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Updated: Tuesday, January 27, 2015

MasterCard leads way for U.S. card acceptance in Cuba

I f you're planning a trip to Cuba any time soon you may want to take along your MasterCard, because U.S.-issued American Express, Discover and Visa cards can't be used on the island nation. That's the situation for now, at least.

MasterCard Worldwide is the first card brand to lift a decades-old ban on using U.S.-issued credit and debit cards for transactions with Cuban sellers, effective March 1, 2015. The move, heralded on the company's website Jan. 23, follows word out of Washington, D.C., last month that the federal government was relaxing restrictions on Americans traveling to Cuba or doing business with Cuban firms and individuals.

American Express Co., Visa Inc. and Discover Financial Services have not followed suit, although according to published reports, similar moves are under consideration at both Visa and AmEx.

MasterCard said it decided to lift the ban based on "recent guidance" from the Office of Foreign Assets Control, an office within the U.S. Treasury Department agency that administers and enforces trade sanctions related to foreign policy. "MasterCard will work with its U.S. issuers to support their Cuba-related activities and decisions," the card company wrote. "Before travelling to Cuba cardholders should contact their bank to ensure the card will be supported on the island."

Lifting costly sanctions

Trade sanctions are implemented whenever foreign countries, regimes, terrorists, narcotics traffickers and others are deemed threats to national security, foreign policy or the U.S. economy. OFAC imposes hefty fines on U.S. companies and individuals found to be in violation of sanctions. In the first 11 months of 2014, OFAC assessed over $1.2 million in civil penalties to a Portland, Ore., company that violated U.S. sanctions on Cuba by purchasing goods, between 2007 and 2011, that used raw materials sourced in Cuba.

The Cuba sanctions date back to 1961 and were a consequence of the Cold War. President Obama announced in December 2014 that the U.S. would relax many of those sanctions, thereby permitting Americans to travel to and do business in Cuba.

While the government has eased some restrictions on trade and travel, the White House noted that the long-standing trade embargo remains in place, pending additional negotiations between the two countries and congressional approval.

Recently, OFAC published details on the lifting of Cuban sanctions. Listed were several specific activities that are now permissible for U.S. banks, companies and consumers. According to a U.S. Treasury fact sheet, these allow:

Going global

Leading acquirers recognize the value of expanding beyond local markets and domestic borders, especially as more U.S. merchants take their businesses to new markets. And although Cuba is not a large market, the island's proximity to the United States and pent-up demand following decades of restrictions on travel and trade suggest new opportunities for driving card payments.

Growth in e-commerce also is stoking interest in international sales and card payment acquiring. The international consultancy OC&C Strategy Consultants predicts international sales by U.S. online retailers will grow from $25 billion in 2013 to $130 billion in 2020. OC&C collaborated with Google Inc. to come up with its predictions, published last year in the report The Global Retail e-mpire.

"Over the next decade, online retail will become even more international," said Anita Balchandani, a partner at OC&C. "This represents a great opportunity for retailers." Balchandani said that online marketplaces like eBay, will contribute to the trend. "We expect online marketplaces to be part of the mix for retailers particularly in the early days of their international expansion, and to play a complementary role with a retailer's own website and stores."

"We believe it's time to declare the 'death of distance,'" Alex Von Schirmeister, eBay Inc.'s point man on European expansion, said in a statement issued by OC&C, which operates from offices in Boston and Europe. "Cross-border trade on eBay in the second quarter of 2013 reached $11 billion, representing 22 percent of the company's total commerce and payments volumes," he noted.


Girl Scouts stage Digital Cookie 'bake-off'
Monday, January 26, 2015

T he January 2015 Consumer Electronics Show in Las Vegas marked the unveiling of Digital Cookie, a new way for consumers to order Girl Scout cookies – and a striking example of how mobile retail and payment technologies are gaining momentum among the public and becoming integral to U.S. commerce.

CES conference attendees were the first to sample the interactive digital platform demonstrated by Girl Scouts from Oregon, Southwest Washington, and Southern Nevada councils. All 112 Girl Scout councils expect to participate in the national rollout, designed to drive revenue and boost Girl Scout brand awareness.

Good for commerce and education

Digital Cookie is available as both a mobile app and an online ordering tool. Girl Scouts in select regional areas can send out email invitations to their personalized cookie websites. Other areas will focus on in-app ordering designed to facilitate in-person credit card orders. The rollout of Digital Cookie version 2.0 will continue throughout 2015, with more councils participating.

