U.S. Doesn’t Seem to be “Keeping up with Joneses” When it Comes to EMV

emv-420The day has come and gone. It has been more than a month since the EMV’s adoption deadline (Oct 2015) here in the United States. The highly-anticipated adoption of the Payment Networks’ Liability Shift associated with EuroPay, MasterCard, and Visa (EMV) has taken effect in the U.S., but retailers and merchants are lagging.

Well, not all retailers and merchants. The adoption is primarily lagging when it comes to smaller retailers and e-commerce merchants. Intuit recently released results of a survey among small businesses. The survey results outlined the following key points:

  • Awareness of the October deadlines for EMV adoption is low among small retailers and most have not committed to the change.
  • Few owners have an understanding of the implications and financial and legal liability.
  • Alleviating concerns that small businesses have over cost of the new card reading equipment will have the greatest impact on successful conversion.
  • The biggest opposition for conversion to EMV will be small businesses because of their low awareness and budget restrictions.

Small businesses need to get on the conversion train or they will be left behind. Even more than being left behind, they will likely be targeted by fraudsters. The cost for them will be much more than new point-of-sale equipment; the ultimate cost will be their new liability for fraud, mainly counterfeit cards.

But what about e-commerce merchants with card-not–present (CNP) transactions? Will EMV make a difference for their transaction business? The simple answer is no. For all the advanced protection it provides, the EMV migration does pose a threat to e-commerce merchants. The primary advantage of using an EMV card is the prevention of counterfeit card-present (CP) fraud. The embedded chip in an EMV creates a dynamic authorization code for each transaction, even if the card number and other sensitive data is stolen the thief will not be able to replicate the code generated by the chip. However, the chip is not being read by a terminal in an e-commerce transaction so it has no effect. In other countries, issuing banks have provided devices that cardholders can connect to their computers to use their EMV cards for payment, but they are not widely used and have not been implemented in the U.S.

Based on EMV migration data from other countries, it is expected that increased use of EMV cards will result in a reduction in card-present counterfeit fraud and a simultaneous increase in card-not-present fraud. Merchants with card-not-present systems should be advised to increase their fraud monitoring and detection capabilities.

What can e-commerce businesses do to mitigate card-not-present fraud? They need to implement a system of authentication that works for their particular business and enhances inspection of their card-not-present transactions. The most cost-effective way to do this would be an identity authentication process combined with a secure payment gateway.  “Important factors for success will be not only effectiveness in reducing CNP fraud, but also ease of merchant implementation and customer ease of use,” according to EMVCo, developed by the Smart Card Alliance. Some techniques and tools for implementing verification for e-commerce businesses are:

  • Continue PCI compliance
  • Use an address verification service (AVS)
  • Confirm the phone number and transaction information before shipping products
  • Take advantage of fraud prevention services available from credit card companies such as Verified by Visa or MasterCard SecureCode
  • Verify card security codes
  • Investigate priority shipping requests (especially if free shipping is offered)
  • Validate unfamiliar orders from repeat and regular customers

It’s estimated that 40% of the world’s cards and 70% of its terminals used outside of the U.S. are using the EMV standard.

Currently, the U.S. EMV adoption rate is stagnant and while some are content to let the financial industry run its own course this laid-back approach cannot last. Small businesses need to adopt EMV, there is no way around it. On the other hand, e-commerce businesses must adapt to the possibility that card-not-present fraud will increase and implement additional verification tools to combat this problem.

We will continue to share our thoughts and recent news about the industry and the EMV adoption process going forward. Until then, we hope you’ll follow the conversation and share your thoughts with us on Twitter, Facebook, and LinkedIn.




10 Most Costly Chargebacks: Survival Guide

  1. Failure of merchant to respond to a retrieval request

    This is the single most frequent cause of chargebacks. Fortunately, this is often the easiest to prevent. Simply keep copies of the sales transaction and respond to any and all ‘Media’ or ‘Retrieval’ requests by sending copies of sales drafts immediately.

  2. Cardholder was billed more than once for the same transaction

    To avoid duplicate processing, reconcile your batches daily and ensure that the register/terminal totals match the credit card receipts for the day. If you do receive a legitimate duplicate processing chargeback, do not issue a direct credit to the cardholder as the credit will be automatically applied.

