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Friday, January 20, 2017

Retail, payments find unity at NRF 2017

T he National Retail Federation's 106th Annual Convention and Expo, held Jan. 15 to 17, 2016, at Jacob Javitz Convention Center in New York City, reflected the retail and payments industries' diverse community of established global enterprises and recent start-up ventures. Approximately 33,000 attendees, 510 exhibitors and 300 speakers participated in the show, which included 70 educational sessions.

In a keynote address, Kip Tindell, NRF Chairman and co-founder and Chairman of The Container Store Group Inc., called retail an "exciting, dynamic and important industry in the U.S.," that employs one out of every four American workers. He acknowledged industry stakeholders reshaping retail's future and "visionaries from every conceivable field who are redefining the in-store experience."

NRF President and Chief Executive Officer Matthew Shay observed the show had a "global feel" and praised the NRF Foundation's fundraising gala that raised $2.1 million. Proceeds will fund scholarships and the Retail Industry Skills & Education program (RISE Up), a retail industry credentialing initiative designed to help applicants of all educational and economic backgrounds acquire the necessary skills to enter the retail workforce and advance in retail careers, Shay stated.

Widespread opportunities, disruption

Shay encouraged visitors to walk the NRF show floor, where numerous exhibits reflected solutions to retail's daily challenges, opportunities and disruptions. He noted the term disruption comes from Latin, meaning to break asunder or shatter to pieces. "Disruption doesn't always feel like a good thing, but we need it," he said. "When a technology disrupts a product, it makes it better, stronger and more efficient than before."

Disruption affects many industries and sectors, including sports, culture and the recent presidential election, which disrupted Washington in a big way, Shay added. "You might like what you see; you might hate what you see," he said. "But the reality is that disruption is here, and it's inescapable."

Data, the new oil

Intel Corp. CEO Brian Krzanich said the retail industry has arrived at a new juncture, where smart and connected technologies are transforming the way we shop and enjoy products. "In the last century, oil transformed the world," he said. "In this century, data is that transforming engine that is changing the very definition of a retail store."

Krzanich additionally noted that the industry's virtual cycle of growth will build on itself as devices become increasingly connected, from smart watches that monitor the body to smart POS systems and equipment. As these devices become connected, more data is unleashed and analytics artificial intelligence and machine learning to transform its business, he said.

"Artificial intelligence and machine learning can now be applied and pushed down into these devices to predict what's next," Krzanich added. "Every industry will be transformed by this, and Intel will use this to deliver amazing experiences."

Krzanich further predicted emerging technologies will have three major impacts on retail: they will enable retailers to reinvent the in-store experience, identify new uses for analytics and create stores of the future. Retailers are already using virtual reality (VR) to create immersive retail experiences for consumers in stores and in their homes, he added.

VR technologies enable customers to control their experience while giving merchants more insights, Krzanich said, adding that consumers "could be sitting in your store and feeling like they're at home, or sitting at home and feeling like they're in your store, while you're getting all that data."

From omnichannel to unified commerce

A new report, Building the Business Case for a Unified Commerce Platform – Optimize the Consumer Experience, co-authored by the NRF, Ecommerce Europe and Demandware Inc., surveyed 300 retail business owners and technology executives in the United States, Europe and Australia. Most respondents were involved in rebuilding their retail infrastructure, architecture, and applications in response to evolving consumer behavior, the report authors noted.

"Retailers are rethinking their technology approach to better serve connected consumers," the authors wrote. "Retailer expectations for the benefits of a unified commerce platform are high, including margin, revenue and brand value."

The theme of unified commerce was also reflected in NRF exhibits, presentations and breakout sessions. Henry Helgeson, CEO and co-founder of Cayan LLC, said unified commerce enables POS hardware vendors to sign up ecommerce merchants and enhance loyalty, analytics and co-branded service offerings. "Omnichannel was a powerful concept in 2016, especially the ability to offer a consistent consumer experience across multiple channels," he said. "Unified commerce expands on that theme, with enhanced capabilities and analytics that retailers love."

Nathan Casper, Director of Marketing at Shift4 Corp., said, "There is no place in [a retail] enterprise for a one-size-fits-all approach to technology and hardware. As merchant advocates, we will work with retailers to ensure their payment systems are secure and compliant." Shift4 is a payments industry gateway that prides itself on having created payment card tokenization.

"Our theme is 'payments solved; payments evolved,'" added Jeremy Fried, System Architect at Shift4. "Unified commerce is the next evolution of omnichannel, where data from multiple, disparate systems is aggregated into a single hub."

Coy Christensen, Vice President of Product Management at Vantiv Inc., has observed payments evolve from distributed systems to mobile solutions to cloud-based intelligence that can monitor devices "down to the board level." Christensen called unified commerce "the endpoint we've been pursuing for the past 15 years but didn't have the technology to support, until now."

