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How The Point Of Sale (POS) Industry Works

If you are researching point of sale (POS) solutions for your business, or just want to understand more about the POS industry, here is a brief summary of how the point of sale industry works.

Point of sale solutions are about as diverse as the businesses they serve.  This stands to reason since businesses vary in size, scope, location, products, services, management styles, customer base, and many other factors.  Point of sale systems include a synthesis of both hardware and software, and coming up with the right blend for a particular business model is no simple matter.  Those in the POS industry know this, and so there is naturally an attempt to create avenues for helping businesses make good decisions and find the support they need.  It is helpful to know how this works.

Generally, the POS industry follows a supply chain model like this:

POS_industry_supply_chain

POS Hardware Manufacturers and Software Developers

APGPodium-Blkm-SSfrontPoint of sale manufactures create hardware, such as all-in-one POS terminals, barcode scanners, keyboards, cash drawers, pole displays, and receipt printers.  Frequently manufacturers will specialize on certain POS hardware items, such as APG Cash Drawer and MMF POS for cash drawers, or Epson for receipt printers.

POS software developers focus on creating software that provides POS functionality such as sales transactions, MMF_ADVC2MetalLockItUpTrayOnTopinventory control, reporting capabilities, managing customer data, and much more.  It is common for developers to customize their POS software for various industries, such as retail, grocery, liquor stores, salons, and others, since these business types can have very different needs.  Some software developers choose to work directly with businesses to create cost-effective and customized solutions, doing without the distributor/VAR chain.  Some developers focus on providing online POS solutions based on cloud technology, so that the point of sale software can be used more independently of hardware restrictions, and accessed from a POS station, computer, laptop, or smartphone.

POS Distributors

POS distributors act as liaisons between manufacturers and VARs.  Large distributors such as BlueStar and ScanSource are poised to find and work with the best manufacturers of POS hardware from across the globe, many of whom offer innovative and cost-effective technology but are not set up to work directly with VARs or businesses efficiently.  By working with manufacturers, the distributors help to reduce costs and improve products with product testing and product support.

POS distributors also are able to integrate POS hardware with various POS software options, allowing VARs to offer reasonable options for businesses of all levels.  Distributors will often include terminal setup so that VARs can offer plug and play installation for their clients, saving both the reseller and the business the headaches of installation.

The distributor’s relationships with POS software developers provide the benefit of customer leads for POS VARs.  Other benefits that distributors offer to resellers include training for products, technology, and business, sales support and advertising assistance, and trade shows for education, exposure, and networking.  They can also provide technical support, such as testing software compatibility with POS terminals, as well access to an extensive inventory.

Distributors also provide a credit facility, when VARs require it, to allow sales involving large amounts of equipment to be easily transacted.

POS Value-Added Resellers (VARs)

POS VARs are specialists who work directly with business owners to find the right blend of hardware and software for their business, adding value to the products with their expertise and ongoing support.  VARs may work independently or with a POS Distributor for added support and expertise.   VARs will handle installations, coordinating or supervising cable and electrical installations.  They will also provide on-site training for the staff.   Many VARs bring decades of POS experience with equipment of all shapes and sizes to bear for the benefit of the store owner.

POS End-Users

The end-users of POS systems are businesses large and small in retail, service and other industries.   Businesses using point of sale solutions range from small single-store outfits to online companies, to national or international corporations.  Point of sale solutions can hold tremendous benefits for apparel or hospitality applications, automotive shops, drug stores, restaurants, grocery stores, e-commerce sites, single store or multi-store operations, and more.  A properly suited POS system can save time and money, greatly increase efficiency and improve customer service and satisfaction.

The effective installation of a point of sale system involves a ten billion dollar plus industry with numerous players adding value at every stage.  End-users of a POS system, and certainly their customers, may not see or appreciate the tens of thousands of people involved, but they are there, in the background, helping to make it happen.  The local reseller may be a two person or fifty-two person operation, but they are ultimately backed by companies from modestly sized software developers to multi-billion dollar distributors and layers of expert industry personnel, all working to ensure a smooth and seamless POS installation.

All-In-One Company

Harbortouch Elite POS was designed from the ground up with custom hardware and industry-specific software exclusively from Harbortouch. Our FREE point of sale system program eliminates the enormous up-front costs over other expensive choices. With credit card processing built in you have one phone number to call for everything. Leaving nothing out, Harbortouch offers complete coverage from 24/7 award-winning technical support to free hardware replacement for the life of your system. Harbortouch has you covered the entire time you own the system.

 

 