  3. Cardholder denies making CARD PRESENT transaction

    Make sure all transactions are magnetically swiped or imprinted. The sales slip must include both a cardholder signature and the card account number to be valid. The account number must be obtained directly from an imprint of the card itself or from electronically reading the magnetic stripe. Manually entering the account number does not protect you from a no-imprint chargeback even if the sales slip is signed.

  4. Cardholder denies making CARD NOT PRESENT transaction

    When no face-to-face, ‘card not present’ transactions take place, you lose the ability to magnetically ‘swipe’ the credit card through a terminal reader, this increasing the chance for a chargeback. Remember, an authorization and/or an approval code only indicates the availability of the cardholder’s credit at the time the authorization is requested. It does not warrant that the person providing the credit card information is the rightful cardholder, nor is it an unconditional promise or guarantee that you as a merchant will not be subject to a chargeback or a debit.

  5. Account numbers do not match

    After swiping a card, if the card number displayed does not match the number embossed on the face of the card, ask for a different form of payment. Always print and double-check the account number on all phone and mail orders. Accepting non-matching transactions will leave you vulnerable to chargebacks.

  6. A credit/refund was not processed properly

    Credits must be processed correctly and on time. Make your customers aware of your credit/refund policy at the time of purchase. Have the policy printed on your sales slips directly above the cardholder’s signature in accordance with Association policy. Issue credits only to the same account numbers to which the sales were made – refunds paid in cash or merchandise, or to a different account number, will not protect you from this type of chargeback.

  7. Failure to obtain proper authorization

    Be sure to authorize all transactions and accurately record the approval code on the sales slip. If your request for authorization is declined, do not attempt to reauthorize transactions to the same account number, as subsequent approval may not protect you from a chargeback. Information on proper voice authorization procedures may be needed for ‘referral’ responses.

  8. A card was used either before or after its valid date

    Never process a transaction on a card prior to, or after, the valid date. Instead, ask for a different form of payment.

  9. Merchandise or service not received by cardholder

    Sales transactions must not be processed prior to delivery of the product purchased. Proof of delivery, signed by the cardholder, should be obtained for every credit card transaction in which the merchandise or services are not delivered immediately at the point-of-sale. Such proof of delivery may be your only defense if a chargeback occurs.

  10. Cardholder disputes quality of merchandise/services

    Ensure that your customers are aware of your return policy at the time of purchase. Stick to your policy. Display the policy at the point-of-sale and print it on your sales slips, directly above the cardholder signature. This practice does not prevent chargebacks, but will assist in providing detail when chargebacks occur.


E-commerce companies among 2014’s top retail earners

With the e-commerce industry booming, there may come a time in which these companies outnumber those that are exclusively brick and mortar. Should that day arrive, 2014 might be looked upon as the moment when the shift began, based on a new report from the National Retail Federation and Stores Magazine.

A substantial number of the retail sector’s highest earners last year were in the e-commerce sector, according to the most recent report from NRF, detailed in its annual “Hot 100 Retailers” list. Topping them all was Amazon.com, raking in $49.3 billion in sales last year alone, up from $40.2 billion in 2013. Last year’s figure accounted for close to 11 percent of market share.

In a distant second was e-commerce furniture retailer Wayfair.com, Choxi.com – which sells discounted merchandise – and Blue Stem Brands, a parent company to several multichannel retailers.

“The best companies in retail today are those who are open to new ideas and nimble enough to bring those ideas to life,” said Susan Reda, Stores’ editor. “Our list is a mix of established retailers like Nordstrom and Kroger along with newer players like Zulily and Choxi.”

She added that while every company in the list differs in one way or another from the next, what they all share in common is keeping the focus on the customer, who’s “the center of every decision.”

One of the most effective ways that retailers reach out to a broader customer base is through social media. Approximately 25 percent of retailers say Facebook is their top platform for acquiring new customers, according to a separate poll also done by NRF.

Close to 60 percent of businesses have increased their spending on social media marketing in the last year, NRF found.


Security is a top concern for online shoppers

securityResearch shows that if consumers are more confident in the security of online payment, they’d be more apt to shop through Internet retailers. 

