Transaction Trends October 2014

EXCLUSIVE! FOURTH ANNUAL MOBILE COMMERCE PROVIDERS GUIDE PAGE 15

TRANSACTION trends The Official Publication of the Electronic Transactions Association

| October 2014

Caught in a

Stranglehold

How Operation Choke Point continues to stifle the payments business

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TRANSACTION trends The Official Publication of the Electronic Transactions Association

Vol. 19 | No. 7

COVER STORY

10 Caught in a Stranglehold

By John Manasso Since its inception in March 2013, Operation Choke Point has been criticized as a veiled attempt by the government to force processors into dropping legitimate businesses under the guise of fraud protection. As the program continues, experts fear its political and economic effects will do much more harm than good for the industry and consumers.

10

FEATURES 15 Who’s Who in Mobile Commerce

Our expanded forth annual Mobile Commerce Providers Guide features the very latest mobile products and services.

From mobile acceptance and banking to mobile rewards, security, and legal services, the companies in this year-round guide will help you form powerful partnerships to take your business to the next level.

24 S P E C I A L S E RI E S

Startup Stories: High-Touch Meets High-Tech

By John Manasso With an old-school approach to relationships and services, National Benefit Programs delivers value to small-to-midsized merchants through vendor discounts and processor partnerships.

15

DEPAR TMENTS 4

ETA Gateway

29

6

Industry News

32 The Last Word

28

Insights from ETA’s CEO, Jason Oxman Trends, strategies, and news in the payments business and ETA member community

Risk in Review

Why the “two-stick” model for PCI compliance doesn’t work What a lame duck congressional session means for payments

Ad Index

6 TRANSACTION trends | October 2014 3

ETA Gateway

The Power of Payments—Amplified!

N

ow just three-quarters through the year, we can confidently say that 2014 has been the most important year for electronic payments yet. ETA is leading the way in helping our members adapt to a changing industry by fostering connections and new business.

At the nexus of payments and technology, ETA has brought the leading executives of our industry together here at the Strategic Leadership Forum (SLF) for an unmatched opportunity to network and chart the course of payments. This year’s SLF at the Breakers in Palm Beach has proven an invaluable industry meeting place.Your business will change based on what you learn and do here this week.

From the friendly competition and networking on the green during the ETA

Editorial Policy: The Electronic Transactions Association, founded in 1990, is a not-for-profit organization representing entities who provide transaction services between merchants and settlement banks and others involved in the electronic transactions industry. Our purpose is to provide leadership in the industry through education, advocacy, and the exchange of information.

The magazine acts as a moderator without approving, disapproving, or guaranteeing the validity or accuracy of any data, claim, or opinion appearing under a byline or obtained or quoted from an acknowledged source. The opinions expressed do not necessarily reflect the official view of the Electronic Transactions Association. Also, appearance of advertisements and new product or service information does not constitute an endorsement of products or services featured by the Association.

This publication is designed to provide accurate and authoritative information in regard to the subject matter covered. It is provided and disseminated with the understanding that the publisher is not engaged in rendering legal or other professional services. If legal advice and other expert assistance are required, the services of a competent professional should be sought.

Transaction Trends (ISSN 1939-1595) is the official publication, published eight times annually, of the Electronic Transactions Association, 1101 16th St. N.W., Suite 402, Washington, DC 20036; 800/695-5509 or 202/828-2635; 202/828-2639 fax. POSTMASTER: Send address changes to the address noted above.

Copyright © 2014 The Electronic Transactions Association. All Rights Reserved, including World Rights and Electronic Rights.

No part of this publication may be reproduced without permission from the publisher, nor may any part of this publication be reproduced, stored in a retrieval system, or copied by mechanical photocopying, recording, or other means, now or hereafter invented, without permission of the publisher.

4 October 2014 | TRANSACTION trends

Golf Tournament sponsored by Global Payments, to the keynote trifecta of Frank Bisignano from First Data, Diane Offereins from Discover, and Tim Tynan from Bank of America Merchant Services, to the unmatched educational breakout sessions, ETA SLF 2014 has galvanized and energized our industry’s executive leadership like no other event.

The payments landscape is now shifting at a never-before-seen pace—gaining exponential momentum after the exciting announcement that Apple now joins us in the payments space. Apple’s partnership with so many ETA member companies— First Data and TSYS on tokenization, Visa, MasterCard, and Amex on payments rails connectivity, to name a few—means great things for the collaboration between payments and technology companies that ETA facilitates.

