Contactless taps new markets
It’s faster than cash, so what’s taking contactless so long to become a mainstream payment method in the United States? Most payments industry analysts agree that contactless technology, which is easy to implement and popular worldwide, may take longer to be fully embraced by U.S. merchants and consumers.
Thanks to the efforts of card brands and their technology partners, we’ve graduated from early pilots and processor certifications to an affordable family of contactless-ready terminals and peripheral readers. Consumers can confidently tap or wave credit cards, key fobs and assorted devices in lanes and counters across the country.
Slow start for fast payments
So why aren’t more people doing it? It’s taking time for consumers to notice the contactless cards on their key chains and in their wallets and understand the benefits of using this alternative payment method. Retailers have been cautious about adopting contactless technology, too. Best Buy Co. Inc. mandated only PIN-based contactless transactions, leading to the discontinuance of Visa Inc.’s payWave at its stores. Most contactless cards are dual-purpose, supporting both contactless and mag stripe, so currently Visa cards can be swiped, but not waved at Best Buy.
Also, unlike markets in Asia and Europe, where contactless payments are popular, the infrastructure in the United States has dampened contactless adoption because it is built more on mag stripe reader technology than on smart card and microprocessor technology.
Contactless taking hold
The rollout may be slow, but there are signs the U.S. market is ripe for contactless payments. Beyond the faster transaction times, there’s more security and control with contactless payments, because the card, key fob or smart phone used at the POS never leaves consumers’ hands. Contactless is also a more fraud-proof technology: the microprocessor used in contactless payments is harder to hack into than traditional mag stripe schemes. Contactless payments can also be paired with gift, frequency and loyalty programs to create rewards and incentives.
Additionally, along with the success of pilots of Visa’s payWave, MasterCard Worldwide’s PayPass, American Express Co.’s ExpressPay and Discover Financial Service’s Zip, there are ongoing systems integration efforts at the host, carrier and gateway level that will seamlessly fold these and other emerging technologies into a congruent, commercial processing framework. Here are additional indications that contactless acceptance in the United States is catching on:
* Our increasing mobility: The primary game changer will probably be the push to pay by mobile phone. Europe, Southeast Asia and other regions have seamlessly incorporated mobile phone payment transactions into legacy processing infrastructures.
* Killer form factor: Earlier entries, such as the key fob or the credit card with embedded chip, were cool but got lost in the shuffle. We’re running out of room on the key ring and in the wallet. So many plastic products compete for our attention that it’s easy to forget which ones have embedded chips that can be tapped or waved. In contrast, we have only one or two mobile phones. The tipping point will occur when more people realize they can leave their wallets at home.
* There’s an app for that: As we depend more on mobility and connectedness, our mobile devices have become much more than phones. They are compasses that navigate the changing landscape of interconnected mobile enterprises. Our always-on digital assistants help us stay connected through email, social media, geolocation and mobile networks with ever-increasing voice and data capacities. Adding payments to the mix is a no-brainer.
* Enhanced security and privacy: When a mobile phone is used as a contactless payments device, it automatically becomes more secure. The microprocessor contains an identifier that’s linked to sensitive cardholder data, but the details and bank information registered to the device are stored remotely. Transactions are more secure and compliant with most Payment Card Industry Data Security Standard requirements.
* Easy to sell and install: Selling and supporting smart phone transactions is relatively easy. Many countertop terminals and customer-facing devices are already contactless-enabled. Peripheral contactless readers can be added to late-model hardware and virtual processing systems. The function is included in most processing software, requiring only a partial download or parameter change and no heavy investment in equipment or training.
* Continuing contactless initiatives: A pilot program, code name Mercury, involving AT&T Inc., Verizon Wireless Inc., Barclays Bank PLC, and Discover will test smart phones equipped with contactless microprocessing chips at POS readers in select markets in 2011. Consumers will be able to wave or tap their phones to initiate payments. And, in a pilot in the New York City subway system, MasterCard and Visa are testing contactless MetroCards that can be waved instead of swiped at turnstiles.
A trend to watch
Contactless initiatives, the relentless efforts of manufacturers of contactless chips and readers, and the increasing adoption of mobile technology will continue to drive mass acceptance of contactless technology.