The Walker Sands’ 2015 Future of Retail Study found that consumer confidence in payment security would increase in the likelihood that they head to the Web to do their shopping. The study also concluded that a number of consumers are concerned with how secure purchases are via channels such as mobile.

In fact, around 80 percent of consumers indicated that they still experience some sort of hesitancy about purchasing goods through their mobile devices. Just over half cited security as the reason why they’re apprehensive about mobile purchases, while slightly under half noted privacy as a concern. Security anxieties may be the result of knowing someone who has experienced some sort of fraud. In fact, one in five shoppers have experienced a security breach while shopping at a major retailer. 

Another study found that businesses that aren’t taking consumers’ security concerns seriously may be hurting themselves. In fact, retailers that don’t take advantage of security measures such as fingerprint recognition or other biometric sensors may lose out on 21 percent of customers, according to Acquity Group’s 2015 Next Generation of Commerce Study. Security is one of the primary concerns of most consumers. 

With the number of people that have experienced security breaches, any sort of payment fraud issues experienced by a retailer could end up detrimental to business. Businesses that accept credit payments should ensure that security is as much of a concern for them as it is for consumers. Otherwise, they could lose out on profit. 

Consumers Increasingly Asking Others’ Opinions Before Buying


In addition to serving as a means through which to stay connected to family and friends, find out what the latest developments are in the news as well as buying items online thanks to e-commerce, the Internet of things is causing many consumers to seek out others’ advice before making decisions, choices that they once made on their own volition, a new survey suggests.

Nearly 70 percent of consumers seek out advice and opinions on goods and services before buying, according to a recent poll conducted by market intelligence firm Mintel.

There are a variety of venues the consumer tends to gravitate toward for opinions. At 70 percent, nearly three-quarters turn to review sites, such as Yelp.com or Epinions.com. Approximately 55 percent use social media for recommendations on what to buy, chiefly Twitter and Facebook, the Mintel poll revealed.

Consumers seek validation
It isn’t just opinions that more Americans are after; they also want answers – or at least as close to conclusions as they can find. This is done both before and after the buying process, chiefly as a way to further validate why they made the purchase they did, the survey revealed.

Fiona O’Donnell, lifestyles category manager at Mintel, said that because there are so many options from which to choose, it can be paralyzing, not working which one is the best, thereby leading to second guessing.

“Americans have what feels like an endless number of choices to make on a daily basis,” O’Donnell explained. “Even the simple act of buying staple household products can be overwhelming to those who have yet to build brand loyalties or those who prefer to try out the latest products.”

She added that consumers look to others’ opinions both to decide what’s the best product or item to buy and to substantiate or support why they made the purchase they did, preventing them from feeling buyer’s remorse.

Average consumer spent $91 per day in May
Consumer spending has been fairly consistent over the last several months. In May, discretionary spending among Americans averaged $91 per day, according to a recent Gallup poll. That’s unchanged from April, but down approximately $10 from year-ago levels.

Approximately 15,000 U.S. adults took part in the poll, which was done in May. Gallup asked respondents to chronicle how much they spent in the previous day, counting online purchases, grocery shopping, restaurant checks as well as buying at brick-and-mortar retailers.

Banks and Merchants Work on Reducing Card Fraud


Security is always the most important consideration with respect to making payments.

Banks try to prevent fraud
CreditCards.com study data discovered that 7 out of 10 Americans who have experienced more than one debit or credit card decline said at least one of those instances was a false alarm, reported USA Today. The study, which surveyed 1,000 people, also found that 53 percent of purchases declined for suspected fraud are actually legitimate. Increasingly, the media has focused on credit card fraud and payment system security lapses, but little has been said about false alarms.

When banks deny transactions, it is because they are trying to be more careful which transactions they authorize. Last year, data breaches at large retailers like Home Depot inspired many merchants to up their security efforts. Consumer also began to reconsider their personal financial safety. Matt Schulz, senior industry analyst with CreditCards.com, noted that banks have extra reason to try and prevent fraud, since they are held financially responsible and must reimbursement the money.

“By and large it’s the banks and card networks that absorb the costs, so it’s definitely in their interest to keep a watchful eye out for fraud,” said Schulz, according to the news source. “I think ultimately (false alarms) could be a good thing, because it means that your bank is keeping a close eye out for you and may be more likely to notice when the bad guys really do strike.”