I’m proud that ETA has worked hard for two years to bring payments and technology companies together to do busi-

ness. ETA’s Mobile Payments Committee, first formed in 2012, is the hub of industry activity in driving merchant and consumer adoption of mobile payments. Our recent Mobile Payments Day in Washington, DC, a meeting of the minds between mobile payment companies, retailers, and federal regulators like the Federal Trade Commission and the Federal Communications Commission, was a huge success and demonstrates how ETA is working tirelessly to advocate and educate on behalf of our industry.

Thank you to all of the top executives here at SLF. We look forward to seeing you all with 4,000 of your current and future technology and payments business partners in the spring at TRANSACT 15® in San Francisco! TT Sincerely, Jason Oxman Chief Executive Officer Electronic Transactions Association

Electronic Transactions Association 1101 16th Street NW, Suite 402 Washington, DC 20036 202/828.2635 www.electran.org ETA CEO Jason Oxman COO Pamela Furneaux Director, Education and Professional Development Rori Ferensic Director, Membership and Marketing Del Baker Robertson Director, Communications Meghan Cieslak SVP, Government Relations Scott Talbott Director, Industry Affairs Amy Zirkle Publishing office: Content Communicators LLC PO Box 223056 Chantilly, VA 20153 703/662-5828 Subscriptions: 202/677.7411

Editor Josephine Rossi Editorial/Production Associate Christine Umbrell Art Director Janelle Welch Contributing Writers Darrel Anderson, John Manasso, Julie Ritzer Ross, Josephine Rossi, and Scott Talbott Advertising Sales Linda Baker Advertising Sales Manager Phone: 703/964.1240, ext. 13 Fax: 866/466.9187 Lbaker@conferencemanagers.com Alison Bashian Phone: 800/335.7500 Fax: 440/232.0398 alisonb@bashian.com

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Cost of Retail Fraud Jumps 10% Over 2013 Fraud is eating more of retailers’ revenues, according to the most recent LexisNexis Risk Solutions True Cost of Fraud study. Merchants lost 0.68 percent of revenue to fraud in 2014 compared to 0.51 percent in 2013 due to increased fraudulent activities.

Another driver escalating the cost of fraud is retailers’ forays into the mobile channel, according to the study. Results indicate that mobile channel fraud costs merchants $334 for every $100 of fraud loss. The study concludes that “many of the tools that are designed to stop fraud in the ecommerce channel aren’t always as effective in the mobile space.”

The study also indicates that large e-commerce merchants are among the most at risk of fraud compared to other types of merchants. Although their general fraud awareness and use of existing fraud solutions is high compared to all merchant categories, large e-commerce companies have reduced the number of fraud solutions that they use: four solutions in 2014 versus five solutions in 2013.

according to a September report from Transparency Market Research.

info GRAPH State of U.S. Merchant Mobile Acceptance Currently using mobile devices to accept payments

21% 16% 48% No plan to implement in the foreseable future

11% 4%

Source: ControlScan 2014 Mobile Payment Acceptance Survey

6 October 2014 | TRANSACTION trends

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AROUND THE HORN

ACI Worldwide announced that it will continue to offer the City of Baltimore electronic payment solutions. EVO Payments International has entered into a longterm, exclusive relationship with Bank of Ireland to provide merchant acquiring services in the Republic of Ireland and Northern Ireland. Spanish luxury retailer Loewe has partnered with Ingenico Group for an iPhone-based in-store mobile payment solution to be deployed across its pan-European and global retail network. Ingenico also recently entered into an agreement with Yapital, a European cross-channel payment system operator. Jill Miller, a partner at Jaffe Raitt Heuer & Weiss, P.C., has been appointed to the Southeast Acquirers Association Advisory Committee. International restaurant chain Subway announced it will launch NFC-based mobile payments nationwide with Softcard , formerly ISIS. T otal Merchant Services has released a restaurant version of Groovv Register designed to help independent restaurant owners manage their businesses more efficiently.

Fed Holds Debit Interchange Fee Cap, Releases Data The Federal Reserve Board has announced that it “does not plan to propose revisions” to debit card interchange fee cap or fraudprevention adjustment for large “covered” issuers based on the results of its 2013 survey of interchange and network fees, covered issuer costs, and covered issuer and merchant fraud losses related to debit card transactions.

“Sixty-four percent of covered issuers had average ACS [authorization, clearing and settlement] costs, including issuer fraud losses, below 21 cents plus 5 basis points of the value of a transaction (the base component of the interchange fee standard) in 2013,” said a Fed press release.

