Payments Strategy Considerations for Retailers Michael English Executive Director of Product Development Heartland Payment Systems

Key Discussion Points

Ø  How  do  your  customer  want  to  pay  and  be  marketed  

Ø  Payment  is  one  aspect  of  the  customer  value  proposi9on  and  perhaps  the  least  important  

Ø  Consider  an  in-­‐store  and  cloud  architecture  that  allows  you  to  assimilate  new  payment  types  

Ø  Tradi9onal  and  mobile  can  complement  and  are  not  exclusive    

Ø Omni-­‐channel  enables  your  customers  to  shop  how  and  when  they  want    

Opportunities and issues for consideration

Ø  Streamlining  the  customer  experience  to  make  acceptance  as  easy  and  fast  as  mag  stripe  

Ø  Training,  educa9on  and  pa9ence  are  cri9cal  for  staff  and  customers  

Ø  Protec9ng  yourself  against  fraud  while  being  flexible    

Ø  As  mobile  and  omni-­‐channel  expand  so  will  concerns  about  privacy  and  security  

Ø Will  POS  the  center  of  your  customer  service  universe  in  the  future?      

EMV Considerations

Making  a  decision  to  implement  EMV  Ø What  increased  card  fraud  levels  do  I  an9cipate  aHer  the  liability  shiH  begins  October  2015?  

Ø What  will  customer  percep9ons  be  of  my  not  offering  chip  acceptance?  

Ø What  percentage  of  my  transac9ons  are  card  present  versus  card  not  present?  

Ø What  percentage  of  my  transac9ons  are  PIN  debit  versus  credit?  

Ø What  is  my  cost  for  upgrading,  upda9ng  or  replacing  my  acceptance  infrastructure  for  EMV?  

Ø  Is  there  a  return  on  my  investment?  Ø  Is  TIPs  applicable  to  me?    

EMV Store System Considerations

Ø  Is  my  POS  system  upgradeable  to  support  EMV?  

Ø What  is  the  cost  of  an  upgrade  versus    a  new  POS  system?  

Ø What  EMVco  listed  peripherals  are  suitable  for  my  opera9on?  

Ø How  will  EMV  fit  with  my  encryp9on  and  tokeniza9on  systems?  

Ø Do  I  need  both  EMV  contact  and  contactless?  

 

EMV Operational Considerations

Ø What  configura9on  best  fits  my  store  opera9ons  and  customer  service  model?  

Ø What  customer  verifica9on  methods  are  best  for  me?  Ø Are  there  any  changes  in  batching  and  seTlement  processes?  

Ø Will  my  monthly  service  or  per  transac9ons  fees  be  impacted  with  EMV  acceptance?  

Ø  Is  there  any  reduc9on  in  transac9on  costs  with  EMV  acceptance?  

Ø What  changes  will  I  see  on  my  statements?  

Ø Should  you  monitor  fallback  transac9ons  at  the  POS?  Ø Mail  order,  telephone  order,  and  Internet  transac9on  acceptance  differences  

Ø Will  eCommerce  fraud  increase?  

Store Level Training Considerations

Ø What  do  chip  cards  and  terminals  look  like?    Ø Managing  mul9ple  customer  verifica9on  methods  Ø Do  I  have  to  check  anything  else  when  a  card  is  used  and  verified  with  a  PIN?  

Ø Customer  forgeUng  their  pin  and  locking  their  card  Ø Fallback  procedures  if  the  POS  terminal  fails  to  read  the  chip  

Ø Transac9on  speed  of  EMV  versus  mag  stripe  Ø How  will  I  know  if  the  chip  transac9on  has  been  successful  or  declined?  

The number one EMV deployment expense

was cardholders leaving their contact EMV cards

in the terminal.

EMV and the Consumers

Ø A  high  probability  of  consumer  confusion  Ø   Time  to  acclimate…  Ø  Inser9ng  and  keeping  the  contact  card  inserted  Ø “Hold”  9me  for  contactless  transac9on  comple9on  Ø ForgeUng  inserted  cards  in  readers  Ø Consistency  from  merchant  to  merchant  

Ø   Disparate  card  issuance  Ø Contact  and/or  contactless  

EMV Conversion Considerations

Ø Can  you  convert  in  the  stages?  

Ø How  many  lanes  and  stores  can  you  convert  per  day?  

Ø What  do  you  need  to  test  when  the  new  hardware  /  soHware  is  installed?  

   Ø How  do  you  ensure  customer  service  and  current  transac9ons  are  not  impacted  during  tes9ng  and  conversion?  