The growing contactless trend promises increased adoption of all forms of contactless payments as consumers and merchants become more comfortable with tapping and waving. We’re even seeing contactless options at self-attended venues such as pay-at-the-pump, quick-service restaurants and vending machines. So stay alert; you don’t want to miss this important new wave.
Originally appeared in The Green Sheet, Issue 10:09:02, November 22, 2010.
©Dale S. Laszig, Castles Technology Co., Ltd.
Please include this copyright notice when reprinting this article, and link back to this site when reprinting or quoting.
Technical details: What to share and what to spare
By Dale S. Laszig
Castles Technology Co., Ltd.
Have you ever felt like a deer in the headlights during a whiteboard exercise? Merchants can feel that way when we get too technical. Most wouldn’t know the difference between an 8-bit and 32-bit ARM processor. They get brain freeze trying to read a self-assessment questionnaire (SAQ). They rely on merchant level salespeople (MLSs) to replace broken equipment. They just want to keep transactions flowing; they aren’t interested in becoming payment processing experts.
But there’s a downside to avoiding technical details. Merchants who don’t understand our services will be more susceptible to competitive offers and fraudulent transactions. Taking time to educate them will build stronger relationships and pave the way for referrals; it will also help them identify the warning signs when unscrupulous customers or solicitors walk through their doors.
So how can we share just the right amount of technical information with our prospects and customers, without overwhelming them or losing their attention? The key is to make our technology relevant by observing it from a merchant’s point of view. Features and benefits are only meaningful when they answer a need or solve a merchant’s problem.
Following are guidelines for informing nontechnical audiences about our industry’s fees, regulations and technology.
Discussing interchange
Despite the more than 100 variations of qualified and nonqualified bankcard transactions in our current processing environment, many merchants will still ask, “What’s your rate?” To foster understanding:
* Share a chart of current interchange rates during sales calls to establish transparency and trust while demonstrating the complexity of interchange. Also, show prospects a sample merchant statement to explain your own pricing.
* Encourage merchants to visit Visa Inc.’s and MasterCard Worldwide’s website sections devoted to merchants at http://usa.visa.com/merchants/index.html#/page1 and www.mastercard.com/us/merchant/index.html, respectively, to get a detailed overview of current interchange rates and card brand rules.
* Spare the details of each individual interchange category to avoid losing your prospects’ interest and your own momentum as you close sales. You can honestly say that interchange is a work in progress subject to ongoing review by the card brands and emerging government oversight.
Talking about security
Considering how much resource processors, ISOs and third-party providers have invested in understanding and implementing the Payment Card Industry (PCI) Data Security Standard (DSS), how can we condense this information into pertinent sound bites to educate our merchants? Here are some tips:
* Share the PCI bottom-line message of protecting cardholder data. Emphasize that the PCI DSS protects merchants as well as their customers. Many merchants who have heard about the high-profile security breaches at major retailers may not realize the highest percentage of fraud is occurring at Level 4 merchants like themselves.
* Explain why it’s no longer acceptable or legal to store receipts that have complete card numbers, expiration dates and addresses on them.
* Spare the implementation details. Build a case for creating a security strategy and explain that PCI is not a one-size-fits-all solution. Convey that the process begins with an SAQ but doesn’t end there; the SAQ will clarify and expose weaknesses in a merchant’s processing environment so the right security tools can be applied.
* Refer merchants to your company’s chosen PCI specialists who can work directly with them to create a security framework that not only meets current standards, but is also flexible enough to meet the changing requirements of the evolving payments sphere.
Homing in on hardware
If you were a merchant, what would you look for in a credit card processing system? Would you care more about looks or performance, high speed or low price? Answers will differ according to the personalities, preferences and priorities of each customer.
Your first priority is to understand each customer’s motivations. Too many MLSs err in recommending a product to fit the needs of a business instead of a person. A small business owner with big aspirations might be offended if you suggest a low-end credit card terminal for processing. Similarly, a high-profile retailer operating on low margins and a reduced budget is not necessarily a candidate for a fully loaded, customized processing system.
Here’s what to do:
* Share an overview of your product line, briefly highlighting the advantages of each device. Reassure customers that the system they invest in today is scalable and designed to grow in direct proportion to their business requirements. Make them aware of buyback or upgrade programs your company offers.