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 While due to be in place last October, EMV has been slowly materializing.  All of the various participants ARE making progress, according to experts.  For example,  MasterCard is now reporting that 80% of its outstanding cards have chips.  But how is the merchant doing, why are we doing chip and signature, and what is in store for the future?
The Point of Sale News spoke with several industry leaders for an update.   Kind enough to share their thoughts were Scott Blum, Vice President of Total Merchant Services; Andrey Tikhonov, Senior Director, Payment Technology, Certified TG-3 Auditor, for Infinite Peripherals; and Henry Helgeson, CEO of Cayan.
Q(Point of Sale News): What does the near future hold for EMV adoption and implementation?
A: Blum: We believe that EMV adoption will continue to grow at a slower yet steady pace in the SMB space than adoption last year.  Many SMBs converted at the deadline, and those that waited have converted on a slower, albeit steady pace.  We believe this adoption trend will continue in the next 6 months.
A: Tikhonov: ISV and vendors will continue on the EMV implementation path. Many previously took a shortcut and implemented limited scope software applications that reduced the software capability to Visa and MasterCard contact chip only, bypassing the less common American Express and Discover card brands and reducing the NFC payment schemes acceptance. Now, many of these vendors must go back to the queue to add support for AE and Discover, as well as re-enabling the NFC schemes. It will take more than 6 months to clear up the queue.
Q: (POSN) Is chip and pin going to emerge or are we destined to have chip and signature forever?  infinite peripherals mPOS
A:Tikhonov: Although initial implementation of EMV was practically 100% chip-and-signature, card brands will begin the process over the next several years of migration to Chip-and-PIN as a more secure card acceptance scheme. The chip-and-signature originally was selected by the card brands as the least invasive option for merchants and customers in the initial implementation of EMV in the U.S. market. The chip-and-signature only addresses one aspect of card-present fraud – counterfeit cards but does not address a stolen card issue. Therefore, chip-and-PIN is enforcing a stronger cardholder validation method, and over time will become a prevalent option for cardholder verification.
A: Blum: EMV is one of the most effective methods for reducing skimming and counterfeit credit card fraud.  The addition of the PIN mitigates losses from lost or stolen card fraud.  In the US, skimming and counterfeit fraud is over 2X the loss from lost or stolen cards, and therefore it makes sense to focus on that first.  Chip and Signature solves that issue, so in the short term, it may be the most cost-effective approach.  In addition, other forms of authentication similar to the PIN are developing, which may make the investment in PIN-less attractive over time.
Q: (POSN) Merchants are saying that there are more charge-backs.  Are you seeing that and if so, why?  
A. Tikhonov: Yes, there is a trend of increased volume of charge-backs — mostly transactions originating with magnetic stripe use in non-EMV-ready merchant environments. This can be attributed to:  1). Issuers are taking advantage of unprepared/non-EMV merchants to satisfy consumer charge-back requests in favor of consumers, justifying the judgment by the new liability shift; 2). Educated consumers may be taking advantage of unprepared/non-EMV merchants by falsely claiming that charges are fraudulent, knowing that in a magnetic stripe environment, they are likely to benefit from a charge-back being honored in their favor.
A. Blum: We are seeing an increase in chargebacks for merchants as a result of the new EMV rules.  This is not a result of any changes in computer programs.
Q: (POSN) What other trends or issues do you see? 
A: Blum: Our initial view is that the introduction of EMV will actually result in an increase in NFC and mobile payment adoption.  This is because the time required for a customer to complete an EMV transaction can take up to three times the time required for an NFC transaction.  As EMV becomes the standard, more merchants and customers will opt to use their phones and watches for convenience and speed.  The card associations are working to increase the speed of EMV  transactions to make this faster, which we believe we happen over the next several years.  At the Electronic Transaction Association’s TRANSACT 16 event, Visa announced the launch of Quick Chip for EMV, a technology enhancement that optimizes EMV chip card processing and check out times.  We will see how that technology plays out, but in the meantime, EMV should help NFC adoption.
A: Tikhonov:  The complexity of EMV implementation will drive the consolidation of ISV market. Due to the significant time, money and expertise required for EMV, only the strongest ISVs will survive the pressure and cost of the integration process.
    Recently a team from NCR exposed a potential flaw in the chipped credit card, much to the consternation of some vendors.   Henry Helgeson, CEO of Cayan weighed in:  “As if EMV speed issues weren’t already a challenge for retailers, now they face the additional concerns brought up by NCR’s report and the assumptions it makes. In reality, it’s not quite as sensational as depicted. What’s really going on here is that many issuing banks are still working through their fraud algorithms. Essentially, when the EMV flag is missing on a card, the issuing bank should be able see that the track data was incorrect and decline the transaction. When this doesn’t happen, there is a risk of merchants getting chargebacks resulting in this type of fraud. Encryption is important, yes, but what’s more pressing is for the issuers to update their fraud algorithms so that merchants aren’t the ones paying the price.”
So, almost a year after introduction in the United States, and ten years after the introduction of chip and pin in Europe and Canada, progress comes at a modest pace – with one step backwards for every two steps forward.  Will it be enough to stay ahead of the hackers?   That battle is likely to continue for the foreseeable future and merchants should be diligent in applying state of the art technology for the safety of their own businesses and for the security of the cardholder’s information.   
Article by Craig L Aberle
More articles about Payment Processing issues, many of which are exclusive to The Point of Sale News, can be found here: Payment Processing News
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What EMV Tokenization 2.0 Means For The Payments Industry

 

Technical body EMVCo launched version two of its EMV® Payment Tokenisation Specification – Technical Framework in September. The market has evolved rapidly since v1.0 was launched in 2014 to address the needs of digital payments including eCommerce, and minimize the fraud risk associated with an exposure of primary account numbers (PAN) – so v2.0 has been eagerly anticipated by the ecosystem.mobile payment

Here are a few things that stood out for me among the key updates and revisions.

Continuous development

As with all technology, the innovation curve is too steep for standardization to keep pace. This update, therefore, brings the framework in line with many of the developments that have happened over the past couple of years. It also addresses a range of feedback from live implementations of the technology to smooth the path for widespread deployment.

For example, EMVCo released an interim note in 2016 on its EMV Payment Account Reference (PAR) which enables merchants, acquirers and payment processors to link together a cardholder’s EMV payment token and PAN transactions. Version 2.0 of the tokenization specification clarifies this at a standards level and sets the rules for BIN controllers (such as an ISO IIN Card Issuer) to implement PAR for their BINs.