“This proportion is slightly lower than the 66 percent of covered issuers with average ACS costs below the maximum inter8 October 2014 | TRANSACTION trends

ETA Comments on Apple iPhone 6 and Apple Watch Release ETA “applauds” Apple for embracing mobile payments with its new NFC-enabled iPhone 6 and Apple Watch, according to a recent press release.

“By forging partnerships with ETA member companies that are leading the mobile payments charge such as MasterCard, Visa, American Express, Wells Fargo, Bank of America, Chase, and Capital One, Apple is helping consumers combine their preferred method of payment with a device they are rarely without,” said the release. “With more than 300 million mobile devices and more than one billion credit and debit cards in American consumers’ pockets, the future ubiquity of mobile payments is certain. “…More than nine million merchants in the U.S. currently accept credit and debit cards, but NFC acceptance capability is only available at a few hundred thousand locations today. Apple’s entry into mobile wallets, combined with the nation’s 2015 migration to NFC-compatible EMV, will make mobile payments acceptance ubiquitous at the point of sale, an exciting development for all mobile payments providers.”

New Members ETA is pleased to welcome the following companies to its membership.

To inquire about a membership with ETA, please contact Del Baker Robertson, director of membership and marketing, at dbaker@electran.org.

BlueStar Payment Solutions Frisco, TX www.bluestarpays.com

CALENDAR: n Silicon Valley Day

PayPal Campus San Jose, CA November 12, 2014 n TRANSACT® 15:

Powered by ETA Moscone Center San Francisco March 31-April 2, 2015

Rippleshot Chicago www.rippleshot.com

change fee in 2011. Covered issuers with average ACS costs below the maximum interchange fee in 2013 processed over 99 percent of all reported covered transactions, the same proportion as in 2011.”

Other highlights from the bi-annual report include: • Average interchange fees per transaction have not changed materially since fourth quarter of 2011, when the cap went into effect.

• The average interchange fee per covered transaction in 2013 was the same for transactions processed over dualmessage networks (which are mostly signature-authenticated) and single-

message networks (which are mostly PIN-authenticated), around $0.23.

• N inety one percent of prepaid card transactions (by value) were exempt from the interchange fee standard and constituted 3.6 percent of transaction value for covered issuers.

• ACS costs, excluding issuer fraud losses, varied greatly across respondents in 2013, with the median issuer having an average ACS cost of 14.9 cents.

• Fraud losses to all parties totaled $1.57 billion in 2013, with an average loss of approximately 8 basis points as a share of transaction value, up slightly from 2011.

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[ COVER STORY ]

Caught

in a

By John Manasso

KEY NOTES 8 The government’s actions with Operation Choke Point have been criticized for intimidating payments processors into dropping legitimate businesses under the guise of protecting consumers against fraud.

8 Operation Choke Point gives the Justice Department the authority to bring civil suits for alleged violations of 14 criminal offenses, including wire fraud “affecting a federally insured financial institution.”

10 October 2014 | TRANSACTION trends

8 The concept of reputational risk—such as classifying of certain merchants as “high-risk”—could represent a slippery slope that could put “almost unbridled discretion in the hands of the agencies,” say experts.

8 Responding to government subpoenas can be tremendously expensive and time-consuming.

8 If Operation Choke Point continues, experts fear that economic consequences will continue and costs could be passed on to consumers without substantially decreasing fraud.

Stranglehold How Operation Choke Point continues to stifle payments A witch trial. That’s what the U.S. House Committee on Oversight and Government Reform compared the actions of the Department of Justice and a number of federal regulatory agencies to in its report on Operation Choke Point.

The House Oversight Committee report referenced a six-month status report on the operation prepared by Justice Department staff for the civil division’s Assistant Attorney General Stuart F. Delery. The department report explained how some payments processors have begun dropping payday lenders under pressure from Operation Choke Point, which is attempting to root out fraud in the financial services industry.The House Oversight Committee report then excoriated the Justice Department for rationalizing such actions.

“Such an expectation—‘if they are legitimate, they can prove it’—is patently absurd, and reminiscent of the formulation that ‘if one is not a witch, then they will sink rather than float,’” reads the committee report, issued on May 29.