NFC

Ø Enables  devices  in  close  proximity  to  communicate  

Ø Uses  of  NFC  for  payment  include:    Ø  Payment  for  goods  and  services  at  a  POS  terminal    

Ø  Transit  fare  gate  payments    

Ø  Parking  payments    

Ø NFC  technology  is  also  used  for  non-­‐payment  applica9ons,  such  as  tags  on  adver9sing  posters,  coupons,  physical  access  to  secure  areas,  and  boarding  passes.    

The  good…  Ø Card  present  mobile  payment  Ø Fast  transac9on  environments  Ø Incorporated  with  EMV  Contactless    Ø No  pairing  necessary  Ø Low  power  

The  bad…  Ø “Tainted”  Ø Crowded  field  raises  transac9on  cost  Ø Management  and  cost  of  downloads  Ø   Proven  work  “arounds”  such  as  QR  Ø Lack  of  meaningful  apps  Ø Ques9ons  as  to  Secure  Element  security    

Tablet POS

Ø  ROI  on  mobile  POS  solu9on  was  less  than  six  months  for  Giorgio  Ristorante  

Ø  Answered  produc9vity  challenge  to  keep  the  staff  on  the  floor  Ø  Entered  orders  at  a  worksta9on  Ø  Ran  orders  from  kitchen  to  table  Ø  Returned  wrong  orders  to  kitchen  Ø  Handled  other  roles  during  slow  periods  

Ø  Results…  Ø  Saved  15%  of  server  9me,  equaling  almost  ten  

minutes  per  hour—two  tables  per  hour,  per  server  

Ø  With  each  server  able  to  handle  more  tables,  payroll  was  reduced  without  impac9ng  incomes  

Ø  The  average  order  increased  by  $2.00  Ø  Order  errors  from  the  kitchen  plummeted  

 

http://www.maitredpos.com/blog/mobile-pos-customer-case-study

Traditional and Mobile Co-existence

Ø  Merchant  have  considerable  investment  in  tradi9onal  POS  

Ø  Need  to  respond  to  compe99ve  and  customer  service  challenges  

Ø  Tradi9onal  and  mobile  complement  each  other  and  are  not  exclusive    

Ø  Small,  Portable  Footprint  

Ø  Enhanced  Labor  Efficiency    

Ø  Targeted  Sales  

Ø  Lower  Investment  Threshold  

Ø  Mobile  extends  func9onality  and  value  beyond  the  point-­‐of-­‐sale    

Ø  Inventory  Maintenance  /  Inquiry  Capabili9es  

Ø  Inter-­‐Employee,  On-­‐Site  Communica9ons  

Ø  Payment  Processing  

Merchants  Ø  Capture  history  and  preferences  Ø  Manage  customer  feedback  Ø  Reward  loyalty  customers  Ø  Engage  first  9mers  or  lapsed  customers      

Consumers  Ø  Pay  when  ready  Ø  Instant  rewards  Ø  Ability  to  split  the  tab  Ø  Send  feedback  

http://www.tabbedout.com/

2D and 1D Bar Codes

Methods  of  use  in  the  payments  environment  for  presentment    

Ø  On  a  receipt  or  on  the  screen  of  a  payment  terminal  

Ø  On  the  consumer’s  smartphone    

Ø The  consumer’s  payment  creden9als  are  stored  in  the  cloud      Considera?ons  Ø Cost  of  bar  code  reader  versus  other  technologies  Ø Counter  space  Ø U9lity  and  uses  versus  other  technologies  Ø Customer  ergonomics  and  transac9on  9me    

Ø  Pay  for  purchases    Track  and  redeem    rewards  

Ø  Reload  Ø  Get  direc9ons  to  the    

nearest  store,  search  by    ameni9es  and  store  hours  

Ø  Explore  coffees,  beverages,  food  and  nutri9onal  informa9on  

Ø  Free  Pick  of  the  Week  songs  Ø  Send  eGiHs  Ø  Stay  informed  by  being  the  first  to  hear  

of  special  offers  

http://www.starbucks.com/coffeehouse/mobile-apps/mystarbucks

Geolocation

Ø  Geoloca9on  services  let  users  “check  in”  when  they  stop  at  a  store,  bar,  restaurant,  park,  event  place  or  supermarket.  