Greater clarity

One particularly positive development is the inclusion of a common set of definitions and terminology in the framework. This may sound simple, but it gives the ecosystem a way to communicate effectively and avoid confusion and delays. Players can now easily understand both the similarities and differences in supporting and implementing tokenization with each of the international and domestic payment schemes.

Elsewhere, EMVCo has clarified the roles, responsibilities and minimum requirements for entities establishing a token program. This will ensure the effective generation, issuance and full lifecycle management of payment tokens as markets develop. The document also outlines a range of new and existing token requestor types to clearly define who can request tokens and their associated notable characteristics.

This increased clarity not only enables greater collaboration and stability, it sets the stage for even more rapid evolution and brings confidence in tokenization as a fraud prevention technology.

New tokenization use cases

Since the launch of the original framework, the use cases for payment tokenization have expanded significantly to allow for multiple types of cardholder- and merchant-initiated transactions. The new framework, therefore, addresses new use cases for eCommerce, including:

– eCommerce using a mobile/digital wallet – consumers can perform a tokenized transaction on an eCommerce site or in-app using their mobile/digital wallet.

 Shared payment token – a Token Requestor can share the same payment token between multiple Token Users (e.g. merchants).

These additions can bring the fraud prevention of dynamic tokens to scenarios like recurring one-click-ordering and in-app payments.

Is this progress?

In a word, absolutely! While there is nothing necessarily revolutionary here, this update is both catching up with innovation and enabling it to continue happening in a sustainable, stable and secure way. We, as a developing ecosystem, now have a more complete reference manual to work from, which makes life easier for entities to clearly define their requirements when issuing an RFP, for example, and for technology providers to better understand what the market needs.

What next?

Work is ongoing. We are moving towards an end-game where all payments (and even all data!) are tokenized, so we need to get to a place where static tokens (like PANs) are no longer used and dynamic tokens are universal.

In our role as an EMVCo Technical Associate, we look forward to continuing to support the future extension and clarification of the framework to enable further common understanding of the roles, concepts and use cases between all parties in the ecosystem.

*EMV® is a registered trademark in the U.S. and other countries and an unregistered trademark elsewhere. The EMV trademark is owned by EMVCo.

 

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Common Mobile Payments Myths All Business Owners Need To Know

While we all know how popular credit and debit card payments are and have been for years now, these days more consumers expect to be able to pay using their mobile device, instead of a typical point-of-sale system. Transactions made on smartphones or other types of small, Internet-enabled devices have been growing significantly, and demand doesn’t look like it will slow down anytime soon. In fact, according to recent statistics, the worldwide mobile payment revenue is expected to hit more than $1 trillion in 2019.

Based on this, it’s easy to see that the cost of not accepting mobile payments in your venture can include many lost sales, not to mention losses when it comes to repeat business and referrals — after all, customers desire convenience, and if they can’t find the payment method they want when dealing with your firm, they’re likely to shop elsewhere in future. They’ll also only recommend to their contacts those businesses they find to suit their needs completely. If you haven’t started making mobile payments available to your clients yet, it’s, therefore, time to remedy this situation.

It is also possible you’ve heard some of the many common myths about mobile payments which are floating around, and think incorporating mobile just isn’t for you. To ensure you’re up on all the facts, read on for the truth behind some of the prevailing myths surrounding mobile payments.

Too Difficult to Incorporate Into Your Business

If you’re like most other entrepreneurs, you’re no doubt crazy busy every week and feel like you never have enough time to get all your jobs done or even make a dent in their number. As such, you might have been avoiding setting up a mobile payment system because you think it will take too much time and be too difficult to set up.

This just isn’t the case though, because most popular mobile payment systems can be put in place in just a few minutes. Like other applications available these days, mobile payment apps are created to be intuitive to use and simple and user-friendly for even people who have limited experience in dealing with this type of tech.

For most mobile systems, to set them up all you have to do is get yourself a merchant account with the provider you have chosen (just like you would with other types of payment systems), and then download the company’s app. If needed, you might also have to plug a credit-card swiper into the audio jack of your smartphone or tablet. Most often these days, though, mobile systems can use NFC and/or Bluetooth tech to read a customer’s card. Credit card information can also sometimes be manually keyed in if required.

                                                                      Not Securepayment myths 2

For a large number of business owners, the myth that mobile payments are less secure than other payment options is the thing that stops them from setting up such a system. When you think about it, you can see that mobile transactions are very similar to traditional POS or e-commerce payments, because no data needs to be stored in the device itself.

All your customer’s sensitive details are transmitted digitally instead, so even if you did happen to lose one of your devices or have a company smartphone or tablet stolen, no personal or financial client information can be accessed by prying eyes.

Like with any other type of payment system you might use, it’s still a good idea to seek out a provider that’s reputable, well-established and takes security very seriously. Look for a firm that adheres strictly to the Payment Card Industry (PCI) compliance standards, and that has a top security record.

Not Worth the Hassle

Another pervading myth that stops some entrepreneurs from going down the mobile payment route is that these types of systems are “not worth the hassle.” Business owners can mistakenly believe they won’t be able to put through enough transactions on their mobile payment app to make the time and effort they think is involved worthwhile. This is just not true though.

As noted above, time is not a factor to worry about with mobile payment systems, and they’re very straightforward to use, too. What’s more, though, is the fact that your business will be able to enjoy many benefits from offering mobile payments to your customers. You can make clients happy because they can pay using their preferred method, plus you can reach people where and when you want.

