“Providing Important Technology related news for a changing Independent Grocery Industry”
“Providing Important Technology related news for a changing Independent Grocery Industry”
Inside this issue:
Unauthorized Withdrawals From Merchant Bank Accounts 1—3
EMV Update 4—5
Future of Mobile Payments (Hype or Reality) 6—7
Unauthorized Withdrawals From Merchant Bank Accounts
How would you feel if you realized that someone had been taking money from your bank account every month, sometimes for years, without your consent or knowledge? Unfortunately, this is thereal-ity many merchants are realizing.
Recently you may have noticed articles describing class action lawsuits that have been pursued against Dis-cover Financial Services and selected marketing partners alleging “deceptive telemarketing practices and illegal billing practices.” While the practices involved may be more widespread than just Discover Financial Services, the focus of this article will be on Discover due to recent interaction with merchants directly impacted by Dis-cover practices.
BACKGROUND
Discover offers several optional services to small business. On the Discover website the services are offered as Merchant Business Solutions and include:
• Web. Com – web-site management services • Business Online Payroll
• Merchant Services Protection Plan (MSPP)
• Access to professionals in legal, tax and identity theft fields • Merchant Discount Health Plan (MDHP)
• Business Technical Care (BTC)
• IT-type support for small businesses
The web-sites for several of these Discover business partners advise that their program was designed specifi-cally on behalf of Discover Network.
How Does It Start?
Stores are contacted by phone by one (or more) of the Discover business partners. By the end of the call, unknown to the merchant, the store has been signed up for the service with the monthly charges to be taken directly from the merchant bank account. At no time is Discover information or banking infor-mation provided by the store.
The scenario described by affected merchants is as follows:
• Stores receive a call, normally in the evening, from the given telemarketer
• The telemarketer does not ask for a manager – they talk to whoever answers the phone • They talk very fast, creating little time to fully comprehend what is being said
• They ask seemingly benign questions that will result in a “Yes” answer
• Portions of the conversation are recorded and played back if the merchant later calls to com-plain about the charges
• Merchants have reported that the recordings are difficult to understand
• The recorded “Yes” answer by the store’s employee is considered to be authorization to sign the merchant up for the service being promoted
• The monthly fees ($29.95, $39.95 or $49.95) are low enough to not attract undue attention. They typically have gone un-noticed for months if not years.
Normally a telemarketer can’t start charges for a product or service until they receive payment information – credit card number or bank account. However; these telemarketers are Discover business partners and Discover already has the necessary billing information.
HOW DO YOU KNOW IF YOU’VE BEEN AFFECTED?
The charges are taken directly from the merchant’s bank account and may be listed as: • Discover Network Settlement
• Healthplan MDHP
• Legal Club Monthly18005112896 • Mer Tech Solut
• MDHP8003195243 • MSPP Healthplan • MSPP
• BTC8003260428
• Monthly amounts charged have been $29.95, $39.95 or $49.95, depending upon the service As of July 2012, charges that had previously slipped beneath the radar with a description of “Discover Settlement “ are now being listed with descriptions that more accurately describe the service related to the charge.
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Unauthorized Withdrawals–Continued
CAN YOU GET YOUR MONEY BACK?
The settlement for merchants who participated in one of the class action suits was capped at $450. Merchants who diligently and doggedly pursued their own resolution have experienced some success in obtaining a partial or full refund – but it takes perseverance!
The steps described by one merchant who received a refund are listed below: 1. Call Discover
a. Describe the charges – ask when they started
b. Ask for a full refund since the charges were not authorized
c. Discover may provide you with an 800 number for the service provider and ask you to try and resolve the issue with them
d. Advise Discover not to share information about your company, your business and your stores with others (including their business partners)
2. Call the provider
a. Take detailed notes with names and dates b. Describe the issue and request a full refund
c. Advise the provider your next steps will be to contact Discover to request they escalate the matter
3. If the service provider does not agree to a full refund
a. Contact Discover and ask that the issue be escalated – Discover does have an Escalation Department.
b. Typically if the issue goes to Discover Escalation, it is resolved
4. In some cases the State Attorney General’s office may be of some assistance in the event Steps 1-3 above are not successful.
HOW CAN YOU PREVENT THIS FROM HAPPENING?
