Merchants, acquirers, processors, anti-fraud providers and others serving the card-not-present payments market met in Orlando, Fla. recently at the first annual CNP Expo. For our readers who were unable to attend the groundbreaking event, CardNotPresent.com will be offering glimpses of the important information covered in two-and-a-half days of panel discussions on a host of issues relevant to merchants that take card-not-present payments and the technology providers that serve them.
By D.J. Murphy, Editor-in-Chief
While mobile payments has captured more than its fair share of headlines in the past few years, most of them tout the advantages to consumers and the potential for merchants to leverage the power of mobile for combining payment acceptance and the delivery of targeted promotions. But, for merchants that want to tap into this power, what are the challenges and risks they will face?
At the recent CNP Expo, a Day 2 session looked at the obstacles merchants might face from a payments perspective if they want to implement a mobile commerce regime. Moderator Michael Liquornik, president of Montreal-based Fin-Serve Advisors, first enumerated the many mobile solutions that networks consider (and subsequently charge higher interchange rates for) as card-not-present. Solutions that use QR codes at the POS (e.g., Starbucks, LevelUp and GoPago), in-app payments (currently mostly used for digital content), direct carrier billing, e-commerce (transactions handled through a merchant’s regular Website that consumers access on their phone or tablet), person-to-person money transfer and daily deals (e.g., Groupon or LivingSocial). NFC-based solutions were not examined in the session as the networks consider them to be card-present transactions.
Merchants that choose to handle mobile payments in any of these ways face any number of challenges specific to the new technology, according to Steve Kirsch, CTO and founder of security solution provider OneID.
“From a merchant’s point of view you have issues about fraud…there’s the training; how complicated is it to train people to accept [mobile], there’s also the POS upgrade,” Kirsch says. “And you have to look at Internet connectivity.”
Those merchants considering mobile solutions also must consider cost—and that those costs vary according to which type of mobile solution a merchant wants to use. Merchants that use a high-cost type of mobile payment (e.g., in-app payments on Facebook, which cost the merchant 30 percent per transaction, or direct carrier billing, which also is far more expensive for merchants than payments made by credit or debit card) must examine the benefits of accepting that payment type and decide if it’s worth the cost.
“When merchants look at accepting new payment types, they’re asking themselves certain questions,” according to Paul Tomasofsky, president of the Secure Remote Payment Council. “What is the demand out there? Am I going to increase sales? What’s the actual cost of the payment?”
Merchants also need to concern themselves with integrating their mobile acceptance with inventory, POS, returns, training, etc., Tomasofsky notes.
“Those are huge costs for many merchants to get something started,” he says. “It’s not just the device or how cool it is. It’s all these other filters they have to run the decision through that makes it a little harder to make those decisions.”
Once a merchant has decided to adopt a mobile payments strategy, it needs to be aware of the main ways it is vulnerable to fraud. According to Rey Pasinli, executive director of California-based consultancy Total Apps, mobile fraud falls into two main categories: lost devices and concerted attacks using stolen credit card information. And, merchants can attack them in familiar ways.
“We have to take the same protocols we use in the card-present environment,” he explains. “Meaning that, if someone is using their e-wallet for the first time, they have to physically present their card and the merchant has to physically identify that consumer as an authenticated consumer. It’s one of the simplest procedures to do.”
At the moment, Tomasofsky admits fraud is “theoretical” in the mobile payments space because adoption is not yet high and where they are being used, ticket amounts are generally low. When mobile payments move into the mainstream, though, Kirsch notes that fraud will certainly pick up. But the potential is there, he adds, for mobile to be the most secure payment type available.
Stay tuned to CardNotPresent.com in the coming weeks as we present summaries and audio clips from the most exciting and relevant sessions at the 2012 CNP Expo. If you’re interested in being involved in next year’s event as a sponsor, exhibitor or attendee, contact Steve Casco at firstname.lastname@example.org.