alasdair FaulknerThe roots of Los Altos, Calif.-based fraud prevention company ThreatMetrix were planted nearly 7,500 miles across the Pacific Ocean from Silicon Valley. The company’s story began in 2005 not with e-commerce, but with a project for the Australian government to stop and prosecute email spammers.

"We were tracking botnets, so we built aggregated intelligence to essentially have a credit score for an IP address," says Alisdair Faulkner, chief products officer for ThreatMetrix.

When the ThreatMetrix team concluded its public service and was looking to translate its aggregated intelligence technology to the private sector, still the founders did not consider fraud prevention at the top of their list.

"We were exploring different markets and the original intention was to look at security and integrate that intelligence in firewalls and appliances," says Faulkner.

How Fighting Spam Informs Fraud Prevention

What Faulkner, who previously had founded a networking technology company that prioritized packets in applications over networks providing real time response, and co-founder David Jones, whose experience was in email filtering, realized was the current methods being used to screen for anything—new account origination, money transfer or online credit card transactions—were not taking basic security intelligence into account.

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Special Feature: Post-Durbin Winners and Losers

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Madeline AufseeserWith the Durbin Amendment to the Dodd-Frank Act slated to go into effect on Oct. 1, how the interchange caps and transaction routing rules will affect all the players is still an open question. Wells Fargo has announced it will begin testing a $3 monthly fee for customers that use debit cards to make purchases in an effort to recoup some of the revenue it expects to lose starting in October. That move and Visa’s recent announcement that it will modify its fee structure are clear signs of the scramble taking place in a post-Durbin world.

In an effort to sort out the winners and losers, Boston-based Aite Group looked at the payments landscape and what all the players can expect after D-Day. In short, says Madeline Aufseeser, senior analyst at Aite Group, merchants will gain the upper hand at the expense of the big banks and the card networks.

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Think Locally, Act Globally

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Peter CaparsoPeter Caparso, president of the North American unit of Dutch e-commerce payments processor Adyen, has some advice for merchants when dealing with their processor: don’t put yourself in a multi-year deal and always be dealing with more than one processor. It may be counterproductive for Caparso if his clients take his suggestions to heart, but, from a merchant’s perspective, he says, it’s the right thing to do.

“All your readers should give me their business,” he laughs, “but always be in contact with a second payments provider. As a business owner that’s how you give yourself the best chance to succeed.”

Adyen grew out of Bibit, another Dutch payments company formed in the late 1990s that had been acquired by RBS WorldPay in 2004. In 2006, Caparso, who had been with RBS WorldPay as the head of its CNP division in the U.S., ran into some of the former Bibit founders who had left the merged company.

The chance meeting lasted much longer than expected and Adyen was born. Having had access to high-level merchants in his position with RBS, Caparso was privy to their pain points and to what they wanted to see. Going with Adyen, he saw, was the right thing to do.

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Fraud Management Solutions, Buy Versus Build, a Case Study

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"Building a fraud solution in-house is not for the faint of heart, it requires a lot of time, resources, money and experience in fraud management."

David-MontagueThere has been a lot of change in CNP fraud management over the past 15 years but today, just as with the early pioneers in e-commerce, whether to buy or build a fraud management solution is still a question we are asked to consider by some of our clients. While the types and volume of fraud attacks have grown over the years, so have the number of fraud solution providers and techniques for combating fraud. Today merchants have a plethora of choices--end-to–end solutions as well as strong niche fraud tools--so why would anyone still want to consider building their own fraud solution?

To be clear, when I talk about building a fraud solution I am not simply referring to hard coding some rules into the back end of an e-commerce system. I am talking about building out the infrastructure for a fraud mitigation program, which, for starters, means being able to write rules dynamically, manage rules, maintain lists, run velocities, scorecards, perform manual reviews, manage data, perform reconciliation and connect to third-party data sources. Building a fraud solution in house is not for the faint of heart. It requires a lot of time, resources, money and experience in fraud management. It is very rare when the business environment, business case and available resources to accomplish the task are aligned to make this a viable option. The fact is, I have seen some very large and technologically sophisticated organizations struggle, and in some cases abandon, their efforts to build in house. 

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Digital River Puts Wealth of E-Commerce Experience to Work

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Paul BridgewaterBetween operating thousands of e-commerce sites globally—many for top brands including Microsoft, Adobe, Electronic Arts and Kodak—and as a pioneer in selling digital software products online, Minnesota-based Digital River, Inc. has access to a wealth of data and knowledge. As the company has expanded organically, via acquisitions and by adding clients, it is leveraging that trove of data to extend its payment and fraud prevention services through its new World Payments solution, and has made them available to online merchants on a standalone basis.