* Avoid technical details that can be easily found on the reverse side of a product brochure by those who care about megahertz, Underwriters Laboratories listings and other data that’s of more use to engineers than business owners. Focus on the business side of things by emphasizing profitability, trustworthiness and ease of use.
Suggesting the right software
Internet connectivity has increased demand for credit card processing applications with multiple access points that can be incorporated into larger enterprise operating systems.
Merchants can choose from an array of processing software, from traditional countertop and mobile terminal applications to virtual terminals and payment applets that blend into accounting software and larger POS management systems.
There is so much choice in today’s processing software that merchants can become overwhelmed and have difficulty making decisions. The best approach in helping merchants choose the right fit in processing software is to get a sense of their requirements. To do this:
* Spare a complete rundown of every different type of software and operating system on the market. Focus instead on the systems that are most appropriate to your clients’ businesses.
* Share how a new system can save time, solve a problem or create new revenue streams, and merchants will be more motivated to make the software investment.
Whether you are managing a territory or a team of agents, your ability to organize the details of your business will be a key factor in your success. Knowing what to share and what to spare will pave the way to peak performance.
Originally appeared in The Green Sheet, Issue 10:08:02, August 23, 2010.
©Dale S. Laszig, Castles Technology Co., Ltd.
Please include this copyright notice when reprinting this article, and link back to this site when reprinting or quoting.
Need intelligence? Tap the feet on the street
By Dale S. Laszig
Castles Technology Co. Ltd.
Want to know what’s happening in payments right here, right now? Ask a merchant level salesperson. MLSs know the players: merchants, acquirers, manufacturers, distributors and value-added resellers. They know what’s hot and what’s not. If you want to craft strategy, invite a few MLSs to your next focus group meeting. Insights on buyer behavior from the feet on the street will bring any situational analysis or marketing campaign into sharper focus.
MLS feedback can save you time and money, whether your strategy is functional, operational, competitive or market-specific. When you share your concept with people who are directly in touch with end users, you’ll find out if your idea has any “street cred.”
From initial concept through implementation, MLSs can help business owners create and execute strategic initiatives. Let’s look at how business owners can leverage the knowledge and real-world experience of MLSs to create relevant, sustainable business practices and strategies.
What’s our current situation?
Effective strategy begins with a situational analysis of the payments industry and market. Periodicals, blogs and newsletters provide a dimensional snapshot of current trends, compliance issues and competitive information. Reporting is compiled from a variety of sources, checked for accuracy and designed to be read on the run by busy payment professionals.
Breaking news from MLSs will validate and clarify other media sources while bringing the added benefit of direct feedback from merchants. This feedback is especially valuable in the payments industry, where six degrees of separation distance the many players in the POS value chain – from manufacturers and distributors to the end users of products.
Many large resellers have a policy of no direct selling or communicating with merchants. They rely on secondhand reports from sales channel partners and help-desk professionals to learn how products are being received. Instead of trying to back into this intelligence with percentages of product failure and return, communicate with MLSs to learn merchant likes and dislikes. What are they hearing from merchants on their daily rounds? What product features and benefits would help them sell more?
Where do we go from here?
Once the situational analysis of your industry and company is complete, it’s time to get tactical. How will you define your company’s strategic vision? How will you identify the steps to get you there? Executives have many things to consider at this critical juncture, including creating the right kind of infrastructure to support growth and encourage innovation.
The ability to react quickly and effectively manage change is a must in today’s fast-moving payments industry. Because of their competitive nature and closeness to merchants, MLSs are frequently the first people to learn about new industry and technology trends. Having one or two MLSs on your advisory board is a good way to keep your finger on the payments industry’s pulse. Having worked with so many different kinds of businesses in various stages of development, including their own, MLSs offer a seasoned perspective on the marketplace and their own observations on winning strategies.
How will we get there?
MLSs will candidly rate strategic initiatives, ad campaigns, and products and services, and let you know if tweaks are needed. It would be a mistake to overlook the influence these sales professionals have on product adoption. MLSs help merchants make informed decisions based on their confidence in product performance.