Schulz advised consumers who know they will be making out-of-the-ordinary purchases to inform their financial institution either by phone or online. Otherwise, banks might stop certain transactions that seem unusual. banks examine transaction history and check to see if purchases match that history.

“What the banks are really looking for and keying in on are patterns of your spending,” Schulz added. “A purchase that is not typical of your usual buying patterns, whether it’s strange because of how much it is or where it is, or some other aspect.”

Retailers should also work on fighting fraud
Retailers should invest in sophisticated POS systems to ensure that credit card data is less susceptible to hacking. Especially given regulations requiring POS systems to be NFC-compatible by October, there is no reason why a merchant should not make sure sales infrastructure is properly upgraded before then. Business2Community advised that retailers should find POS systems that not only promote security, but also aid with business analytics and marketing capabilities.

Mobile Payments Are Good for Business


There are many ways to encourage customers to buy at your store and become loyal visitors to your business. Accepting mobile payments is one of those ways.

Apple Pay is popular with retailers and merchants
Know Your Mobile indicated that Apple Pay has the power to revolutionize the way people pay for things. Introduced to the market in October 2014, Apple Pay allows iPhone 6, 6 Plus and Apple Watch users to wave their devices at NFC-enabled sales terminals and make payments. Currently accepted at over 700,000 retail locations, Apple Pay continues to attract new retail partners. Retail members already include Bloomingdale’s, Subway, Petco, McDonald’s, Macy’s, Walgreens and Sport Authority.

Apple Pay is particularly convenient for in-app transactions, noted the news source. Ticketmaster, Target, Uber, Starbucks, Groupon and Airbnb are among the Apple Pay-compatible apps already on the market. Using Apple’s mobile technology for in-app purchases is a quick and efficient way to manage all of your online transactions in one place.

Apple Pay can up transaction activity for your business
Industry experts have suggested that Apple Pay can make mobile payments a well-established method of making transactions. Google Wallet has been around for a long time, but has been unable to accomplish this. Writers for The New York Times, Mike Isaac and Brain Chen, mentioned the affect Apple Pay had on Whole Foods and McDonald’s.

“Whole Foods, the high-end grocery chain, said it had processed more than 150,000 Apple Pay transactions,” wrote Isaac and Chen, according to the news source. “McDonald’s, which accepts Apple Pay at its 14,000 restaurants in the United States, said Apple Pay accounted for 50 percent of its tap-to-pay transactions.”

Security is a key feature in Apple Pay
Apple Pay gives users greater security than what they get with traditional magnetic strip cards. Since users do not have to physically give their phones to store employees, they never risk losing their phones. Additionally, all users have to do to make a payment is tap their iPhone on an NFC terminal and start the transaction process. Know Your Mobile noted that in January, Apple CEO Tim Cook told the media that approximately $2 out of every $3 that are contactless payments, going through Visa, MasterCard and American Express, are done with Apple Pay.

If mobile payments have the ability to bring your additional customers, why would you not invest in point of sale devices that are mobile payment-compatible. many consumers today want to use their mobile phones in-store and online. Letting them do so would be a smart business move.

Optimal Payments to Launch iOS SDK for Apple Pay, Enabling Secure Mobile Payments for Developers, Merchants, and Partners

Consumer Spending Rises Slightly in March


Despite personal income levels hitting the skids in the month of March, consumers increased their spending in store and online, but only modestly, according to newly released government data.

Personal spending rose approximately 0.4 percent on seasonally adjusted basis in March when contrasted with February, the U.S. Department of Commerce reported recently.

Millan Mulraine, TD Securities analyst, indicated in a note to clients that this is a good sign for the economy, as household spending accounts for a substantial percentage of gross domestic product.

“The effectively points to some positive momentum in household spending going into the second quarter, though if fell somewhat short of the strong rebound that we had anticipated,” said Mulraine, according to The Wall Street Journal.

Meanwhile, personal income reached $6.2 billion in March, up 0.1 percent from February, suggesting that wages are stagnating, according to data from the Commerce Department’s Bureau of Economic Analysis.

Federal Reserve officials say that the economy should pick up steam in the month ahead, as the winter months are usually slow in the consumer buying sector, The Wall Street Journal reported. Retailers are hoping to stimulate sales with deep discounts both in store and via e-commerce.