According to Paul Bridgewater, vice president of World Payments, the payments experience of managing tens of thousands Web stores around the world has enabled Digital River to understand, “based upon the demographic of the consumer and the types of products being sold by merchants, what payment options matter and how those payment options should be formatted and presented to consumers in the checkout experience.”

Bridgewater notes the knowledge accrued operating e-commerce sites since its launch in 1994 has provided the company the basis to develop template payment pages that merchants can experiment with to find the ones that are most effective. The templates, which are deployed by the merchants themselves in the World Payments command console, represent Digital River’s own “best practices” for payments pages on their e-commerce sites.

Bridgewater says Digital River’s payment programs are all designed to grow revenue.

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Accertify Leverages American Express’s Global Reach

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Jeff LiesendahlAccertify’s anti-fraud solution is relied on by some of the largest U.S.-based and global brands to manage card-not-present and other types of risk. Last fall, following several years of growth, the company was acquired by American Express. Accertify co-founder and CEO Jeff Liesendahl says in 2011 the company will concentrate on global expansion of its fraud prevention platform and promoting its new chargeback management service.

Origins
A decade ago, Liesendahl and the rest of the management team of the online travel startup Orbitz were struggling with how to address fraud in an industry where individual transaction value is high and margins are miniscule.

Liesendahl and other Accertify founders were dissatisfied with commercially available fraud solutions at the time, which they believed failed to address many parts of the screening, review and other processes that were necessary for stopping fraudsters. 

The Orbitz team looked at all the data they had as merchants—generated internally and externally—and built an end-to-end system from scratch that was more comprehensive, data-driven, automated and capable of evolving as fraud scams did.  The system successfully solved Orbitz’s fraud problem and provided a springboard for the platform Liesendahl and his team later created at Accertify.

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Kount 'Quietly Doing the Laundry'

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Steve RouseSteve Rouse, chief operating officer of Kount, bills the Boise, Idaho anti-fraud software provider for e-commerce merchants as a four-year-old company “with about 13 years of experience.” The company that evolved into Kount actually began as one of the merchants it now serves, Rouse explains. In the late 1990s, Rouse and the team at Kount operated an online business that sold e-books and software called ClickBank. It got into fraud prevention simply as a way to address its own needs as a merchant.

“We quickly figured out as an online business that you have to have fraud protection, so we invented some technologies that really underpin the fraud protection business today like device fingerprinting and proxy piercing,” Rouse says. “Those are technologies we invented and patented to protect our own merchant business.”

Rouse says it became quickly apparent that the anti-fraud technologies patented by ClickBank could sustain a separate business. But, the company instead decided to sell some of its technology. It reacquired the patents and rode out a seven-year non-compete before launching Kount four years ago.

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CNP Meets Brick-and-Mortar with AisleBuyer

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Aisle Buyer LogoStanding in an aisle at Best Buy two years ago, Andrew Paradise was stumped. The self-described “techno dork,” who had built and recently sold a business in the image recognition and online advertising space, couldn’t decide between two nearly identical memory cards he had been shopping for. So, he fell back on a trusted piece of technology: he whipped out his iPhone and Googled the cards to compare their features as he stood in front of them at the store.

Paradise, whose background in addition to deep programming experience includes time in venture capital, was struck by an idea. As smartphones gain a toehold with consumers (30 percent penetration right now, estimated to increase to 50 percent by yearend, he says) is there a way to incorporate the online and offline shopping experiences so that a retailer doesn’t lose engagement with consumers even while they’re in the store?

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The CNP Spotlight – Retail Decisions

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Carl ClumpLong before the Internet existed as the e-commerce behemoth it has become, Retail Decisions (ReD) and its forebears were screening card-not-present transactions for fraud. The international fraud prevention group, which has grown to include payment processing in addition to providing custom CNP anti-fraud software for clients around the globe, grew out of two separate firms on either side of the Atlantic Ocean.

Nearly a quarter century ago, a U.S. company called Transaction Billing Services was one of the first to focus on screening CNP transactions for fraud when it began serving telecommunications companies that had introduced calling card services for travelers.

"If you were going to make a phone call from a hotel you probably didn't want to use the hotel phone directly because the rack rate was so expensive, so you used an international calling card service such as 1-800-CALL-ATT, which gave you lower rates," said Carl Clump, CEO of Retail Decisions.