Since the Obama administration unveiled the operation, it has continued to stir debate as to whether the government’s actions are intimidating payments processors into dropping legitimate businesses under the guise of protecting consumers against fraud. On June 9, House Oversight Committee Chair Darrell Issa (R-California) wrote a letter to Federal Deposit Insurance Corporation (FDIC) Chairman Martin J. Gruenberg requesting

an explanation of why certain businesses were classified as “high-risk” in terms of fraud. In all, Issa listed 30 categories of merchants, including ammunition sales, dating services, firearm sales, government grants, home-based charities, payday loans, pharmaceutical sales, surveillance equipment, telemarketing, and travel clubs.

The effect of Operation Choke Point on the payments industry is that processors and banks are held responsible for the actions of a few bad merchants—forced to cut off essentially large and, in most cases, legitimate business segments and left open to enormously expensive government investigation.

But to understand the full depth of the issue, it is important to revisit how we got here.

Questionable Beginnings Operation Choke Point began on March 20, 2013, when the Financial Fraud Enforcement Taskforce announced a new initiative by its Consumer Protection Working Group to address large-scale consumer fraud by holding banks and payments processors liable for the acts of certain merchants.The working group is co-chaired by repre-

TRANSACTION trends | October 2014 11

[ COVER STORY ] sentatives from the Justice Department, Federal Trade Commission (FTC), and Consumer Financial Protection Bureau.

President Obama formed the task force in November 2009 when the country was still recovering from the Great Recession to prosecute “significant financial crimes,” according to the task force website.

To enforce Operation Choke Point, the task force can initiate investigations and civil suits under the Financial Institutions Reform, Recovery, and Enforcement Act (FIRREA).This gives the Justice Department the authority to conduct investigations and bring civil suits for alleged violations of 14 predicate criminal offenses, including wire fraud “affecting a federally insured financial institution,” according to congressional testimony in July by Scott Talbott, ETA’s vice president of government affairs.

In its May report, the House Oversight Committee said that through Operation Choke Point, the task force has “radically and inappropriately expanded its own authority under FIRREA.” During his July testimony before the House Judiciary Committee’s Subcommittee on Regulatory Reform, Commercial, and Antitrust Law, Talbott said the self-regulating steps ETA has put forth are working: A recent survey of ETA members indicates that more than 10,000 merchants were discharged in 2013 for fraud and that fraud represents a fairly tiny percentage of transactions handled by the industry. He also outlined the best practices document that ETA put forth to members earlier this year, “ETA Guidelines on Merchant and ISO Underwriting and Risk Monitoring.”

ETA “strongly supports the vigorous enforcement of existing laws and regulations to prevent fraud,” Talbott said.

Because consumers have “zero liability” for fraud as it concerns electronic payments, payments processors “have a strong interest in making sure fraudulent actors do not gain access to payment systems.”As a result, ETA members have developed “effective due diligence programs” in that regard.

The rationale for targeting banks and payment processors to act as de facto fraud police goes back to the founding 12 October 2014 | TRANSACTION trends

of the Financial Fraud Enforcement Task Force, when Executive Director Michael J. Bresnick said they are the “so-called bottlenecks, or choke-points, in the fraud committed by so many merchants that victimize consumers and launder their illegal proceeds.”

According to Bresnick, processors provide “scammers” with access to the U.S. banking system, some of whose members “are not always blind to the fraud” perpetrated by bad actors. To underline his point, he said that banks and processors can be guilty of allowing merchants with high rates of chargebacks, far beyond industry averages, to continue to operate.

“Consequently, banks should endeavor not only to know their customers, but also to know their customers’ customers,” Bresnick said.“Before they agree to do business with a third-party payment processor, banks should strive to learn more about the processor’s merchantclients, including the names of the principals, the location of the business, and the products being sold, among other things. If they are going to allow their institutions to be used by others as a gateway to access the bank accounts of our nation’s consumers, banks need to know for whom they are processing payments.”

Earlier this year, ETA worked in concert with FTC to establish a list of best practices to help members avoid regulatory scrutiny. In an interview with Transaction Trends, FTC Associate Director for the Division of Marketing Practices Lois Greisman said it is the responsibility of processors to know what their merchants are doing.

“It’s not enough to monitor chargebacks,” she said. “Know how the product’s being marketed. Keep an eye out for high refunds or return rates… Why does one merchant have more than one merchant account? Why does one merchant have more than one descriptor?

Why do they change merchant accounts from time to time? Tell-tale signs are not hard to spot if your eyes are open.”

Coordination vs. Overreach In addition to the use of FIRREA, part of what has proved controversial about

Operation Choke Point is the degree of coordination among agencies with the Justice Department. In general, coordination among agencies is a good thing, so as to avoid duplication and waste.