Customers Want E-Commerce Solutions and Transaction Security


In 2015, when someone asks a question that no one in close proximity can answer, the words “Google it!” are inevitably heard. People no longer think to consult an encyclopedia, find a subject matter expert or give up their quest for knowledge when asked a question they cannot answer immediately. Instead, a person will take out their mobile device, look up whatever they want and learn most of what they need to know. The ability to access information has become exponentially easier than it used to be in the past. The same is true for the business of making and receiving payments. In the consumer market, whether a company operates in retail or is service-oriented, there are many technology solutions that make life easier.

Technology solutions are good for business
A business that does not fully leverage the power of e-commerce and payment technology solutions is at a disadvantage. In the same way that people should not wait to consult encyclopedias in order to answer simple questions, businesses should not rely on cash and credit card transactions alone and expect to be competitive in their respective industry.

CIO magazine pointed out that approximately two-thirds of cell phone owners in the U.S. now use their phone as their primary access to the Internet. Accordingly, business experts advised that companies should enable all aspects of the digital customer relationship in order to capitalize on current trends. Ari Weil, vice president of Yottaa, a cloud-based automation platform, reiterated this sentiment.

“Today’s online customers want the information they need when they need it, at the click of a mouse or a swipe of a tablet or smartphone,” said Weil, according to the news source.

Security is an important issue that is addressed through technology
Last year, mass credit card breaches at retailers like Home Depot and Target proved that payment technology should rise in sophistication to buffer consumers from malicious individuals. PYMNTS reported that Apple Pay, which uses tokenization to protect customer information, is good for preventing fraud. Vice President at First Data Kim Ford indicated that tokenization transaction volume is on the rise, because of the additional safety it offers.

“It was slow going for tokenization a couple of years ago,” Ford said, according to the news source. “But now we are getting close to 2 billion transactions that have used our tokenization and encryption.”

This is the era of e-commerce, and consumers have become accustomed to purchasing items online, making payments through digital channels and having all their financial activities facilitated by technology. There is no reason why a company should avoid innovation and fail to offer its customers added security and convenience.

Smartphone Users Spend Much of Their Online Time Searching

Branding Brand MCI Smartphone Traffic Sources Infographic

When it comes to generating online web traffic as well as online purchases, it’s these searches that represent roughly half of the activity that’s going on at any one time among mobile web users, according to the results of a newly released survey.

Search engines like Google have revolutionized the way in which consumers interact with the Internet. By simply typing a few words and hitting “enter”, it results in millions of hits, with the most-visited sites at the top of the page.

And when it comes to generating online web traffic as well as online purchases, it’s these searches that represent roughly half of the activity that’s going on at any one time among mobile web users, according to the results of a newly released survey.

Between January and March, nearly 45 percent of all smartphone traffic in the U.S. was search-related, based on a recent survey from Branding Brand.

These inquiries provided mobile web users with a variety of means by which to get to the sites they were looking for. For instance, in the first quarter, 27 percent of smartphone traffic got there via the exact web address, 16 percent arrived via email and 14 percent through a referral.

“Search is the leading source of traffic to retailers’ smartphone sites,” said Chris Mason, Branding Brand CEO and co-founder.

He added that with Google set to unveil an improved mobile device Internet search engine, retailers need to improve their search-engine optimization strategy so that they can be identified when consumers need something that businesses cater to.

Customers visiting retail websites via mobile more often
With devices like tablets and smartphones being purchased at a staggering rate, more consumers are logging on to retail website while on the go, rather than on desktop computers, for example. In August of last year, more than half of all online retail visits originated from a mobile form of technology, according to a separate poll also conducted by Branding Brand. Most of those that took place were on products manufactured by Apple.

“This fundamental shift in consumer behavior from desktop to mobile happened with unprecedented speed and represents the greatest opportunity in retail since the advent of the Internet,” said Mason.

He added in August of last year, 81 percent of all tablet visits were on iOS-supported devices, proof positive that online shoppers are interacting with brands via mobile technology at a swift pace.

Since January, mobile-based purchases in the U.S. have risen 10 percent, according to estimates from marketing technology company Criteo. Smartphones was the main mobile device vehicle.