Payments industry addresses ADA compliance
Wednesday, January 18, 2017

P ayments analysts and consumer advocates are urging the merchant community to conform with guidelines established by the Americans with Disabilities Act (ADA). The legislation, originally signed into law in 1990 and modified in 2009, established comprehensive guidelines for commercial structures and mass transit to enable people with disabilities to participate in a variety of public venues. These guidelines include specifications for countertop payment terminals and service lanes, payments analysts stated.

“Wal-Mart Stores Inc. just settled a four-year class action and is implementing ADA-compliant mounting solutions in 200 stores,” said Steve Taylor, ADA consultant and Chief Executive Officer of Taylor Point of Sale Mounting Stand Solutions. “All merchants must comply with ADA guidelines to avoid lawsuits and fines; the minimum fine is $4,000, whether you process $1,000 or $1 million a month.”

The lawsuit, brought by Center for Independent Living Inc. et al. v. Wal-Mart Stores Inc., was tried in the U.S. District Court for the Northern District of California. Plaintiffs alleged that disabled consumers were unable to reach consumer-facing POS devices because they were mounted too high. This forced some consumers to share personal information, such as PIN codes, with cashiers to complete transactions, the plaintiffs stated.

ADA-centric innovation

Taylor stated that he created a patented ADA-compliant stand that makes customer-facing PIN pads accessible to wheelchair-bound consumers. Users can pull on a blue lever to release the tethered PIN pad from its mounted stand and complete their transactions without assistance. The industrial-strength wire tether keeps the device safely connected to the stand and countertop, enabling it to transition from fixed to handheld configurations, he said.

Taylor noted that several device manufacturers are using the ADA-compliant stand in large-scale, customized deployments with major retailers. He is also working with The Electronic Transactions Association on a webinar designed to educate members on ADA guidelines.

Taylor is also forming a working group to raise awareness of ADA compliance and address numerous issues related to implementation. Total System Services Inc. and Mastercard have already joined, he added.

Accessible lanes, countertops

ADA guidelines state that merchants must have enough clearance for wheelchairs to freely move through lanes and aisles. The space adjacent to a countertop must be at least 30 inches long by 48 inches wide and “connected to the accessible route which connects to the accessible entrance and other areas in the business where merchandise or services are provided,” ADA stated.

Grocery store checkout lanes must provide 36-inch-wide access aisles designated with the international symbol of accessibility mounted over the aisle. Store owners must provide a certain number of accessible lanes based on their total number of lanes. “For example, if one to four aisles are provided, then at least one should be accessible,” the ADA wrote. “If more than five to eight aisles are provided, then two accessible aisles are needed.”

Additionally, every type of checkout, including express lanes and customer service counters, must provide access to disabled consumers. Certain grandfathered clauses enable buildings and stores constructed before Jan. 26, 1992, to make modifications to existing infrastructure. Stricter guidelines apply to newer facilities. Specific guidelines on design and renovation can be found in The ADA Standards for Accessible Design.

State, federal laws apply

The U.S. Department of Justice, consumer rights division, is actively enforcing ADA guidelines, Taylor stated. In addition, numerous state ordinances dictate accessibility codes, which are further enforced by local building inspectors. Merchants must comply with local, state and federal requirements, he added.

“The ADA issue has become a hot topic, and 60 Minutes recently aired a segment about drive-by attorneys who are exposing noncompliant businesses for [the attorneys’] own personal gain,” Taylor said. “The payments and kiosk industries are working on a series of initiatives to eliminate the massive amounts of ADA lawsuits at checkout.”

NRF urges Supreme Court to lift surcharging ban
Friday, January 13, 2017

T he National Retail Federation recently voiced strong support for the plaintiffs in Expressions Hair Design v. Schneiderman, a lawsuit seeking to overturn New York State's ban on surcharging credit card transactions. Initially filed by 10 merchants against the state's attorney general in 2013, the case is now under review by the U.S. Supreme Court.

In a statement issued Jan. 10, 2016, NRF Senior Vice President and General Counsel Mallory Duncan urged the court to mandate fee transparency for credit card transactions. The issue is not surcharging per se, but about giving merchants the chance to show their customers the true cost of using a credit card, Duncan stated.

"It's about giving retailers freedom of speech when they try to give their customers a break for paying by cash," he said. "Some states allow cash discounts but prohibit credit card surcharges. A gas station owner shouldn't be hauled into court for saying gas is $2.90 a gallon cash and $3 credit rather than saying $3 credit and $2.90 cash."

It's complicated

Surcharging became legal Jan. 27, 2013, as part of a class action settlement against Visa Inc. and Mastercard, but was subsequently banned in California, Colorado, Connecticut, Florida, Kansas, Maine, Massachusetts, New York, Oklahoma and Texas. Also, U.S. Retailers, initially elated when surcharging became legal, were rapidly discouraged by the complicated implementation process in states where surcharging is not banned.