Instead of having to be tied down to a physical cash register or another location-dependent point-of-sale system, you can complete transactions on the go and at alternative places like tradeshows, client homes or offices, festivals, and conferences. The resulting sales and exposure you can get from this should be well worth it.

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Last Friday’s bombshell news seems to have taken many by surprise.   We received dozens of emails about it.   Surely it’s a good move for amazin’ Amazon, and probably a good (graceful) wind-down strategy for the beleaguered John Mackey of Whole Foods, who’s been hounded by shareholders and stakeholders (employees and customers) for years.

This acquisition is not a surprise

This IS history repeating itself. Sears Roebuck – which began as a mail-order company offering an enormous level of inventory and options (maybe the equivalent of today’s Internet company) did the same thing a century ago. It came on like a steamroller – redefining what retailing was all about and many businesses could not compete with Sears.

(Trivia – Sears didn’t open their first retail store until 1925 (source – Sears Archives) – that is less than 100 years ago– 92 years ago to be exact.        

Then came WalMart – barreling down the retail highway and doing to Sears and Kmart in kind. And wiping out a plethora of micro-sized businesses on Main Street in America. The anti-Walmart articles of the last few decades have cried bitterly about the decline of the small town Main Street at the hands of the evil Walmart – but the population voted with their pocketbook.

(Trivia – Walmart didn’t open a store outside of Arkansas until 1968 – that is 49 years ago.)

Now it’s Amazon taking market share from retailers by offering good value, quick service, a vast inventory (exponentially beyond the old Sears and Roebuck catalog) and pioneering technical efficiencies in a new world environment.

It’s the same creative destruction embraced by the wallets of hundreds of millions of consumers in the past, even as it leaves our consciences a little uneasy.  Amazon doesn’t own the future of retailing, however, any more than Sears or Walmart did in their times – but it sure feels like it today.

Ironically, the $13.7 billion dollar announcement had the effect of wiping out nearly a collective $40 billion dollars of its competitors market value – Kroger ‘s stock price dropped over 9% that day.  And yet, subsequent to the announcement the price of Whole Foods stock is popping up above the purchase offer price, suggesting that other prospective buyers may emerge and make an offer for WF stock.

So, what do industry executives think about it?

“This changes the game completely for so many grocery retailers and has put Amazon in a perfect position to push the boundaries of the grocery segment. We will quite likely see them continue to push to sell more than just groceries as well as continue to trial more store innovations. One of the most obvious obstacles for Amazon going after the brick-and-mortar grocery market in 2016 was the lack of physical store shelves, which is so critical in grocery. This has changed overnight for Amazon. The purchase of Whole Foods will make the online grocery space even more competitive, which is why it will be so important for grocery retailers to have consistent online and in-store pricing. For grocery retailers to even think about competing with this new juggernaut, the industry must have the ability to control and drive in-store pricing and promotions with speed, agility, and consistency.” –Paul Milner, Marketing Director, DisplayData

Over 70% of US Households making $112k a year have an Amazon Prime account. There is a very high correlation of these shoppers being the shoppers that go to Whole Foods.  There is mounting evidence that wealthier consumers are no longer choosing luxury items like cars and boats to show status, but rather leveraging healthier food choices and education options as class markers.   Kelly Sayre IHL Services

“The concept of a friction-free shopping experience, that dissolves the lines between brick and mortar locations and the digital world, is a winner – Amazon recognizes this and is moving to execute that fantastic vision. Buying the 400+ Whole Foods Market locations may just be their new starting point.  With this, the battle lines are being drawn quickly.  Some will run for the exits, while others will freeze with fear and doubt. Think of the old saying, “When you’re being chased by a bear, you don’t have to outrun the bear, you just need to outrun the guy running next to you.”  With that in mind, look out for those local and regional retailers who are prepared to take a stand by moving quickly to dramatically up their technology game.” – Pete Catoe, Founder and CEO, ECRS

“Amazon’s news to acquire Whole Foods may seem shocking, but they are continuing on a mission to provide seamless customer experiences. We know Amazon has been investing in the grocery space for some time, starting with Prime Now and then moving into AmazonFresh…. This deal gives Amazon the seal of approval for the quality products that Whole Foods has earned over decades. … Additionally, this acquisition will make Amazon a huge omnichannel juggernaut in one swift move, taking them 15 physical stores to well over 400 overnight.” – Jennifer Sherman, SVP of Product & Strategy, Kibo

 “Amazon’s acquisition of Whole Foods goes way beyond just grocery. This is a major wake-up call for all of retail. What this means for retailers, in general, is that they need to get their omnichannel strategies in play – FAST. A retailer’s best option is to invest in order management, highlight that they offer click and collect services, and provide the best service possible on that in-store drop in.” – Charles Dimov, director of marketing, OrderDynamics

“Amazon’s acquisition of Whole Foods addresses its two greatest weaknesses – a lack of physical stores and a strong grocery play – while potentially creating even greater advantages for its greatest strengths – endless aisles and customer data. Bringing hundreds of physical locations under its control will allow Amazon to understand consumers at a much deeper level, enabling them to personalize the experience, both online and in store, to an unprecedented degree.” – David Buckingham, CEO, Ecrebo