Leaders of Ventura-based Girl Scouts of California's Central Coast look beyond dollar signs to the educational value of the digital ordering platform. Council CEO Gina Jaeger noted that beyond having the "best cookie sale ever with all the new tools available for our Cookie Bosses," that the program represents the largest girl-led business in the United States and provides benefits beyond just dollars and cents to participating girls.

Jaeger and team are excited to be part of the kick-off event that offers "21st Century tools" that help Girl Scouts learn about money management and help them meet their goals."

In addition to the Cookie Booth Sales that run from Feb. 13 through March 15, the council can take orders for Girl Scout Cookies to be sent to military service personnel serving overseas, in partnership with the organization For the Troops.

Exponential growth of digital commerce

Forrester Research predicts continued momentum in U.S. mobile spending, which is expected to swell to an estimated $142 million in the five-year period between 2014 and 2019. Pew Research findings show that more than half of Americans use smartphones; it expects one in five mobile phones will be equipped with mobile wallets by 2018.

A study by Accenture presented at the Money2020 Conference in 2014 showed that 87 percent of the 4,000 consumers researchers interviewed used smartphones regularly, and 45 percent used them to make mobile payments.

Consumers' mixed definitions of mobile commerce include such activities as tapping a mobile phone on a contactless reader, using the mobile web to make a bill payment and making a payment from within a mobile app. End-users' perceptions of mobile wallets are equally diverse, while the leading mobile wallets like Google Wallet and Apple Pay continue to gain brand awareness and market share.

Payments industry consultant Richard Crone, author of the popular phrase, "the one who enrolls is the one who controls," urges large and small retailers to introduce their own branded mobile payment apps so that they can control their destinies. A mobile app can include loyalty programs, geolocation services, digital coupons and other assorted values beyond a simple payments mechanism. A mobile wallet also has the advantage of keeping consumer customers engaged within the brand while preventing them from defecting to competitors.

Crone stated that mobile wallets provide retailers with an opportunity to control their brands, boost in-store engagement, and manage transactional data to get closer to their customers.

Digital cookies for new demands

As the Girl Scouts of America bring a new flavor of commerce to a 100 year-old tradition of selling cookies, payments industry analysts anticipate additional benefits for all stakeholders in the payments industry value chain.

A mobile cookie finder app, available on both Android and iOS, can help consumers locate the closest cookie booth in America and Puerto Rico. Soon all of these booths will be equipped to accept mobile payments and online orders, using Digital Cookie version 2.0.

Derek Webster, Founder and CEO of CardFlight, sees the digitalization of the time-honored Girl Scouts brand as indicative of the growth in mobile payment acceptance across a wide range of merchant types. Webster said, "Smart merchants know that consumers expect to have the option to pay with their credit card and are looking for easy ways to accept those payments. Mobile payment systems and mobile point of sales systems are great ways of powering commerce on-the-go."

"I am excited to see that payments are playing a key role in the Girls Scouts organization which benefits so many young girls," said Linda Rossetti, 2015 Women's Network in Electronic Transactions' (W.net) president and president of Bluestone Payments. "I commend the Girl Scouts for teaching great selling skills through the sale of cookies, as well as adopting technology to make it easier for each of us to pay."


NRF show celebrates innovation, spots trends
Friday, January 23, 2015

A n estimated 33,000 attendees convened at New York's Jacob Javitz Center for The National Retail Federation's 104th Annual Convention and Expo, held Jan. 11 through 14, 2015. In his opening comments, NRF President and Chief Executive Officer Matthew Shay said, "We believe this is the greatest industry in the world, and we're proud to help you tell that story."

Payment professionals contributed to the story by demonstrating their products and services and networking in the exhibit hall, evidencing that, while retailers may complain vociferously about the high cost of interchange, they are nevertheless collaborating with the payments industry in innovative ways.

Digital, the great equalizer

While retail's big show was once considered the province of corporate sales professionals and complex integrated POS systems, retail's mass adoption of digital technologies has created a new culture of innovation. There is room in this playing field for fresh ideas and bootstrapped startups.

Merchant level salespeople (MLSs) can benefit by attending NRF, even if they only walk through the Expo Hall. The show provides insights into the way retailers think and the problems they are trying to solve. Retailers, according to the 18th annual Global Powers of Retailing report by Deloitte Touche Tohmatsu Ltd. and Stores Media, must be nimble, adaptable and innovative in order to compete in 2015 and beyond.

Five trends to watch

The DTTL and Stores study identified five growth categories in retail that are affecting business owners around the globe and noted that while the trends are not new, their increased adoption rate is changing the game for retailers and consumers alike.

Following are five big categories to watch in 2015.