MLSs have also taken risk to a whole new level. Many boldly experiment with new technology instead of waiting for their ISOs or processors to bring tested and certified solutions to market. Some of their experiments have been wildly successful; others have failed. All have taught them important business lessons. Their experience is valuable because it blends general best business practices with specific payments industry know-how. That blend makes them perfect allies during brainstorming sessions.
What’s our competitive advantage?
Which products and services will differentiate your company from the competition and help you build brand awareness? MLSs are adept at incorporating value-added programs – such as electronic gift and loyalty, check guarantee and verification, dynamic currency conversion, and bill payment applications – into traditional credit card processing. These programs earn customer loyalty as well as increased residual income streams.
Benefit from their experience and work directly with professional MLSs to create the right blend of payment and nonpayment solutions for the merchant community. Ask for their input, and put new ideas on the drawing board. Try to break out by coming up with a unique product or service that will capture the imagination of merchants. Become the pioneering company that others emulate.
How do we continue to grow?
After you have achieved recognition for your winning strategies, you may find it challenging to hold on to – and build on – your success. Companies in the payments sphere need to constantly reinvent themselves to keep up with shifting priorities and practices. This includes anticipating change, reacting promptly to it and being out in front with innovative products and services.
If being on the “bleeding edge” is not a part of your current business model, you can get ideas by watching the primary “change agents, ” the companies that seize the offensive, set the pace for our industry and spur the rest of us to follow.
I guarantee these leaders have done their due diligence by observing the merchant-level playing field from multiple points of view, including the wise and knowledgeable perspectives of our MLS colleagues. Corporate strategists would do well to follow in the footprints of our feet on the street. Through their tireless efforts and sheer ingenuity, MLSs continue to define the best path forward.
Originally appeared in The Green Sheet, Issue 10:07:02, July 26, 2010.
©Dale S. Laszig, Castles Technology Co., Ltd.
Please include this copyright notice when reprinting this article, and link back to this site when reprinting or quoting.
Crossing the POS chasm
By Dale S. Laszig
Castles Technology Co. Ltd.
Now that 3-D technology has entered our living rooms, older 2-D movies may begin to look dated and flat. Acceptance of the new technology will vary among consumers.
* Innovators will experiment with 3-D software to improve their viewing experience.
* Early adopters will form long lines at retail stores when the newest Blu-ray players come to town.
* Early majority consumers will read Consumer Reports and compare prices before buying.
* Late majority consumers will wait until the industry agrees on a universal standard for formatting and viewing 3-D movies.
* Laggards will make their move when 3-D technology becomes so mainstream that it’s no longer expensive to buy or time-consuming to set up.These are the five stages of the high-tech product adoption cycle. Most merchant level salespeople (MLSs) have seen the same buying patterns among merchants.
Stepping stones
Savvy MLSs understand the importance of fine-tuning sales presentations to each group’s unique buying habits. They recognize each group represents a stage in the product adoption cycle, like stepping stones that lead from one sale to another. Some stones are close together and easy to walk across; others are so far apart that reaching them requires dexterity and a leap of faith.
According to Geoffrey A. Moore in his book, Crossing the Chasm: Marketing and Selling High-Tech Products to Mainstream Customers, the biggest chasm in the product adoption cycle is the one that exists between bleeding-edge early adopters and leading-edge early majority customers.
Bleeding edge
Early adopters are proud to be first to try new technologies. They are willing to endure the slings and arrows, software bugs and hardware issues that frequently accompany product introductions. Moore wrote that by “being the first to implement this change in their industry, the early adopters expect to get a jump on the competition, whether from lower product costs, faster time to market, more complete customer service, or some other comparable business advantage.”
Leading edge
Early majority customers, according to Moore, want “evolution, not revolution.” They look for ways to improve operational efficiencies without being on the “bleeding edge” of technology. Per Moore: “They do not want to debug somebody else’s product. By the time they adopt it, they want it to work properly and to integrate appropriately with their existing technology base.”
The great divide
Progressing from early adoption to early majority selling is easier said than done. Differing priorities and outlooks create the chasm between the two groups, according to Moore. “Because of these incompatibilities, early adopters do not make good references for the early majority,” Moore noted. “And because of the early majority’s concern not to disrupt their organizations, good references are critical to their buying decisions.”