“Whole Foods has over 430 stores globally; meaning Amazon has acquired more than 430 new properties to use as distribution centers. Retailers already concerned about Amazon’s strength in digital commerce now need to contend with the reality: Amazon is coming after brick and mortar, too. I talk with retailers every day who are in denial of Amazon’s impact on their business. But Amazon understands that retail and distribution have changed forever. It’s no longer about buying and reselling products, but about creating incredibly valuable ecosystems. ” – Adrien Nussenbaum, U.S. CEO and co-founder, Mirakl

This news has the whole grocery industry waking up today with a realization that the playing field just changed dramatically. I doubt other Retail sectors that compete with Amazon understand the impact of how now having the large treasure trove of data on customer’s grocery, health and well-being buying is going to enable Amazon to be an even more ruthless competitor in every retail sector whether it is shoes, baby products, apparel, electronics, or any of the other 400 million + products it sells.– John Squire, CEO, DynamicAction

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Companies like Google and Tesla are engaged in an arms race to control the future of AI. Not only is this new frontier the engine that will drive their respective companies, it’s changing the face of almost every industry—including the payments ecosystem.AI 1

In the years since I co-founded eMerchantBroker we’ve seen this nascent technology start to affect all parts of the payments chain. Huge investments are being made in developing the different aspects of AI to optimize how we do everything from exchange payments to detect fraud to support our customers.

The next few years will see an acceleration in developments that will alter how payment companies large and small operate their businesses. Some will be left behind. Others, those at the leading edge of the wave, will separate themselves from their competitors and emerge as industry leaders.

This is especially true in the high-risk merchant processing side of the industry, where the potential for fraud and high levels of chargebacks is rampant. Those high-risk merchants who take advantage of the growing suite of AI driven tools to reduce risk while providing a better customer experience are the ones who will thrive.

Here’s why.

Investment in AI is growing every year

According to a CB Insights annual AI funding report, funding in AI start-ups increased from just under $600 million in 2012 to $5.021 billion in 2016. This tremendous growth is spurred by the promise for radical change that AI brings to most industries—including the payments industry. It has the potential to streamline the payment chain, reduce fraud, improve customer service and optimize risk assessment—all key success criteria for companies in the high-risk merchant space.

What is AI?

AI can be generally described as the ability of a machine to exhibit human-like intelligence—to make decisions like a person, only faster, and after considering a much greater volume of data. It is commonly used in smartphones, reservation systems, medical diagnosis and, of course, finance. It makes possible greater efficiencies, faster processing, and almost complete accuracy.

Types of AI

Today’s Artificial Intelligence research centers on several key technologies. For the high-risk merchant processing industry, the most important include: Machine Learning, Natural Language Processing, Verbal and Vision Recognition, and AI bots.

Machine Learning

Machine Learning (sometimes called Adaptive Learning) is crucial to the high-risk processing industry’s ability to detect and respond to fraud. Generally speaking, Machine Learning describes a process by which a software model is constructed and vast volumes of data are compared against it. Learning algorithms enable the model to evolve in response to changes in the incoming data.

For example, financial services companies develop Machine Learning models with rules that outline typical fraudulent activity. The software can review data as it comes in and flag patterns that match the fraud model—indicating the transactions should be investigated. As more and more transactions and patterns are examined, the model can develop itself based on learning algorithms.

Such Machine Learning models can also help high-risk payment companies optimize product offerings, detect money laundering schemes, and perform online risk management.

One example of how machine learning can help the high-risk merchant industry combat fraud is Simility’s introduction of a new AI-based fraud prevention platform. The company’s Adaptive 3-D Secure software uses Machine Learning to create rule-based models that can evaluate each transaction in real-time. The AI looks at device fingerprinting, behavioral analytics, proxy filtering, and geolocation to identify high-risk transactions. And, because of that AI model, Simility is able to ask for secure authentication only for truly high-risk transactions where fraud could be present. This makes the payment process easier for customers while offering chargeback protection for merchants.A1 2

Vision Recognition (VR)

Vision recognition technology is a breed of AI that allows the software to identify objects. In the high-risk payments industry this is particularly applicable to fingerprint or facial recognition as second level authentication methods. The technology enables customers to easily make mobile payments and provides security from fraud at the point of sale. Apple Pay uses this type of AI to secure POS payments by requiring fingerprint ID for each iPhone or iPad transaction. Flint and Square use the technology to allow merchants to accept payments on their mobile—using the phone’s camera and VR capabilities to confirm that the card information being processed is legit. In the high-risk processing world, VR is important because it’s authentication capabilities reduce chargeback rates for companies targeted by fraudsters.

Natural Language Processing (NLP)

NLP is already in widespread use in a number of industries. It is an AI technology that allows a machine to understand spoken commands or questions. Among the most well-known applications using NLP are Apple’s Siri and Google Translate. In the high-risk processing space, NLP is being used to reduce customer service costs by taking customer questions without human interaction. As well, NLP is being used by Apple to allow iPhone users to initiate payments using voice commands. This reduces customer friction and makes the sales process easier.

How are AI bots impacting the high-risk payments industry?

AI bots are kind of a hybrid piece of software. They are apps that present the appearance of being human—in that they can understand and answer customer questions for instance—while being completely automated. They combine NLP and Machine Learning code to present effective interfaces that can handle thousands of interactions at the same time, rather than the one at a time limitations of human customer service reps.

AI bots used in chat software, messaging apps and virtual assistants are changing the face of the high-risk payments industry. They enable better and cheaper customer service, and streamline the payments process.

