By Paul Rasori
Closing out 2007 and moving quickly toward 2008, it's time to take stock of where we are and where we're going in the payments industry. To sum it all up: Wow - It's a great time to be in the payments business.
Consumers continue to rely heavily on card-based payments for everyday purchases. Merchants are increasingly sensitive to the need to upgrade to modern equipment and software that meet today's security standards.
And we're on the cusp of a new era of contactless, mobile and unattended payments that will provide even greater opportunities to the ISO and merchant level salesperson (MLS) community.
The increasing reliance on card payments is reflected in the recent astounding news that Visa Inc. is expected to raise $10 billion in its initial public stock offering.
The prospect of the public markets investing that huge amount of money into the payments space is breathtaking and reflects a tremendous amount of confidence in the viability of our industry.
Security will remain a major driver of sales for next year and beyond. With mandates looming in the areas of Payment Card Industry (PCI) Data Security Standard (DSS) and PCI PIN entry device (PED), major retailers are on the move and smaller merchants will have to follow.
In May 2007, Visa announced requirements for U.S. acquirers to identify security risks among small merchant customers and develop an educational program to raise their awareness and understanding of the PCI DSS.
One aspect of this program is that acquirers will be looking to identify their riskiest tier 4 merchants and will require them to comply with network scans and compliance assessment requirements.
In the current environment, it's not likely that awareness is going to be an issue when it comes to selling security features. That creates a ready opportunity for ISOs and MLSs to accelerate and amplify marketing and sales programs around security. In the past, security has too often been viewed as an added cost.
Today, though, security is becoming a requirement. In fact, failure to comply with security mandates is increasingly costly in terms of card Association fines, damage to company reputations and the expense of responding to government inquiries. ISOs and MLSs can take the initiative by working to educate their customers about changing mandates and point out the damages a security breach can cause.
There is a degree of urgency. After Dec. 31, 2007, VeriFone and other device manufacturers may no longer sell Visa PED-approved systems for PIN-based transactions, and all PEDs sold thereafter must be PCI approved.
While there is no set date for removal of Visa PED-approved systems from operation, retailers should realize that in the event of a PIN compromise, noncompliance could result in losses, and card reissuing costs could be passed on to them.
Additionally, there are still many systems in operation that predate Visa's PED standards, and these systems must be taken out of operation by mid-2010.
That may seem like a long time, but that's what we used to think about Visa's Jan. 1, 2008, compliance date: In less than a month acquirers may no longer purchase for their merchants terminals that are not compliant with the Payment Application Data Security Standard (PA DSS), nor may they board merchants using payment applications with known vulnerabilities.
Formerly the Payment Application Best Practices (PABP), the PA DSS is now managed by the PCI Security Standards Council. (For more information on this transition, read "Farewell PABP, hello PA DSS," The Green Sheet, Nov. 26, 2007, 07:11:02)
This is not to say we should be banking on scare strategies - far from it. We need to educate merchants that security has a distinct value that protects them from fines and the potential of jeopardizing customer loyalty. Hand in hand with selling security features, ISOs and MLSs also need to educate merchants on the other tangible benefits of migrating to more modern payment systems.
There's a lot happening in payments that will dazzle consumers. First off, there is the continued expansion of the wireless payment systems market.
The United States was slow to adapt to wireless because the country's telephone infrastructure was so extensive. But as wireless has incorporated additional benefits - primarily reliability, security and competitive pricing - it has become a much easier sale.
One area where wireless is starting to make a dramatic impact is in restaurant pay-at-the-table applications. Not only does the technology offer productivity advantages, but it can lower interchange costs, create a more secure aura for cardholders and respond to consumer demands for PIN entry debit card use.
A restaurant can be equipped with Wi-Fi or cellular service relatively easily and now can even utilize Bluetooth wireless to integrate wireless hand-held systems with existing phone lines.
There is a solution to fit virtually any need, whether the restaurant is fine dining or casual, part of a large chain or a small independent operator.
Wireless payment is incredibly versatile. It is even starting to take hold in taxicabs; both Philadelphia and New York have implemented system wide rollouts. Hundreds of thousands of in-home and delivery services represent a largely virgin market waiting to be developed.
Contactless is also starting to take hold. Issuers have invested heavily in distributing contactless-enabled credit and debit cards, while card Associations have put money in sponsoring adoption by highly visible national chains such as McDonald's Corp.
In 2008, VeriFone will have contactless capability in each of its product lines, reflecting the investment that systems providers have made.
Even more intriguing is the possibility of mobile payments, or m-payments. Contactless payment standards are compatible with the Near Field Communications standards developed for mobile phones.
This means mobile phones can become the wallet of choice for consumers who would rather tap a mobile phone against a contactless reader than dig around and search for a payment card.
Contactless is a key option in another market that is just beginning to open - unattended payment systems. These are an ideal solution for environments such as ticket vending machines, multimedia kiosks, parking garages and other self-pay systems.
Unattended solutions range from outdoor PIN pads to complete systems that include multimedia devices, transaction and estate management software, and implementation and consulting services.
The self-service market is another that is relatively untapped to this point. It just takes some expertise to figure how to line up the appropriate payment device along with any installation and ongoing maintenance services that may be required.
Kiosks for quick-service restaurants, self-service parking systems and similar applications require payment solutions that are state-of-the-art, highly secure and easy to use. But it doesn't take much to provide seamlessly integrated solutions services today; you just need to know they exist and where to look for them.
So as we near the start of 2008, I think there's plenty to be thankful for in this industry. Virtually every merchant needs a payment solution, and there's an ideal solution to fit just about any need.
With consumers continuing to vote with their cards, we should all look forward to great opportunities throughout the year. So rest up over the holidays, and recharge your batteries for a great selling season ahead.
Paul Rasori is VeriFone Vice President of Global Product Marketing. He can be contacted at firstname.lastname@example.org.
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