NRF urges Supreme Court to lift surcharging ban
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."
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:
- Notification: Participating merchants must notify Visa, Mastercard and their payment acquirers at least 30 days before activating surcharging practice.
- Disclosure: Signage informing consumers of merchant fees connected with their bankcard purchases must be posted in-store at merchant entryways, at POS devices and on payment receipts. Ecommerce disclosures must be visible on the first web page displaying credit card brands.
- Fee limits: Surcharging applies to credit cards only and may not exceed a merchant's discount rate or 4 percent, whichever is lower. Surcharging is not permitted on debit and prepaid cards. In addition, merchants may not require minimum purchases for credit card sales.
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.
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 Sudbury.com. 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.”
Double-digit growth in 2016 holiday spend
Wednesday, January 4, 2017
I ncoming reports on the post-holiday season show double-digit growth in all areas of retail, from mom-and-pop merchants to the world's largest retail brands. Analysts attribute consumer confidence among key demographic groups and omnichannel marketing campaigns as key drivers of increased holiday spend. Consumers are increasingly using technology to augment, but not replace, the brick-and-mortar shopping experience, experts noted.
"Consumer confidence continued to improve into December, and we saw this optimism reflected in the holiday spending numbers," said Tom McGee, President and Chief Executive Officer of the International Council of Shopping Centers, a global trade association established in 1957. "The strong holiday shopping season suggests a positive environment for retail sales overall."
Chris Mason, CEO and co-founder of online menswear retailer Branding Brand Inc., said the mobile web attracts new customers, and mobile apps earn their loyalty. "Mobile is the primary growth channel, traffic channel and soon to be revenue channel for e-commerce," he added.
Consistent online, in-store growth
The ICSC's Post-Holiday Consumer Shopping Survey, published Jan. 3, 2016, was based on a survey of 1,030 adults. It was conducted by Opinion Research Corp. between Dec. 27 and 28, 2016. Respondents indicated they had spent an average of $711 on holiday-related gifts in 2016, a 16 percent increase in overall holiday spend above the $611 average spent during the same period in 2015.
Despite record numbers of ecommerce spending, consumers continued to shop in brick-and-mortar stores, which represented almost 70 percent of total holiday-related spending. This data reflects the predominant omnichannel trends across retail, as merchants strive to satisfy the shopping behaviors of all generations, McGee noted. "The convergence of physical and digital continues to be important, as consumers have come to expect an integrated experience allowing them to buy products through a variety of channels," he said.
Increased smartphone shopping
The Synchrony Financial Digital Study, released in October 2016, identified increasing use of smartphones among all key demographic groups. Researchers used survey data gathered from 1,294 adults between May and June 2016. Following are key metrics in the study:
- Increased mobile usage: 67 percent of respondents completed a shopping-related task on a mobile phone, up from 45 percent in 2015. Activities included using a mobile phone to research a product, check in at a retailer, track reward points and complete purchases online.
- Added revenue from in-store pickups: 61 percent of respondents who visited stores to pick up items ordered online made additional in-store purchases.
- Shopping center visits: 81 percent of millennials, 62 percent of baby boomers and 73 percent of gen X shoppers visited a shopping center during the 2015 holiday season. Millennials surveyed used technology to enhance, not replace the physical shopping experience.
Online, in-store cross-selling
Retailers have benefitted from consumers who order online and pick up their orders in physical stores. These in-store visits create additional opportunities for adjacent retailers, researchers found. The ICSC study found 70 percent of adults who visited shopping centers during the holiday season engaged in ancillary activities, including the following:
- Price comparison: 52 percent used connected devices to compare prices.
- Inventory checking: 40 percent checked item availability.
- Coupon presentment: 37 percent presented digital discounts or coupons at the POS.
- Product reviews: 33 percent read or wrote product or service reviews.
- Dining and entertainment: 45 percent dined at a restaurant; 26 percent saw a movie.
In-store, online mix
Post-holiday reports have shown mobile and ecommerce activities can benefit brick-and-mortar retailers. According to ICSC analysts, consumers who shop online for holiday gifts "routinely opt to shop with retailers that have a physical location." The association also stated it is confident shopping centers will remain "integral to the social fabric of their communities by providing a central place to congregate with friends and family, discuss community matters, and participate in and encourage philanthropic endeavors."
Synchrony Financial researchers concluded that digital shopping, social media influence and mobile payment schemes have permanently altered the retail landscape. "As the quality of digital retail experiences increases, consumers will continue to feel more comfortable using this media for their shopping transactions," they wrote. "To provide a better, more satisfying shopping experience, as well as to stay competitive and relevant, retailers must be constantly innovating and exploring new ways of leveraging today's digital technology and tools."