So if the only way to convince an early majority customer is to furnish references, and the only available references come from early adopters, how do we manage the transition? Here’s where dexterity and the leap of faith come in.
When change is not optional
Sometimes new technology is not optional, but mandatory. The Payment Card Industry (PCI) Data Security Standard (DSS) require all merchants, processors and third-party service providers to follow specific guidelines for transmitting, processing and storing cardholder data.
Regardless of where your customers fall in the product adoption cycle, they all need your advice about creating security strategies. If you are promoting an upgrade to a noncompliant hardware or software platform, educate your merchant about the need to meet industry requirements and the consequences of failing to do so.
A leap of faith
Although it may seem a bit challenging at times, bringing new technology to market can be tremendously rewarding for you and your customers. Accept the assignment; you’ll find a way to get it done.
Problem solving
Most customers enjoy complaining, and smart sales people listen carefully when they do. Because when we really listen, we can locate their problems and their pain. Is the problem treatable? If nothing is done, will it get worse? Sometimes the risk involved in doing nothing will outweigh the risk of trying something new.
The art of persuasion
Customers buy for different reasons. Brand loyalty, price sensitivity and special event promotions are among the top three motivators.
* Sell a brand extension to a customer who has been faithful to a product line. Emphasize the similarities between the old and new products. State compelling reasons for why the updates by the manufacturer make the processing platform the same, only better.
* Create special incentives for a price-sensitive customer and demonstrate how the new product or service will save money while improving an existing processing system.
* Limited time offers will create a sense of urgency and resonate with any customer who is attracted to special sales and promotional events.
Take the path of least resistance
The next time your company rolls out a new solution, whether it’s a value-added application or updated hardware or software to meet the PCI DSS, think about your diverse population of merchants and their equally diverse buying habits.
It will be easier to sell to early adopter and early majority merchant customers than to try to convince the late majority and laggards to get on the bus.
Be a change agent
Be aware of the buying habits of your customers, and customize your sales presentations to their unique opinions and perspectives. Then go sell them something. Don’t worry about whether it’s too early or too late. You’re there; they’re listening.
Do some trial closes. The sooner you begin to make the sale, the sooner they will come around to buying. Early adopters will usually get there ahead of the laggards, but you’ll always find some wonderful surprises.
Originally appeared in The Green Sheet, Issue 10:04:02, April 26, 2010.
© Dale S. Laszig, Castles Technology Co., Ltd.
Please include this copyright notice when reprinting this article, and link back to this site when reprinting or quoting.
POS Unplugged
By Dale S. Laszig
Castles Technology Co. Ltd.
emember the early days of relationship marketing? Our job back then, as merchant level salespeople (MLSs), was to show merchants how to optimize customer-facing POS solutions, from PIN pads with basic black and white monitors to full-color signature capture touch screens.
Add a video or coupon to the monitor, we advised them. Leverage your customer relationship management database by offering discounts to your customers on their favorite items. It’s about building relationships. Today, merchants and customers have taken relationships to a whole new level. They follow each other on Twitter and “friend” each other on Facebook. We’d insult their intelligence if we suggested they become better acquainted. They’re not dating anymore; they’re married. In a post-analog world, a merchant’s traditional media mix is getting a makeover via mobile commerce, social networking, blogs and chat rooms, online ordering, and in-store digital content environments. MLSs need a high-level understanding of these applications, so we can partner with merchants who are looking for ways to seamlessly integrate payment processing across an enterprise. Merchants need to connect with their customers anytime, anywhere and on any device.
Anytime
Virtualization is a driving force in the new POS landscape, forever changing traditional concepts of time and place. In an always-on, always-connected merchant/customer relationship, leveraging five seconds at a checkout counter is no longer mission-critical.
It still makes sense for merchants to offer instant coupons, but if their customers don’t seize the PIN pad moment, they can always opt-in later, with an online order, text or e-mail.
The on-demand component of the digital age has freed consumers from the constraints of scheduled programming. Television shows can be recorded by DVRs, to be screened at the viewer’s convenience, commercial free. Meetings and tutorials can be posted online, to accommodate busy and changing work schedules.