1. Reconcile your bank statement every month 2. Verify that charges are correct
a. “Discover Network Settlement” would appear to be a legitimate charge but don’t assume the amount taken from your bank account matches the fees listed on your credit card statement
3. Question any differences between what you think should have been taken and what was actually taken from your account
4. Don't assume that it can't happen to you, or that it won't happen again. Even after you've in-structed Discover to stop sharing your information, you may not be able to determine whether your information was previously shared (or whether it has been re-shared by any of Discover's business partners). Remain vigilant in reviewing your financial records on a regular basis.
EMV Update
EMV is an acronym for Europay, Mastercard and Visa, the three companies that jointly created the ini-tial chip card specifications in 1994. Currently, these standards are globally accepted in most areas of the world except the United States. However, that changed August 9, 2011 when Visa announced a three part plan to speed up chip migration and adoption of mobile payments in the United States.
1. Expand the Technology Innovation Program (TIP) to U.S merchants
Effective October 1, 2012, the US will be included in the Technology Innovation Program (TIP). Theoreti-cally, TIP eliminates the requirement for eligible merchants to annually validate their compliance with the PCI Data Security Standard for any year in which at least 75 percent of the merchant's Visa transactions originate from chip-enabled terminals. To qualify, terminals must be enabled to support both contact and contactless chip acceptance, in-cluding mobile contactless payments based on NFC technology. Contact chip-only or contactless-only terminals will not qualify for the U.S. program. Quali-fying merchants must continue to protect sensitive data in their care by ensuring their systems do not store track data, security codes or PINs, and that they continue to adhere to the PCI DSS standards as applicable.
2. Build Processing Infrastructure for Chip Acceptance
U.S. acquirer processors and sub-processor service providers will be required by VISA to support mer-chant acceptance of chip transactions no later than April 1, 2013. Chip acceptance requires service pro-viders to carry and process additional data that in chip transactions, including the cryptographic mes-sage, makes each transaction unique.
3. Establish a Counterfeit Fraud Liability Shift
Effective October 1, 2015, there will be a liability shift for domestic and cross-border counterfeit card-present point-of-sale (POS) transactions. Fuel-selling merchants will have until October 1, 2017 before this liability shift takes effect. With the liability shift, if a contact chip card is presented to a mer-chant that has not adopted, at minimum, contact chip terminals, liability for counterfeit fraud may shift to the merchant's acquirer.
EMVco has established a website (www.emvco) to provide the online resources, including published specifications, bulletins and application notes, type approval-process documents and approval lists. The International Retail User Group (formerly the IBM Retail User Group ), IRUG has created an EMV Focus group to assist with the development of POS
and EPS processing to meet these published dates. However, it should be noted that as a whole, the US adoption of EMV is unlike the adoption in other areas of the world, and the published dates are generally considered to be unobtainable by all parties.
First, the EMV process is marketed as a fraud reduction program. In reality, the program is less about fraud reduction and more a thinly veiled attempt by the Association and card Issuers to provide an infrastructure, at the cost of the mer-chants and across their in-store systems, to en-able dynamic updates to chips on consumer cards to keep Issuer portfolios current. Despite the EMVco claim for fraud reduction, there are no plans to reduce the fraud costs within the current interchange fee structure, even though liability for this fraud shifts from merchant to Re-tailer.
Second, the dates set by VISA provide the US merchants and industry providers even less time than was afforded to Canada and other imple-mentation regions – even though the US market has to provide significantly more technology support than the other global regions. Canadian implementations did not have to consider Con-tactless or Mobile conCon-tactless platforms and still had almost twice the timeline afforded to US Merchants that have to complete Contact, Con-tactless and Mobile ConCon-tactless systems. US Acquirers and industry providers have already expressed to EMVco the unrealistic April 2013 date. Especially given the EMVco published standards have yet to address DEBIT.
Third, as currently written, the EMV standard is in direct conflict with the Durbin Act because the EMV standard does not provide the required minimal 2 processing rail options required by Durbin. As such, EMVco cannot enforce any actions from non-conformance to the deadlines related to the Durbin conflict.
Finally, once the Durbin conflict is resolved and acquirers plan their certification dates, there will be significant backlogs for merchants trying to schedule certification windows. The US has a sig-nificantly greater number of retailers than Canada, but the available acquirers are not equally greater. This will leave merchants exposed to the liability shift deadline because they were ready, but un-able to certify with their acquirer before the 2015 date.