Frost & Sullivan probes cybercrime in APAC region
Saturday, December 31, 2016
I n a study on cybercrime in the Asia Pacific region, published Dec. 29, 2016, Frost & Sullivan identified eight predominant schemes criminals used to gain unauthorized access into business networks. Citing major attacks against the National Payment Corp. of India and Bangladesh Central Bank, the research firm warned organizations and IT professionals to be vigilant and “cyber-ready” to protect their intellectual property and data in 2017.
Researchers found a direct link between cyberattacks and the increasingly hyper-connected environment of the Internet of Things (IoT). Following are what Asia Pacific Cyber Security practice analysts consider the leading methods of cybercrime and their potential impact on business owners and consumers:
- Business email compromise (BEC) attacks: Email continues to be the leading conduit of fraud and malware, accounting for $19 million in losses in Singapore between January and September 2016. Global BEC attacks increased 20 percent worldwide in 2016, compared with the previous year. Businesses that transact internationally are most vulnerable to these attacks, researchers stated.
Charles Lim, Industry Principal, Cyber Security practice, Frost & Sullivan, Asia Pacific, predicted that BEC will be more prevalent than Ransomware and Advanced Persistent Threat attacks throughout Asia-Pacific in 2017. “As BECs are relatively easier to execute and evades cyber defense tools better than other popular attack vectors such as ransomware and APTs, it can potentially be the main cyber threat in Asia,” he stated.
- Distributed denial of service (DDoS) volumetric attacks: DDoS attacks caused nationwide internet outages in 2016. Cyber attackers exploited device and network vulnerabilities caused by insecure networks with insufficient defenses against volumetric attacks and default passwords on newly-deployed IoT devices, triggering day-long internet outages in some areas.
- IoT entry point attacks: Criminals used insecure IoT devices to gain access into numerous business networks in 2016, report authors noted. The prevalence of insecure devices and default passwords has prompted some governments to expand regulatory guidance and security standards for IoT devices. The authors cited a recent botnet attack on IP cameras as an example of “how manufacturers did not include a security process of changing default passwords when connecting the devices to the Internet.”
- Ransomware attacks targeting healthcare: Healthcare providers were significantly disrupted by ransomware attacks in 2016. Facilities compromised by infected computer systems had to reroute patients to other hospitals. Major healthcare providers in Asia are HIPAA compliant but are vulnerable to attacks due to their legacy infrastructures and weak security tools, researchers noted.
Report authors noted the importance of protecting personal healthcare data, which many criminals value more than credit card information, adding, “The healthcare industry needs a good 'cyber health check' before it is too late.”
- Drone attacks: Mainstream consumer adoption of drone technology has made drones affordable and easy to use. Researchers believe insecure wireless networks will provide easily accessible methods of transport for nefarious drone attacks.
Drone use in the commercial sector is also on the rise, adding to the possibility of enterprise-scale drone attacks. Analysts believe drones will be deployed to jam GPS signals on marine and terrestrial vehicles and to drop contaminated USB drives into critical network infrastructures.
Recommended remedial measures
In addition to their predictions and warnings, Frost & Sullivan analysts provided salient advice and described enhanced security methods for protecting critical infrastructures. Following are some examples of how collaborative efforts and emerging technologies can protect against cybercrime:
- Implement emerging technologies: Distributed ledgers such as blockchain can be used to safely transmit sensitive intelligence between trusted parties. “Blockchain may emerge as the technology to facilitate the exchange as it authenticates the trusted party to contribute, obfuscates the contributor's detail with anonymity, and offers a tamper proof system that prevents unauthorized alteration of any data shared,” researchers noted.
- Share and distribute threat intelligence: The Information Sharing and Analysis Centers (ISAC), a collaborative effort of government and private sector participants, is focused on creating a public forum where individuals and organizations can share information about the evolving threat landscape. Critics have questioned some participants’ authority, warning that untrusted sources may deliberately or unwittingly propagate inaccurate intelligence.
- Employ enterprise-level, proactive security teams: Researchers found an increased number of enterprises committed to staying ahead of attackers by understanding new and evolving cyberattack techniques. This improved understanding will help the teams anticipate criminals’ next moves and defend against new attack vectors.
- Initiate bug bounty programs: This relatively new approach uses crowdsourcing to reward potential hackers who identify a network vulnerability or “bug.” By paying the hackers to find and report vulnerabilities, organizations hope that hackers will be motivated to use their talents as a force for good.
These recommendations are consistent with Frost & Sullivan’s belief in innovation as a core value and the cornerstone of every business. “Identifying, developing and leveraging innovation will give your company a competitive edge and solidifies your company's long term success,” the company stated.
View prior breaking news