Visa and Mastercard advised merchants to review state guidelines pertaining to brand-level and product-level surcharging to ensure they comply with all criteria. Brand-level surcharges levy a uniform percentage on all Mastercard and Visa credit cards; product-level surcharges apply to specific types of Mastercard or Visa cards. The laws apply only to credit card products; debit and prepaid products do not apply, the card brands stated.

Merchants in U.S. states and territories that allow surcharging must also comply with rules and conditions, including:

Penalties, prevention

Visa and Mastercard have been actively monitoring surcharge law compliance, particularly in states that outlaw the practice. The card brands have asked cardholders to report any irregularities to their state attorneys general. Violations could lead to stiff penalties. For example, New York retailers found guilty of surcharging could face $500 fines and year-long prison terms.

The complex implementation process and varying state regulations prompted some merchant service providers to help merchants achieve compliance by automating surcharge processing. Transaction Services, based in Omaha, Neb., developed customized terminal software and a payment gateway that details net deposit credit card transactions and gross deposits debit card settlement reports. Berwyn, Pa.-based JetPay Corp. created Limitless, a solution that automates cash discounts and credit card surcharging.

Constitutional rights

Many retailers petitioned state courts to lift their bans, claiming they violated their constitutional right to free speech, guaranteed in the U.S. Constitution's First Amendment and 14th Amendment's Due Process clause. Some states ruled in favor of lifting the bans, only to have their decisions overturned when the payment card brands appealed the rulings. The matter eventually escalated to the U.S. Supreme Court, which agreed to review the right of individual states to ban surcharging. The court heard the case Jan. 10, 2017, and a decision is expected by June 2017.

As the world's largest retail trade association, the NRF supports its members by challenging laws in the 10 states that prohibit surcharging. The trade association claims the payment card industry is the only party that benefits from the ban, which penalizes merchants who provide cash discounts to their customers.

"Banks charge merchants a fee averaging about 2 percent of the transaction amount each time a credit card is used, and a fee of at least 21 cents when debit cards are used," the NRF said in a statement to the press. "The fees total more than $50 billion a year and drive up costs for consumers because card industry rules effectively require [the fees] to be built into the price of merchandise."

Wal-Mart ends Visa debit moratorium in Canada
Wednesday, January 11, 2017

W al-Mart Stores Inc. and Visa Inc. appear to have settled differences over PIN debit in the Canadian region, retail analysts noted. The Green Sheet had previously reported on Wal-Mart’s May 2016 civil complaint against Visa in Issue 16:06:01, dated June 13, 2016.

Walmart filed a complaint May 10, 2016, claiming Visa opposed its PIN debit requirement for customers using chip-enabled debit cards at the POS. Visa claimed Wal-Mart’s chip-and-PIN debit requirement violated its processing guidelines.

Wal-Mart spokesman Randy Hargrove said Mastercard had cooperated with the company’s chip-and-PIN guidelines, which he called a superior method of authentication commonly used in other countries. He believes Visa prefers to route debit transactions through the company’s credit card networks where they are billed at higher payment card interchange rates.

Hargrove further noted that debit card transactions extract funds directly from consumer accounts, which entitles debit transactions to lower rates due to their enhanced security and guaranteed payment methods. "Visa nevertheless has demanded that we allow fraud-prone signature verification for debit transactions in our U.S. stores because Visa stands to make more money processing those transactions," he stated.

Goliath versus Goliath

Hostilities escalated when Wal-Mart banned Visa cards at three of its Canadian stores in July 2016; the ban eventually affected 19 of the retailer's 409 locations in Canada. Visa retaliated by launching a marketing campaign that offered $10 and $25 credits to Visa debit cardholders who used their debit cards at select retailers and grocery stores located near Wal-Mart locations in Canada. Many participating retailers were small mom-and-pop stores, Visa stated.

Observers were fascinated by the fight between the retail giant and major payment card brand. "They'll try to paint the situation as David versus Goliath, but really it's Goliath versus Goliath," Professor David Vendramin stated in an interview with the Canadian news source He added that the business community will probably never know how the two companies arrived at an agreement. This appears to be the case, as neither Wal-Mart nor Visa has shared details of their reconciliation.

New year, fresh start

A terse statement posted Jan. 5, 2016, on Wal-Mart's website confirmed the company would once again accept Visa cards at all Canada stores, beginning the following day. “We have come to an agreement with Visa which allows us to continue offering Visa as a form of payment in our [Canadian] stores. Customers in Manitoba and Thunder Bay, Ontario, will be able to use their Visa credit card starting January 6, 2017,” Wal-Mart stated.