Users of these services called the 800-number and were prompted to give credit card details, which Transaction Billing Services grabbed and screened against the data available at the time. "That was, of course, a CNP transaction all those years ago before people were ever thinking about online," Clump remembers.

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Secure Remote Payment Council Finishes Year One

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SRPcIn August 2009—just a few months after Visa announced that its total U.S. debit volume had surpassed credit for the first time—a small group of payments professionals began discussing the problems inherent in accepting debit payments for card-not-present purchases made via the Internet and mobile device. Would security concerns derail the apparent match made in heaven between the most popular payment method and the fastest growing retail environment in the United States? The small group, which would become the Secure Remote Payments Council (SRPc), aimed to make sure that didn’t happen.

First, however, the group would have to be inclusive in a way that other associations dealing with e-commerce and m-commerce payments hadn’t, according to payments consultant Paul Turgeon, one of the SRPc’s founding members.

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PCI and Tokenization: Are Either the Answer for E-Commerce Merchants?

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PCIE-commerce merchants spend an ever-increasing amount of time and resources trying to protect the payment card data of their customers. Compliance with the Payment Card Industry Data Security Standards (PCI-DSS) and tokenization are two arrows in the quiver of just about every merchant when it comes to ensuring their customers can pay for goods or services without fear of having their personal information stolen. According to one consultant’s estimate, nearly a third of consumers affected by the breach of a merchant’s systems will terminate their relationship with that merchant.

So are PCI compliance and tokenization serving the purpose for which they are designed? Are they worth the resources being expended on them? Increasingly, in the case of PCI compliance, the answer seems to be no. For tokenization, the benefits are clearer, but the process comes with its own set of challenges. Regardless of the strategies they choose to employ to secure data, merchants must remember why it’s vital in the first place: to preserve their brand.

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Protecting Customer Data from Internal and External Threats

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Vincent DeLucaData breaches affecting merchants and financial institutions can have damaging and far reaching implications if not handled properly. And, it is becoming a growing certainty that nearly every business will face the problem. According to the 2009 Ponemon Institute U.S. Cost of a Data Breach study, approximately 85 percent of businesses have experienced a data breach, up from 60 percent in the 2008 study. In other words, the chance your business’ data security will be compromised is overwhelming, and it’s getting even more likely as time passes.

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Does Durbin’s Debit Deal Really Help CNP Merchants?

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In the past three months, retailers have won significant victories in the area of interchange legislation, but forgive card-not-present merchants if they still feel a bit left out in the cold.

DurbinWhile the Durbin Amendment of the Dodd-Frank Wall Street Reform and Consumer Protection Act of 2010 promises some relief to the seemingly endless escalation of the fees paid by merchants on payment card transactions, for now the savings will be restricted to when shoppers pull out their debit cards. Legislative efforts abroad have concentrated on debit as well, but consumers continue to choose credit cards to purchase goods and services in CNP environments, especially online, due to the perception that protections are weaker for debit cards in the event the account information is compromised.

But, while the Durbin Amendment clearly benefits card-present merchants to a greater degree, there are certainly ways CNP merchants can leverage the new law’s provisions to decrease their interchange burden. Also, a recent settlement between MasterCard and Visa and the Department of Justice will give retailers additional ways to take advantage of payment methods that cost less per transaction. Most importantly, lobbying efforts continue on behalf of legislation that will go beyond debit and address interchange rates applied to credit card transactions.

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Reducing Chargebacks through Effective Billing Descriptors

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handsFor Card Not Present merchants, the descriptor they use to identify the charge is vital because a consumer can’t always connect in his mind a product he received in the mail (from a merchant he may not remember) with the words on the page in front of him. Often, this confusion leads to the initiation of a chargeback dispute. In most of those cases, the consumer actually did make the purchase but sincerely does not recognize the charge on the bill. The confusion is frequently genuine and completely unnecessary.

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Is My Business Generating Enough Chargebacks?

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For CNP merchants, chargebacks are generally seen as an unfortunate cost of doing business. Whether a dispute is fraudulent or sincere, if a consumer initiates a chargeback it costs businesses time and money. The energy and expense devoted to avoiding and reducing chargebacks is evident and necessary. But a question businesses operating in the CNP space also must consider is: Are my chargebacks high enough?

Growing businesses that are under the limits set by the card networks may want to take more chances to increase their orders lest they leave money on the table.

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