In Always On: Advertising, Marketing, and Media in an Era of Consumer Control, authors Christopher Vollmer and Geoffrey Precourt of Booz Allen Hamilton Inc. address the new consumer-centric playing field, which has made it necessary for merchants and advertisers to personalize their overtures to target audiences. Market research has been replaced by one-on-one, interactive communication.
They wrote, “In an always-on world in which media usage is migrating to digital, advertising can be blocked or skipped, and content can be consumed on demand, marketers have to find new ways to distinguish between those aspects of consumer behavior that will remain the same and those that will change. Many are turning to direct observation of and contact with consumers.”
For more information about the book, visit http://books.google.com/books?id=GV5EomJuc68C&printsec=frontcover&dq=Always+On+by+Precourt&source.
Any device
Interaction isn’t limited to the cash register or credit card terminal anymore, or even the brick-and-mortar store. It happens everywhere we go, through laptop and smart phone browsers that keep us connected to friends, families, employers and suppliers. It’s hard to imagine life without the mobile Web now that it has become so embedded in our collective consciousness.
Internet access, once considered the exclusive province of computers, has gone unplugged. According to Dmitriy Lerman, Director of Marketing at Charge Anywhere LLC, “Smart phones are replacing computers in our everyday lives. Simple tasks like writing an e-mail, reading an attachment, staying in touch with people, getting informed on news and weather, and organizing one’s day have comfortably fallen into the realm of a phone, no longer a computer. Payments are not immune to this paradigm shift.”
Today’s merchants have more choice in POS hardware. Credit and debit cards can be swiped on portable and countertop terminals or on card reader peripherals paired with laptops and smart phones. Secure encrypted cardholder data can be managed by payment gateways.
A major component in the payment value chain, gateways optimize the Payment Card Industry Data Security Standard, increase transaction visibility through secure Web portals and empower business owners with real-time access to transaction data from broad populations of devices. They offer reporting tools to manage that data and the ability to react quickly to questionable transactions and communications failures. For a list of validated payment applications, visit www.pcisecuritystandards.org.
Anyone
We’re living in an age of one-hour sales and text messaging from banks on available lines of credit. POS technology has expanded in scope, beyond countertop devices and customer-facing screens, to a multidimensional, interactive consumer environment. This environment is more conversation than transaction. What does that mean, exactly?
Consider how frequently you receive an e-mail after making a purchase, inviting you to write a review. The company would like to know more about you and your preferences and will post your comments, good or bad, on its Web site, to be shared with other prospective buyers. Or how about the e-mails you receive from manufacturers and credit card issuers, inviting you to join online communities where members can exchange ideas and information?
It’s all part of the new online experience. Anyone can host a Web site, post a real-time video, write a blog and participate in live chat. The media is watching us. Every day, ordinary citizens are pulled from obscurity and elevated onto the world stage. Newly minted celebrities who surpass 1 million hits on YouTube are approached by advertisers who pay to post banner ads and product placements on their sites to be proudly displayed on millions of tiny screens.
While the monetization of social networks and YouTube is being debated, it’s clear that the ever-broadening online marketplace will need fast, secure and reliable methods to process payments, because there’s no place for hard cash in the virtual world.
In my next article, I’ll take a closer look at some cool, new applications that leverage mobile technology, enrich electronic transactions, and deepen the relationship between merchants and consumers. The mobile Web is the next frontier of payment processing and an opportunity for MLSs to demonstrate knowledge and leadership. To paraphrase Visa Inc., it’s everywhere we want to be.
Originally appeared in The Green Sheet Issue 10:02:02, February 22, 2010
©2010 Dale S. Laszig, Castles Technology Co., Ltd. Please include this copyright notice when reprinting this article. Please link back to this site when reprinting or quoting.
Product Review: Vega7000
The Vega7000 combines magnetic stripe and smart card reader technology in a compact EFT countertop terminal with multiple options for transaction processing and connectivity. A clam shell thermal printer makes paper loading easy. A flexible operating system and multiple Secure Access Modules (SAMs) stand ready to support a variety of applications.
Vega7000 is configurable for multiple communication interfaces, such as USB, RS232, RS485, GSM/GPRS, and CDMA. Its PIN pad is PCI PED certified, delivering a secure and reliable transaction.
Its versatility and enhanced performance give the Vega7000 a leading edge in meeting the complex requirements of today’s electronic processing environment.