  1. Travel retailing: The growing adoption of mobile technologies is directly attributable to increasingly mobile lifestyles in business and private sectors. Business travel and tourism are on the rise, with half of the growth coming from emerging countries. Many retailers have been focusing on building brand awareness in emerging countries in major cities and airports, which have become "retail destinations … dominated by luxury fashion trends rather than the duty free shops of the past."

  2. Mobile retailing: Mobile retailing will be following close at the heels of the world's growing use of mobile devices, with about 65 percent of the world's population using mobile phones in 2015, and 83 percent using a mobile device to access the Internet. Retailers need to satisfy the growing requirement for "real-time, relevant and personalized information and offers," while protecting these services with enhanced security.

  3. Faster retailing: Speed is a driving force for large and small retailers, largely driven by millennial consumers who are accustomed to fast response times and immediate gratification. Trends in fast retailing include flash sales, "fast fashion," event-based marketing and pop-up stores, and self-service kiosks that offer immediate service without wait times.

    Same-day delivery, currently on offer by Amazon.com Inc. and Google Inc. in select areas, is also impacting retail's supply-chain. "Retailers will need to optimize their information to provide as much content as shoppers need without the load time, especially over Wi-Fi and cell networks on mobile devices, so shoppers can easily and quickly find the information or product they need."

  4. Experience retailing: The NRF's crowded exhibit hall was filled with new products and a heightened level of excitement, as product vendors and acquirers demonstrated solutions designed to enhance the shopping experience. The entertainment value of the products and services was considered equally as important as their features and purpose.

    Retailers have taken a more active role in sponsoring sports and entertainment venues, and have even produced their own interactive events and social media displays. Gaming has become an integral part of the retail experience, enticing consumers to try their luck or skill to win products and discounts.

    DTTL and Stores noted that these emerging forms of engagement are creating the omnichannel experience, in which consumers can enjoy a consistent experience "whether it's in-store, online, at home or on the street."

  5. Innovative retailing: The retail industry expects disruptors to continue invading payments and retail during 2015. Nontraditional retailers, such as those using mobile POS systems inside pop-up stores and mobile kiosks, will continue to blur the line between retailers and producers of goods and services.

    In some cases, "the middleman will be cut out completely – no physical stores, inventory or warehouses – replaced by made-to-order direct from manufacturer, such as Awl & Sundry and Made.com," the DTTL and Stores study stated.

Looking ahead

While the NRF compiles performance metrics, including attendee and exhibitor demographics, from this year’s conference, payments industry leaders see retail as an exciting space, filled with new ideas and energy.

The speed of innovation is expected to continue to ramp up, requiring all industry stakeholders to react quickly to the changing retail landscape. Like payment professionals, the NRF show make it clear that retailers need to adapt in ways that drive innovation and help them stay ahead of the competition


High court rebuffs merchant challenge to debit interchange rules
Tuesday, January 20, 2015

E fforts by the nation's retailers to force down debit card interchange was dealt another blow this week when the U.S. Supreme Court declined to review a 2014 appellate court ruling that let stand rate caps set by the Federal Reserve Board under the Durbin Amendment to the 2010 Dodd-Frank Act.

Undeterred, retailers have vowed to continue pressing for mandated lower interchange. Banks, for their part, have countered that enough is enough.

The Fed has been on the hot seat since it first took up the mission of capping debit card interchange as directed by Congress, with retailers pressing for bigger cuts and banks seeing it as a windfall for retailers, especially big-box retailers like Wal-Mart Stores Inc.

Retailers vow to persist

In July 2013, a group led by the National Retail Federation, the National Association of Convenience Stores and several individual retailers successfully challenged the $0.21 per transaction cap set by the Fed in U.S. district court, but that decision was overturned in March 2014 by the U.S. Court of Appeals for the District of Columbia. The Supreme Court's decision not to review the appeals court decision means the 2014 decision stands.

The expected response from retailers was swift. "Banks will benefit from this ruling, but the battle over swipe fees isn't over," said Mallory Duncan, NRF Senior Vice President and General Counsel. "There is still litigation pending on credit card swipe fees, and policymakers continue to be concerned by the anti-consumer, anti-competitive practices of the card industry."

Bankers are relieved

Banking groups said they were pleased with the decision. They also insisted that the underlying policy remains flawed, is bad for consumers and that Congress should not be in the business of setting bank fees.

"The Durbin Amendment has significantly harmed consumers and financial institutions," said Frank Keating, President and Chief Executive Officer of the American Bankers Association. "At the end of the day, American consumers have paid the price for the efforts of big-box retailers to line their pockets at their own customers' expense."