They allow customers to make direct payments without leaving their preferred social media platform. For instance, PayPal can integrate with Facebook Messenger, Siri and Slack—meaning you can actually initiate a payment to a co-worker just by typing in a command in Slack. And, from Messenger or Slack, it’s possible for people to use bots like Hipmunk to find, book and pay for hotels, flights, and car rentals.

AI bots also make it possible to make payments via text messaging. The Mypoolin app has a mobile payments bot that lets you text an instruction to transfer money from your bank account to a phone number—enabling you to easily make payments to people in your contacts list.

Financial services firms are using AI bots to create awesome client experiences. The bots allow customers to easily monitor their spending, check account balances, make better financial decisions and pay off debt. Mastercard is developing an AI bot called Mastercard KAI that lets consumers make payments, manage finances and shop from Facebook Messenger.

In the high-risk space, AI bots are a boon because they can replace human service reps in handling customer questions and complaints. They speed up the service process and create significant savings.

Wrap Up

The high-risk merchant processing industry is evolving. Adoption of AI solutions for improving the customer experience and reducing fraud and chargebacks is improving efficiency and profit margins. Those merchants and payments companies who are quick to adopt the latest AI solutions are more likely to succeed in the new, automated business environment. Those high-risk businesses who ignore the changes reshaping the industry run the risk of being left behind by their more nimble competitors. In an environment where competition is increasing and margins are tightening AI provides high-risk companies new opportunity to evolve and grow.

 

Electronic payments expert, Blair Thomas, co-founded eMerchantBroker in 2010. His passions include writing/producing music, and travel. eMerchantBroker is America’s No. 1 credit card processing company, serving both traditional and high-risk merchants.

 

 

 

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The TLS Changeover: Why You Should Start Preparing

Source: Business Solutions 

3 Signs Your EDC Takes Data Security Seriously

The next big deadline in payment processing is on the way, but surprisingly not many people in the industry are talking about it. In June 2018, the TLS changeover deadline is coming. It might seem far away, but it’s going to require a lot of work to get your merchants prepared, and it’s best to get started soon. Because if they’re not ready in time, it’ll cost them.

The Basics

On July 1, 2018, an encryption method called TLS 1.0 will no longer be approved by the Payment Card Industry. Merchants must update to a newer version of TLS by June 30, 2018, or they can no longer process card payments.

What is TLS?

Transport Layer Security (TLS) is an encryption protocol approved by the Payment Card Industry (PCI).

Its details are complex, but what’s important for merchants to understand is that it keeps customer data safe through encryption and ensures no third parties can eavesdrop or tamper with messages when servers and clients communicate. It’s involved in every step of the payment chain. POS systems, processors, acquirers—every step from the merchant to the credit card companies and back.

The Reasons Behind the Decision

The Payment Card Industry (PCI) declared that TLS 1.0 is too far out-of-date and no longer keeps data safe enough—the concern is that hackers have developed too many ways to exploit this standard. Merchants must upgrade to a new version, either TLS 1.1 or TLS 1.2, by the June 30, 2018 deadline.

What happens if a merchant doesn’t update?

If a merchant doesn’t update by June 30, 2018, they will no longer be able to process card transactions as of July 1, 2018. If they wait until that date and their processing stops, it will be difficult for them to quickly determine why, exactly, it happened—they will have to call everyone involved in their payments, starting with their POS company and processor, to determine which piece they hadn’t updated. All of this while a merchant is losing sales by not processing credit cards.

Some experts have estimated that the US economy could stand to face $20 billion in lost transactions if merchants don’t start to update in time.

Why You Need to Start Helping Your Merchants Soon

While it’s more than a year away, prior history with large payment tech changes indicates that merchants need a lot of advance warnings—so you should start work soon. Most notably, the chip card switchover and the SHA update created difficulty for everyone involved in the industry, from merchants to processors to VARs.

The TLS update process isn’t a totally simple one, but getting started early will mean you don’t have to deal with much bigger stress down the road. All the different companies involved in a merchants’ payment and checkout experience may need to be consulted. Because if merchants don’t update, they’re at risk of losing a huge amount of revenue.

What are your options to resolve this update?

You can pay several thousand to upgrade your current system. Could take months but keep in mind the deadline is June 30th, 2018. Florida POS Systems would recommend a Harbortouch Point of Sale System. With no up-front costs, free programming, free installation & training with award winning 24/7 technical support. To see our full line of POS Systems and other payment solutions click here.

 

Take it from Jon Taffer of Bar Rescue, a new partner with Harbortouch creating the world’s first Smart POS System.

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JOHANNESBURG AND PURCHASE, N.Y. – April 20, 2017 – Mastercard today unveiled the next generation biometric card, combining chip technology with fingerprints to conveniently and safely cardholder’s identity for in-store purchases. South Africa is the first market to test the evolved technology, with two separate trials recently concluded with Pick n Pay, a leading supermarket retailer, and Absa Bank, a subsidiary of Barclays Africa.

mastercard biometric

Michelle van Schalkwyk, Head of Brand at Pick n Pay, pays for her shopping using her fingerprint to authenticate the transaction during the first global trial of the Mastercard biometric card in South Africa. The new card builds on fingerprint scanning technology used for mobile payments today and can be used at EMV terminals worldwide.

“Consumers are increasingly experiencing the convenience and security of biometrics,” said Ajay Bhalla, president, enterprise risk and security, Mastercard. “Whether unlocking a smartphone or shopping online, the fingerprint is helping to deliver additional convenience and security. It’s not something that can be taken or replicated and will help our cardholders get on with their lives knowing their payments are protected.”

