At the close of 2014, payments industry leaders were reflecting on the year's highlights and looking ahead to what many believe will be a defining year for the industry. An unprecedented number of disruptions have occurred over the past twelve months, led by emerging technologies, the expanding role of data analytics, and changes in purchasing behaviors and banking environments. The digital transformation of payments is perhaps most evident in the changing role of payments industry equipment manufacturers. Top brands have evolved from device-centric models to holistic, end-to-end solutions that are compatible with diverse populations of POS hardware and software.
Thierry Denis, North American President of Ingenico Group, a global enterprise dedicated to seamless payments with U.S. headquarters in Atlanta, expects to see more disruption in 2015, as EMV (short for Europay, MasterCard and Visa) adoption, mobile payments and improved security standards continue to shape the future of merchant services. For this article, Denis discussed six top payments trends Ingenico identified for 2015.
As the last region in the world to adopt EMV, the United States became an easy target for cyber criminals who found it relatively easy to steal cardholder data processed on mag stripe card readers, compared with the more secure method of smart card payment processing. A record number of data security breaches occurred in the North American region in 2014.
Ingenico Group advises all merchant services providers to work closely with retailers to address this. Many companies are revisiting security strategies to improve their protection of card data environments in conformance with guidelines of the PCI Security Standards Council (PCI SSC).
Also known as end-to-end encryption, P2PE encrypts card data from the entry point of a merchant's POS device to a point of secure decryption outside the merchant's environment, such as a payment processor.
Many Tier 1 and 2 merchants are preparing for the Oct. 2015 EMV liability shift with a shortcut approach that links EMV and P2PE planning, an approach that Ingenico calls "semi-integrated." This aims to take the entire merchant environment out of Payment Card Industry (PCI) Data Security Standard (DSS) scope and solve the EMV piece at the same time via a seamless payments system that addresses both PCI and EMV compliance.
Ingenico noted that small to midsize business owners have been slower to implement EMV technology that would help protect their processing systems from malicious attacks. This is puzzling, considering that a majority of data security breaches have taken place at Level 4 merchants, according to data provided by the PCI SSC.
Even the upcoming liability shift has not made a significant impact on EMV adoption in this segment. Ingenico predicts that over half of Tier 3 and 4 merchants will not have implemented EMV payment processing by the Oct. 15, 2015 deadline.
Ingenico believes online fraud and chargebacks will become increasingly complex to manage in the global marketplace, as merchants shift their focus to international markets and mobile commerce continues to drive growth in many developing countries.
Fraud rates in cross-border and mobile commerce generally exceed those of domestic e-commerce. Ingenico expects merchants to increasingly outsource fraud management to online payment or fraud specialists in 2015.
Merchants of all sizes and categories have expressed the desire to partner with their customers in every step of the commerce journey. Many brick-and-mortar retailers have implemented in-store mobile POS solutions with smart posters and kiosks that facilitate consumer purchasing decisions without being overly intrusive. Solutions such as iBeacon help retailers stay connected to their consumer base and better understand and track who's shopping in their stores, Ingenico noted.
In an ongoing effort to support customers' preferred payment methods, many Tier 3 and 4 merchants are upgrading processing systems to support near field communication and Apple Pay. Ingenico sees increasing adoption of Apple Pay by Tier 3 and 4 merchants as evidence that Apple is inspiring technology upgrades in this market where EMV could not.
Consumers, increasingly willing to spend online, have been driving the global expansion of e-commerce and adoption of new, more secure methods of online shopping. According to Ingenico, mobile commerce is driving overall online commerce growth in many international markets. Consumers increasingly expect a seamless buying experience that's integrated across multiple platforms, including mobile devices, automobiles and wearable technology.
Merchants will require a developer-centric approach from vendors with easy access to modern application programming interfaces to be able to sell goods and services in the omnichannel world.
Ingenico also expects advanced data analytics and visualization software to play a central role in identifying and removing bottlenecks in the payment process and improve conversion rates. Many enhanced intelligence solutions enable merchants to benchmark payment performance against peers and discover new market opportunities.
Greg Boardman, Senior Vice President of Product Development at Ingenico Group, sees the next several years as challenging but exciting times for large and small retailers. He has been involved in a number of payments industry initiatives focused on improving adoption of P2PE and EMV, technologies that he considers as critical priorities.
Boardman believes broad implementation of these solutions will require more than just technical savvy; it will increasingly depend on the cooperation of all stakeholders in the value chain, and partnerships that are based on respect and trust. Both retailers and acquirers have benefited from the new collaborative model, and Boardman and his colleagues expect the momentum to continue in the New Year.
"The fundamental but long overdue technology implementations of P2PE and EMV acceptance requires a long runway and will dominate most budgets and human resources, [and] unfortunately comes at a time when innovation in payments is at a fever pitch," Boardman said. "Choosing the right strategies to benefit from both sides of this equation can be difficult. Satisfying the base requirements while also entertaining the possibilities for new payment schemes and mobility initiatives demands a level of focus and partnership that very few organizations in payments understand."
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