E-COMMERCE
BRIDGING
OF EMV THE GAP IN 2016
T
he year 2015 has passed us by and left our industry with one of the largest changeovers in recent memory. As you read this article, tens of thousands of US-Based Point of Sale retailers will have transitioned to EMV while an almost equal number will follow. For many of us, it will be hard to take our eye off of EMV’s implementation given the myriad effects it will have on our industry. EMV’s impact is certainly worth observing – and I’ll provide a few of my perspectives below – but I see two additional oncoming developments worth watching in 2016. THE EMV BLOWBACK: CNP FRAUD First, let’s consider EMV and 2016. While POS retailers spent the New Year celebrating EMV, Card Not Present merchants are bracing themselves for an onslaught of fraud as criminals turn their attentions toward CNP and telephone channels. Based on other counties’ experience, we can expect to see increases in CNP fraud while POS numbers reduce. Criminals aren’t always hard workers and will most likely focus on CNP as they will consider it to be the weakest link. According to Aite Group research, CNP fraud is expected to more than double from $2.8 billion to more than $6.3 billion by 2018. Expect to see regulatory intervention as numbers begin to climb. In the meantime, we can expect to see CNP merchants strengthen their risk management in order to counter the oncoming attack. By year’s end, we’ll see that the best fraud prevention strategy is a multifaceted operation that enables merchants to manage multiple anti-fraud tools in real-time. Each merchant action should be based on
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Payment Quarterly | Q1 2016
analytics provided by fluid data points and back-end feedback loops. This year’s winners will be merchants who deploy post billing chargeback notifications. More than fifty percent of cardholders avoid contacting the merchant when disputing a charge and instead report directly to their issuing bank. 2016 will see broader acceptance of post billing chargeback notification platforms that enables near real-time collaboration for both fraud and non-fraud chargeback disputes. By integrating directly with card issuers and redirecting disputes from the issuer to the merchant for resolution, disputes can be resolved before they escalate and become chargebacks. This solution will enable everyone to win as merchants avoid costly fees, fines or penalties while Issuers experience lower operating expenses while supporting cardholder satisfaction through timely resolution. THE INTERNET OF THINGS, DRIVING M&A In the recent past, we have seen a transformation take place as all things physical seem to enter into the digital realm. The next wave in technology – and in payments – will be a transition in the opposite direction as all things digital infiltrates the physical objects surrounding us. This is the era of the Internet of Things, where everyday objects become interconnected, sending and receiving data from anywhere and everywhere. According to McKinsey & Company research, the Internet of Things could have a financial impact of $11.1 trillion per year by 2025. According to a recent review of global M&A activity by EY, the biggest deals in terms of money exchanged
By: Matthew Katz Founder & CEO Verifi were driven by the Internet of Things, data analytics and payment service technologies. We should expect to see more companies pursue and acquire the technology to monetize their assets now that those assets (or “things) are now creating revenue. CROSS BORDER GROWTH, THANKS TO MOBILE Expect to see cross border selling continue expanding as merchants focus on emerging markets to sell their goods and services. We’ve seen several innovative alternative payment methods come about – especially in the developing and emerging worlds – but credit cards will remain the globally preferred payment method for ecommerce transactions for many years to come thanks to integration into mobile payments. CNP payments are accepted worldwide and can be paid from multiple devices. Expect to see mobile ecommerce attract greater attention this year as merchants realize that a majority of their sales may be coming from consumers’ pocket devices and not their presence in a brick-and-mortar store. According to Aite Group, online payment will continue to supplant traditional POS at both retail and ecommerce. Look for a few break-out merchants to read the writing on the wall and make greater accommodation for mobile payment and commerce. Mobile will grant merchants greater personal communication channels with consumers. The first to combine a trusted payment platform with ease-ofuse will be among 2016’s winners.