How It Works

A cardholder enrolls their card by simply registering with their financial institution. Upon registration, their fingerprint is converted into an encrypted digital template that is stored on the card. The card is now ready to be used at any EMV card terminal globally.

When shopping and paying in-store, the biometric card works like any other chip card. The cardholder simply dips the card into a retailer’s terminal while placing their finger on the embedded sensor. The fingerprint is verified against the template and – if the biometrics match – the cardholder is successfully authenticated and the transaction can then be approved with the card never leaving the consumer’s hand.

Benefits

Authenticating a payment transaction biometrically – in this instance via a fingerprint – confirms in a very unique way that the person using the card is the genuine cardholder. Merchants can easily maximize the shopping experience delivered to their customers, as the card works with existing EMV card terminal infrastructure and does not require any new hardware or software upgrades.

For issuers, the technology helps detect and prevent fraud, increase approval rates, reduce operational costs and foster customer loyalty. Additionally, a future version of the card will feature contactless technology, adding to the simplicity and convenience at checkout.

Trials Underway

The recent South African trials mobilized employees from Pick n Pay and Absa Bank to test the potential ways convenience and security could contribute to the checkout process. Over the next few months, additional trials will be conducted with the biometric card. A full roll out is expected later this year.

Said Richard van Rensburg, deputy CEO of Pick n Pay: “We are delighted that this innovation has been trialed for the first time at Pick n Pay stores in South Africa.  Biometric capability will mean added convenience and enhanced security for our customers. The technology creates a platform on which we can further our strategy of personalizing the shopping experience in a meaningful way.  We have been extremely impressed with the robust and secure nature of the technology.”

For Absa, the biometric card forms part of the bank’s strategy to test and develop sophisticated technology capabilities designed to improve its payment operations and client service, reduce risk, and make banking easier and even more secure for its customers.

“We are very proud to be the first bank in Africa to test – in a real payment environment – the single-touch authentication technology that will unlock the benefits of biometrics,” said Geoff Lee, head of card and payments at Absa Retail and Business Banking. “The technology will effectively enable our customers to rely on their unique fingerprints to make payments in a face-to-face environment. Following the test period, we will make it available to our customers in a way that is affordable, reliable, and convenient and, most importantly, extremely secure.”

Additional trials are being planned in Europe and Asia Pacific in the coming months.

About Mastercard

Mastercard, www.mastercard.com, is a technology company in the global payments industry. We operate the world’s fastest payments processing network, connecting consumers, financial institutions, merchants, governments and businesses in more than 210 countries and territories. Mastercard products and solutions make everyday commerce activities – such as shopping, traveling, running a business and managing finances – easier, more secure and more efficient for everyone. Follow us on Twitter: @MastercardNews, join the discussion on the Beyond the Transaction Blog and subscribe for the latest news on the Mastercard Engagement Bureau.

About Pick n Pay

Pick n Pay is a leading grocery retailer that operates a multi-format, multi-channel business across South Africa, as well as in Zimbabwe, Namibia, Botswana, Zambia, Swaziland and Lesotho.

In South Africa, the company has over 1,500 stores including Hypermarkets, Supermarkets and franchised Family Stores, which employ nearly 85,000 people. Well over 95% of the R50 billon of products purchased by Pick n Pay each year are sourced from South African producers and suppliers, sustaining a value chain which employs more than 400,000 people across the country.

The company’s success has been built on the principle of consumer sovereignty as a cornerstone of the Pick n Pay business.

About Absa Bank

Absa Bank Limited (Absa Bank) is a wholly owned subsidiary of Barclays Africa Group Limited, which is listed on the Johannesburg Stock Exchange and is one of Africa’s largest financial services groups. Absa offers a range of retail, business, corporate and investment banking and wealth management products and services primarily in South Africa and Namibia.

Barclays Africa is 50.1% owned by Barclays Bank PLC (Barclays). We operate in 12 countries with about 40 thousand permanent employees and we serve more than 12 million customers.

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We found this interesting article about how EMV terminals can get dirty from repeated use. We at Florida POS Systems recommend cleaning the chip card access port with the proper cleaning methods. Florida POS Systems will provide these tools for our merchants.

 AUBURN, Maine, Sept. 13, 2016 /PRNewswire/ — It’s coming: The holiday season and the rush of revenue.  It’s the stuff of retailers’ happy dreams. But with the switch over to EMV or chip cards, the anticipation of failed transactions, downed EMV POS terminals, and long, slow moving lines on Black Friday is what really keeps retailers up at night, according to the technical cleaning specialists at KICTeam, Inc.  While speed and efficiency are critical to the bottom line, they are also the main components to ensuring customer satisfaction and loyalty. Should anything change that, check out becomes a nightmare.

Nothing frustrates a paying customer more than the inability to use their debit or credit card due to devices that jam, incur errors or won’t accept payment.  And nothing is more debilitating to operations than a line of waiting customers, unable to move because of POS failures.  The amount of time wasted on rejected cards or read errors has become measurable and revenue losses stunning.  Think about it.  Every minute, every second a patron has to stop a transaction to determine what’s wrong with their card, change cards, or track down a manager to fix a self- service device is revenue lost.  And an exasperated customer, who walks away because your machines won’t work, may not come back.  Wouldn’t ease and speed of payment be one of the first things you consider to create the best experience possible for your customers?