In a short interview with Bloomberg, Carla Hindman, Head of Corporate Communications for Visa Canada, confirmed the ban would be lifted. “We have come to an agreement with Wal-Mart through which Visa credit cards will be accepted at all Canadian Walmart stores,” she stated.

Pricing debates continue

As a global retailer, Wal-Mart remains concerned about interchange pricing in all regions of the world, retail analysts noted. Some remarked that Wal-Mart has complained about fees in public statements and conferences. For example, the company took aim at all credit card brands in a September 2016 press release, stating, “Walmart Canada pays [more than] $100 million in fees to accept credit cards each and every year. Lowering costs such as these is necessary for us to be able to keep our prices low and continue saving our customers money.”

Payments analysts question how the frequently contentious relationship between Wal-Mart and Visa will manifest in the United States and other major markets around the world. The two companies are not always at odds. They collaborated on an initiative to speed up chip-and-PIN transactions at the POS in April 2016. Visa introduced new software, and Wal-Mart eliminated a prompt that asked consumers to verify transaction amounts. The net result reduced average transaction times by approximately 11 seconds, the companies stated.

Ecommerce drives global economic growth
Friday, January 6, 2017

E commerce may have a greater impact on economic growth than physical goods in the post-industrial world, according to a new report published in December 2016 by McKinsey Global Institute. Digital globalization: The new era of global flows found developing countries are using ecommerce platforms to participate in the international business community.

“Tens of millions of small and midsize enterprises worldwide have turned themselves into exporters by joining e-commerce marketplaces such as Alibaba, Amazon, eBay, Flipkart, and Rakuten,” MGI researchers wrote. “Approximately 12 percent of the global goods trade is conducted via international e-commerce.”

MGI analysts expect digital information flows to grow an additional nine times over the next five years in response to increasing movement of goods, services, finance and people. The global economy has a digital component for every type of cross-border transaction, they stated.

New global citizens

MGI research additionally found private individuals use connected devices to manage personal and professional networks. “Some 900 million people have international connections on social media, and 360 million take part in cross-border e-commerce,” the authors wrote. “Digital platforms for both traditional employment and freelance assignments are beginning to create a more global labor market.”

Hyper-connected global citizens represent an important new demographic segment in financial services, noted Mike Massaro, Chief Executive Officer at Flywire, a cross-border payment service provider. “This fast-growing segment does not consider borders in terms of lifestyle, access or travel and is spending more than ever on goods and services outside of their home countries – on education for their children, medical care for themselves and their family members, real estate, luxury items and other offerings that bring diversity and culture to their life experience,” he said. “We’ll see this demographic continue to grow in 2017 and beyond and flex their spending power in new ways.”

Bridging cross-border gaps

MGI’s analysis attributes a 10.1 percent increase in global gross domestic product to cross-border data flows that expose economies to ideas, research and talent, a value worth $7.8 trillion in 2014, researchers stated. The MGI Connectedness Index indicated it ranked 139 countries on their use of digital channels to manage “inflows and outflows of goods, services, finance, people, and data.” Singapore received the highest ranking, followed by the Netherlands, the United States and Germany.

The rise of cross-border payments has broadened the international marketplace and made it easier for consumers to pay in local currencies, using familiar options such as bank transfers, online banking, credit and debit cards, payments analysts stated. This has placed additional pressure on international payment service providers to adopt digital payment schemes.

“Payment speed and convenience aren’t the only drivers for global citizens,” Massaro said. “Their top priority is ensuring the payment gets to the institution on the other end. The certainty of funds is also critical to the receiving institution – assurance that the amount owed is the amount received, along with the data that goes with it to reconcile their own ledgers.”

Enhanced services, security

Cross-border transactions are typically complex and challenging for merchants, and consumers and businesses must take steps to reduce friction while making payments safe, convenient and cost-effective, Massaro stated. Increased levels of fraud reported in 2016 prompted many institutions to protect their customers by restricting access to trusted service providers and educating customers to conduct transactions solely through these channels.

“Both payors and payees are looking for protection against fraud and assurances of compliance with any international regulations,” Massaro added. “And with governments’ increased focus on cutting off financing sources to potential terrorists, any entity processing large, cross-border payments will need to have secure systems in place to verify sources and recipients, ensure strict compliance with anti-money-laundering laws and provide detailed transaction reporting.” The increase in high-ticket transactions across disparate cultures, languages and time zones will place additional pressure on business owners to provide continuous support to their international clientele, Massaro predicted.

“Schools, hospitals, tax agencies and others are not necessarily equipped to be in that business,” he said. “Any entity accepting large, cross-border payments in any volume will need to be able to provide ancillary support services related to those payments – in-house or via qualified third parties – and 24/7 customer support will become a minimum requirement.”

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