Apart from the certification dates, retailers need to understand that as a result of EMV, there will be additional ongoing costs related to their own future POS programming that impacts electronic pay-ment processing. In the EMV model, the mer-chant’s pin pads will now contain kernel code that “belongs” to EMVco. The merchant is not able to change or remove this code and must allow the
code to be “dynamically” changed by EMVco. Certain EPS-related merchant changes will re-quire recertification of this code, and they will serve as the officially licensed certification lab/ provider. Examples of changes that might require this additional certification cost include (but not limited to) selection of new pin pad device, ac-ceptance of new payment mechanism/token, change of switch provider or acquirer. As of the October IRUG EMV Focus Group meeting, in-dustry providers estimate these certification ser-vices to cost in the range of $100K+ per occur-rence.
Retailers are urged to work together to finalize a meaningful and attainable roadmap towards US adoption. There is also a need to resolve the dis-parate costs placed on merchants by EMVco and Issuers by this initiative.
There is not much current Retail Technology generating or receiving as much hype as mobile payments. Currently retailers are trying to differentiate between the hype and the real opportunity. There is also confu-sion about already available mobile payments solutions, with digital and NCF wallets co-existing with QR-driven payment solutions, contract-less cards and direct-carrier billing systems.
For retailers, limited consumer adoption of mobile payments, high merchant service changes, technology and systems integration costs make it difficult to justify the move towards mobile and digital payments.
However, retailers need to prepare now for the changes the smartphone revolution is bringing. Soon the en-tire shipping experience is going to be profoundly re-shaped by smart devices, as on-line and off-line retail-ing merge. Successful payment solu-tions need to be developed for this new commerce. From the start, these solutions need to be imbedded in the wider loyalty strategies, mobile cou-poning, and click & collect promo-tions strategy.
Most of the activity around mobile payments in recent years has fo-cused on technologies rather than on viable go-to-market strategies. Of all technologies, Near Field Communi-cation (NFC) has the largest momen-tum behind it, backed by Mobile Net-works, many financial institutions, card associations and some big tech companies like Google.
Several issues have prevented mass adoption of NFC-mobile payment solutions. But arguably the main ob-stacle for NFC is that the leading smartphone manufacturers, like Ap-ple, have not yet adopted NFC for its devices. Instead, Apple has up-graded its Bluetooth offering to Blue-tooth Low Energy (BLE) on its entire portfolio of mobile and computer de-vices. Whether BLE will play a role on mobile payments or not remains to be seen, but the technology is in many ways superior to current NFC offer-ings and can enable new features in m-payments such as long-distance check-outs.
While NFC still has the largest momentum behind it, it could be losing steam. Payment incumbents are em-bracing NFC because it simply represents an update of their delivery format rather than a threat to their busi-ness model. Innovators are instead focusing on solutions that can be launched into the market right away. Startups like Square are changing the way we look at traditional transaction processing. As the adoption for new payment products continues to increase there will be increased pressures on processors, POS and EFT terminal providers, to stay current and implement customer-driven technology and security which brings value to the electronic payments transaction ecosystem.
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The Future of Mobile Payments: (Hype or Reality)
WHAT IS A
MOBILE PAYMENT?