Richard Hunt, President and CEO of the Consumer Bankers Association, also weighed in. "Reasonable minds have prevailed with the Supreme Court ruling," he said. "This drawn-out fight should put on notice those members of Congress who insist upon interfering with the free market."


EMVCo to improve standard for e- and m-commerce
Thursday, January 15, 2015

E MVCo LLC revealed plans on Jan. 8, 2015, to leverage 3D Secure (3DS) to help stem a rising tide of e-commerce fraud while enhancing global interoperability and security. 3DS, a technology developed by Visa Inc. and subsequently licensed by MasterCard Worldwide, is designed to protect card-not-present (CNP) transactions by incorporating an additional layer of security into the online checkout process.

Six major card brand members comprise EMVCo: American Express Co., Discover Financial Services, JCB International Credit Card Co. Ltd., MasterCard, China UnionPay and Visa. The global technical body has broad support from banks, merchants, payment processors, vendors and other stakeholders who participate as EMVCo Associates.

An effort to evolve and streamline

The rapid growth of mobile payment technologies has made it necessary to create a simplified version of the EMV (Europay, MasterCard and Visa) standard that will make it easier for consumers to safely transact in e-commerce and m-commerce environments.

Payments industry analysts are hopeful the new 3DS standard will address inherent flaws in previous versions, which some consider to be cumbersome due to the requirement that consumers enter multiple, distinct passwords within a single transaction.

EMVCo Executive Committee Chair Tac Watanabe noted the need to secure CNP transactions while global e-commerce and m-commerce continue to expand. The committee plans to further strengthen the technology platform with 3DS 2.0, a user-friendly version with enhanced interoperability.

"Increased security [should not] cause product abandonment or make online shopping inconvenient," Watanabe said. "It also needs to align with the needs of today's market stakeholders. The EMV 3DS 2.0 Specification will address this by enabling the merchant to offer a better, more streamlined authentication experience across different devices and channels."

Protecting three 'domains' with 3DS

3D Secure stands for Three Domain Secure, a specification that supports authentication for payment card transactions that originate on the Internet. The technology is designed to protect the three different banks or "domains" of an e-commerce transaction: the issuing bank, acquiring bank, and cardholder bank.

3D Secure is the underlying technology platform for Verified by Visa, a process that validates a cardholder's identity during the online checkout process by requiring an additional password or other form of data to ensure that only the cardholder can use a particular Visa-branded card online.

Participating merchants displaying a Verified by Visa logo on their websites prompt participating cardholders to enter the additional data, ostensibly helping customers feel more secure when shopping online. This additional security can potentially improve transaction security, reduce operational expenses and streamline the dispute resolution process.

3D Secure works across multiple device platforms in e-commerce and m-commerce environments. It can be used with multiple authentication technologies including passwords, digital certificates and chip cards.

Reliable, secure, international framework

Sean Conroy, EMVCo Board of Managers Chair, said the goal of the technical body is to define the specifications in conjunction with the payments community and establish a reliable, international framework that facilitates digital commerce without compromising security.

"We recognize that advancing the enhanced 3DS specification to meet the needs of consumers and merchants today will greatly enhance the usability of the specification and its appeal to suitably authenticate e-commerce cardholders," Conroy said.

He added that EMVCO provides the "technical depth and strategic knowledge to bring the relevant parties together to establish an industry-available specification that will be scalable to support future market needs across a number of different stakeholders."

Kamran Chaudhary, Director of Compliance Technology at ANXeBusiness Corp., believes EMVCo's decision to leverage 3DS is in sync with other efforts within the industry to secure payments in CNP and mobile environments.

"Bluefin's recent certification of mobile P2P, using an encrypted USB device that can be used in card-not-present environments is just one example of the innovation that is going on in the e-commerce and m-commerce environments and the payments industry's investment in security," Chaudhary said.

He added that the "coming liability shift in October has raised awareness of the importance of EMV. While we anticipate some challenges in implementation, we expect EMV adoption to significantly decrease fraud while delivering significant benefits to payments industry stakeholders."

Randy Vanderhoof, Executive Director of the Smart Card Alliance feels EMVCo's announcement shows awareness of the expanding payment landscape and the need for industry-wide, interoperable standards to help secure all retail commerce channels, including the CNP channel. "The timing of this announcement is especially good in the U.S., where the migration to EMV chip technology is helping to secure the card-present channel and retailers are actively exploring ways to secure the card-not-present channel at the same time," he said.

EMVCo expects to deploy the new specification in 2016. Industry stakeholders interested in collaborating on the 3DS 2.0 initiative can visit EMVCo's Associates Program page at www.emvco.com/faq.aspx?id=188 .


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