And there are additional card processing fees, chargebacks and fallback penalties, and the liability issues associated with unsuccessful EMV transactions. Failure to comply with the Payment Card Industry Data Security Standard (PCI DSS) governing payment procedures, have serious and costly consequences. Maintaining the uptime of EMV devices not only lowers the risk of the shift in liability associated with using the magstripe reader or manual keyed entry, but also has a reduced risk of a data security breach. The negative impact on brand image of a breach can cause millions in lost revenue.

These payment failures could be the difference between a fast, steady stream of happy holiday shoppers bringing in revenue and a growling group of discouraged people driving away from your business. And dirt is what can make that nightmare a reality.

Dirt? Yes.  In today’s brick and mortar retail environment, the core component of operational success is credit and debit payment. It is the culmination point of the customer facing experience.  But even the newest, most advanced customer payment systems are still subject to environmental conditions, airborne contaminants and just plain dust. Unlike simpler magstripe readers, chip technology requires sensitive friction and landing pins to make contact with the embedded chip. Due to normal environmental conditions and use, these pins can become dirty very quickly. Dirt, grease and grime can disrupt or negate the data exchange causing the transaction to fail.And it’s not just the environment. We know that money is dirty. But credit cards? Credit cards, one of the most handled items we possess, are a hotbed of germs and bacteria.  In a recent study 1 conducted by the London School of Hygiene & Tropical Medicine and Queen Mary, University of London, one in 10 credit cards were contaminated with fecal organisms. Studies have also found food particles, drug residue, grease, and DNA from a variety of animals. When customers use your payment terminals, all those contaminants are transferred into the devices. Now doesn’t THAT make you want to clean?

How?  By implementing a simple, weekly device cleaning program utilizing pre-saturated cleaning cards, wipes and swabs. These are inexpensive disposable products specifically designed to clean the interior contact points that facilitate transactions on electronic devices such as payment terminals and bill acceptors. They remove dirt, salt, sand, dust, oils and other contaminants in a safe, efficient manner. Cleaning programs ensure overall device efficiency by eliminating or minimizing failed transactions. Time and again we hear the devices aren’t broken, they are just dirty.

A 2013 pilot study done in 15 national retail locations over a 5 week period had store owners and operators testing a very simple cleaning kit designed to target specialized POS equipment including card readers, touch screens and thermal printers.  The results?  100% of Test Stores noticed a reduction in error messages and recommended that a cleaning kit be implemented as Preventative Maintenance because:

  • Lines moved faster since the devices functioned properly
  • Customers were more satisfied that card readers worked the first time
  • Managers felt the small investment in the cleaning kit reduced need for service and device replacement

The idea to advocate routine cleaning has proven extremely effective in the industry, saving companies thousands annually. “It’s amazing how many decision makers in the retail industry already know about adopting cleaning programs to keep their store devices operating at optimal levels,” said Greg Dumais, Business Development Executive for KICTeam, the leading experts in technical cleaning programs. “With EMV implementation in full swing, keeping the devices operating full time has never been more important.” Whether merchants do it in-house or utilize a POS service company, moving to a regulated cleaning regime with mandated adoption enables merchants to manage their in-store transactions with a higher data transmission rate and maintain a seamless transaction process.  This reduces costs associated with failed chip reads, fallback fees, delayed transaction speeds or perceived “broken” devices.  By maintaining the uptime of the EMV device, the merchant lowers the risk of a data breach and the shift in liability associated with using the magstripe reader or manual keyed entry. The company will also benefit from improved POS performance metrics which have been proven to have a direct impact on customer retention and revenue.On Black Friday, there will be things you can’t control: the economy, crazed customers, power failures, “acts of God.” So you have to rely on the things you can control to make things go smoothly. The easiest way of eliminating your Black Friday EMV nightmare is by having clean, functional devices.  Dream happy, retailers!

 

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 Considerable changes are being made to PCI requirements in order to address a vulnerability with SSL encryption called POODLE. In short, SSL encryption, which has been the standard encryption method for decades, is no longer PCI compliant due to vulnerabilities in this protocol. 

 In April 2015, the Payment Card Industry Security Standards Council (PCI SSC) released version 3.1 of the PCI Data Security Standard (PCI DSS), only four months after version 3.0 went into full effect. The most important changes are in the communications protocols SSL (all versions) and TLS (version 1.0). These protocols are now considered insecure. They are vulnerable to well-known exploits such as Heartbleed and POODLE.

 The PCI due date for security up to date, more secure conventions was initially in June 2016. This gave associations 14 months to address the update. The liberal calendar was an affirmation of true staffing and spending worries, in spite of the way that the defects in these more established conventions were by and large effectively misused every day.

In April, the industry was all over the news. “Try not to hold up! Do it now!” was the rallying call. The PCI site reported the dangers of proceeding to utilize these out of date conventions. Be that as it may, in December the due date was stretched out from June 2016 to June 2018, giving an additional two years before compliance.

 This change represents a significant opportunity for Merchants to take advantage of Harbortouch’s Point of Sale Systems. Harbortouch has gotten out ahead of this potential disruption, but most of our competitors are just starting to become aware of this issue and it is likely that many of them will be severely impacted. SSL has been the standard encryption protocol for decades, so virtually every POS system older than a few months will likely require a costly security upgrade no later than June 2018 (with some deadlines as soon as this summer) or face a complete shutdown of credit card processing capabilities. Don’t be caught in this SSL Shutdown. You can rely on Harbortouch Point of sale systems are completely PCI compliant.

 

 

Source: https://www.solutionary.com

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