THERE ARE FIVE MAIN TYPES: MOBILE AT THE POINT OF SALE MOBILE AS THE POINT OF SALE THE MOBILE PAYMENT PLATFORM DIRECT CARRIER BILLING CLOSED LOOP MOBILE PAYMENTS THE MOBILE WALLET EVERY SMART‐ PHONE IS A CASH REGISTER THE EVERYTHING ELSE MOBILE PAYMENT TELLING DIGITAL MERCHANTS TO "PUT IT ON MY BILL" THE RETURN OF THE STORE CREDIT CARD: THIS TIME IT'S MOBILE THIS IS THE FIRST MOST OVER‐HYPED TYPE OF MOBILE PAYMENT. PAY‐ ING FOR THINGS AT A STORE WITH A MOBILE DEVICE USING NFC OR "TAP AND GO" OR SOME OTHER YET‐TO‐BE HYPED METHOD. THE SECOND MOST OVER‐ HYPED TYPE OF MOBILE PAY‐ MENT. THIS IS MERCHANTS USING A MOBILE DEVICE TO PROCESS CREDIT CARD PAY‐ MENTS. DO NOT CONFUSE THIS WITH MOBILE WALLETS. THEY ARE NOT THE SAME THING. THIS IS EVERY‐ THING ELSE. THINK OF IT AS A CATCH ALL CATE‐ GORY FOR PRODUCTS THAT LET CONSUMERS SEND MONEY TO MERCHANTS OR EVEN EACH OTHER (SOMETIMES CALLED P2P), USING MOBILE DEVICES. IT MIGHT BE AT THE POINT OF SALE, IT MIGHT BE ONLINE, IT MIGHT USE TEXT MESSAGES OR EVEN NFC SOMEDAY. THIS IS CON‐ SUMERS BUYING RINGTONES OR GAMES OR DIGI‐ TAL CONTENT BY PUTTING THE CHARGES ON THEIR CELL PHONE BILLS (YOU MAY HEAR IT CALLED "IN APP BILLING" TOO). UNSEXY? SURE BUT IT'S ALSO THE ONLY ONE THAT'S ACTUALLY WORKING IN THE HERE‐AND‐ NOW. (PEOPLE WANT THEIR ANGRY BIRDS.) IF A COMPANY DOESN'T WANT TO WAIT FOR SOMEONE ELSE TO BUILD A WALLET OR A PLATFORM, IT CAN ALWAYS BUILD ITS OWN. STARBUCKS DID IT. IS IT EXPEN‐ SIVE? YOU BET. IS IT WORTH IT? ASK STARBUCKS. THEY DID 5 MIL‐ LION TRANSAC‐ TIONS IN THEIR FIRST TWO MONTHS.Here’s a small list of some the current players in the M-Payment market: • PayPal: Companies like PayPal
that already have consumers’ credit card or bank account info on file are hoping to leverage loy-alty. Home Depot has hopped on and is now taking PayPal in all its stores. The advantage for con-sumers is they don’t have to carry, expose or otherwise remember their credit card numbers.
• Isis Mobile Wallet: Mobile phone operators recognize that one way or another they’re the new vehicle payments will ride on. Verizon Wireless, AT&T Mobility, and T-Mobile USA have put together a consortium that they hope
be-come consumers’ “wallet” of choice. The technology to be used is “NFC” or near-field communica-tions. Basically, you tap your phone and go. But will there be enough value for the consumers to use this over other solutions?
• Apple has yet to introduce NFC technology into its products. They did purchase a company in July called Authen Tec, a company with a fingerprint scanner that can interact with NFC-applications. This eliminates my personal fear that anyone can pick up my phone, tap and go spend my money. They also could use Bluetooth 4.0 (BLE) which is already in all of their current mobile and pc devices.
• Square: Easy to use payment technology that plugs a low-cost Magstripe reader in the audio jack on smartphone devices running Android and IOS. The company has focused their efforts on small businesses and food trucks. But is running a new program with Starbucks that could expose their technology to an even wider customer base.
• Google Wallet: This is another technology using NFC. Google is investing big into this technology and has a number of mobile devices (phones/tablets) on the market today. They have also have signed up some merchants to use the Google Wallet product at POS in some markets in the US. • Retailers-MCX: A group of leading US merchants has announced the formation of Merchant
Cus-tomer Exchange (MCX), a new mobile payments and promotions company "dedicated to offering consumers a versatile mobile commerce experience that will combine the convenience of paying at the register with customizable offers”. This uses NFC as the key technology driver for deployment. Some of the founding member companies are 7-Eleven, Best Buy, CVS Pharmacy, Hy-Vee, Lowe's Home Improvement, Publix Super Markets, Sears, Shell Oil, Sunoco, Target and Wal-Mart. Future plans call for MCX to be able to "address the needs of financial institutions and merchants of all sizes to better serve consumers in the growing mobile marketplace" — suggesting that the founders see MCX becoming a full competitor to mobile payments services like Isis and Google Wallet.
The content in this newsletter was created in cooperation with Associated Food Stores of Salt Lake City, UT, Associated Wholesale Grocers Kansas City, Wakefern/ShopRite and Unified Grocers.
Retail Technology Professional Services Contacts
For additional information regarding any of Unified Grocers’ Retail Technology products and services, contact:Southern California Tim Eddy (323) 729-7310 teddy@unifiedgrocers.com Northern California Chris Barcal (916) 521-9444 cbarcal@unifiedgrocers.com Oregon Dan Morris (503) 833-1825 dmorris@unifiedgrocers.com Washington Linda Robinson (206) 764-7614 lrobinson@unifiedgrocers.com