Ø  Smartphones  allow  companies  to  leverage  customers’  loca9on  and  contact  them  with  offers  that  are  geographically  relevant  

Ø  Geoloca9on  is  used  by  a  variety  of  marketers  such  as  Kiehl’s,  Best  Buy  and  Ace  Hardware  

Considera?on    Ø  Privacy  and  Opt-­‐out  Ø  Card  not  present  transac9on  costs  Ø  Security  Ø  Mobile  baTery  drain  

“The  most  important  benefit  of  geo-­‐targe9ng  for  the  retailer  is  being  able  locate  an  interested  customer  nearby,  in  real-­‐9me,  with  the  ability  to  direct  them  to  where  they  can  make  a  purchase;  this  can  be  a  key  driver  of  foot  traffic  for  brick  and  mortar  stores.”  

Alistair  Goodman,  CEO  of  Placecast,    San  Francisco  Source: http://www.mobilecommercedaily.com/the-allure-of-geolocation

6.5% 9.5%

13.5% 16.5%

US Adult Mobile Coupon Users, 2010 – 2013 Millions and % of adult phone users

Source : eMarketer, Aug 2011 / www.emarketer.com

Bluetooth Low Energy

Bluetooth  Low  Energy  (BLE)  also  known  as  Bluetooth  Smart    Ø  2.4  GHz  wireless  technology,  

consumes  low  power,  operates  up  to  100  meters  in  range,  and  is  primarily  used  for  data  transfer.    

Ø  Connect  consumers  to  enhanced  shopping  experiences  -­‐  ordering  at  a  lunch  spot,  or  geUng  personalized  service  at  your  favorite  store  

 

Considera?ons  Ø  Security  Ø  Coverage  Ø  Collision  Ø  Consumer  u9lity    Ø  Cost  of  payment  

Ø  September  2013  debut  

Ø  POS  support  includes  Erply,  Leaf,  Leapset,  Micros,  NCR,  ShopKeep  and  Vend  

Ø  Consumers  download  PayPal  app  and  opted  into  use  for  check-­‐in  and  payments    

Ø  Once  ac9vated  the  technology  will  trigger  to  confirm  a  successful  check  in  with  photo  appearing  on  the  screen  of  the  merchant’s  POS  system  

https://www.paypal.com/webapps/mpp/beacon

ACH at the POS

Primary  advantage  of  ACH  is  the  generally  lower  transac?on  fee  as  compared  to  credit  or  debit  card  transac?on  fees    Considera?ons  with  using  ACH  Ø ACH  is  a  batch  system  and  designed  for  real-­‐9me  payments  Ø Merchants  accept  the  liability  for  a  situa9on  in  which  a  transac9on  may  not  clear  due  to  lack  of  funds  in  the  consumer  account  Ø Limited  fraud  or  chargeback  protec9on  for  consumers  Ø Unauthorized  ACH  transac9ons  result  in  funds  “missing”  from  the  consumer’s  account  un9l  a  provisional  credit  is  issued  

Ø  A  de-­‐coupled  debit  network  card  that  carries  a  fee  of  1%  +  5  cents  to  area  merchants  

Ø  The  en9re  1%  Fee  is  forwarded  to  local  non-­‐profits  

Ø  Businesses  save  money  on  fees  and  money  is  re-­‐invested  locally  

Ø  Businesses  give  consumers  an  opportunity  to  donate  to  non-­‐profits  by  shopping  local  

Remote Ordering

Use  merchant’s  mobile  applica?on,  mobile  Web  site,  or  tradi?onal  Web  site  to  place  and  pay  for  orders  Ø Increases  ways  consumers  can  do  business  with  you  Ø increased  produc9vity  Ø increased  customer  sa9sfac9on  -­‐  customers  can  order  at  their  own  convenience      Considera?ons  Ø Coordina9on  with  “brick  &  mortar”  Ø Ecommerce  card  rates  Ø Security  Ø Consumer  expecta9ons  Ø Merchants  and  providers  must  disclose  how  they  use  customer  data    

http://www.crunchbase.com/company/tapingo

And finally…

Ø No  silver  bullet  Ø  Gain  knowledge  of  new  payment  

types  and  enabling  technologies  Ø  Know  thy  customer  Ø  Liver  the  customer  value  proposi9on    Ø  Tradi9onal  and  mobile  are  not  

exclusive    Ø Omni-­‐channel  enables  your  

customers  to  shop  how  and  when  they  want    

Ø  Privacy  and  Security  are  core  

 

 

Smart Card Alliance 191 Clarksville Rd. · Princeton Junction, NJ 08550 · (800) 556-6828 www.smartcardalliance.org

Michael English Executive Director of Product Development Heartland Payment Systems michael.english@e-hps.com www.heartlandpaymentsystems.com