However, using the concept of reputational risk—such as the FDIC’s classifying of certain categories of merchants as “high-risk”—could represent a slippery slope that could put “almost unbridled discretion in the hands of the agencies,” says Emory University School of Law Vice Dean and Professor Robert Ahdieh, whose areas of expertise include federalism.

“You are really talking about an incredibly open-ended claim or ground for regulatory engagement of a particular bank or particular entity,” he says of making rules on the basis of reputational risk.

Ahdieh makes an analogy using a hypothetical case of reputational risk, one in which a bank might have made large loans to an individual who is making significant donations to one political party.

“Can you imagine telling the story that this potentially creates reputational risk?” Ahdieh asks. “Of course it does.

Again, you very well might imagine that there will be some depositors and investors who would say this bank is really out on a limb here. On the other hand, the idea that an agency is going to advise a bank,‘Please avoid doing business with this entity because its owner, its whatever—its operating officers—gives significantly [to a specific political party].’ That’s a big problem.”

Another potential concern about Operation Choke Point is that agencies such as the FTC are theoretically independent. The FTC has five commissioners nominated by the president and confirmed by the Senate to seven-year terms. No more than three commissioners can be of the same political party.

Consequently, a president from one party could inherit an agency with a majority of commissioners nominated by a president from the other party.

As of yet, there are no indications of pressure by the Justice Department (which reports more directly to the president as part of the executive branch) on independent agencies. The

potential threat of such pressure would prompt concern, according to Ahdieh.

Financial Fallout One of the greatest powers wielded by the Justice Department is that of its subpoena power, and among the most high-profile Operation Choke Point cases in which that power has been used involves Four Oaks Bank and Trust of North Carolina and a Texas-based payments processor. According to a Justice Department press release, the department claimed that the bank ignored

sent a strict regime of prior and ongoing investigation and monitoring designed to prevent future consumer fraud.”

Four Oaks had a meritorious defense, but the timing of the subpoena was bad for the bank, which was seeking capital at the time, according to Jeffrey Knowles, a partner in the Washington, D.C., office of Venable, who negotiated the settlement on behalf of Four Oaks.

Knowles says the investigation would have precluded the bank from doing so.

As a result, it elected to settle for a “relatively small civil penalty” and received

“IT’S USING A HOWITZER TO ATTACK AN ANT HILL. …THE COST OF SIMPLY RESPONDING TO A GOVERNMENT SUBPOENA CAN RUN INTO THE HUNDREDS OF THOUSANDS OF DOLLARS, IF NOT MILLIONS OF DOLLARS, AND SO RESPONDING TO AN OPERATION CHOKE POINT SUBPOENA IS AN EXTREMELY COSTLY, BURDENSOME EXERCISE.” —Jeffrey Knowles, Venable LLP regulators’ concerns about associating with a processor that serviced fraudulent merchants.

“Allegedly, this third-party payment processor’s merchants included large numbers of Internet payday lenders that engaged in fraud against borrowers,” says the department press release.

To resolve the case, Four Oaks Banks agreed to pay a $1 million fine to the U.S. Treasury Department and $200,000 to the U.S. Postal Inspection Service’s Consumer Fraud Fund.The bank also was “permanently prohibited” from providing services for processors that work with the so-called “high-risk” merchants “ab-

what he called favorable treatment from the Justice Department. Following the settlement, the bank terminated its relationship with one of its two processors.

Knowles, who advises ETA on a broad range of regulatory and legislative issues, says that Operation Choke Point represents a government overreach.

“The Department of Justice going after a small bank like Four Oaks Bank is a little bit like going after a fly with an elephant gun,” he says.“It’s using a howitzer to attack an ant hill.The government has tremendous power. The cost of simply responding to a government subpoena can run into the hundreds of thousands

of dollars, if not millions of dollars, and so responding to an Operation Choke Point subpoena is an extremely costly, burdensome exercise that takes a tremendous amount of time and attention by both bank management but also by outside counsel. The investigation itself is extremely taxing on any bank, even if it’s a large bank.”

Knowles also reiterates a point that Talbott made in his appearance before the House Judiciary Committee: Operation Choke Point is making banks and processors into adversaries, as opposed to partners, in the fight against fraud.

When Assistant Attorney General Delery testified in July before the House Judiciary Committee, he said the Justice Department had issued 50 subpoenas in ongoing investigations as a part of Operation Choke Point. The Washington Business Journal reports that PNC Bank has received a subpoena relating to “the return rate for certain merchant payment processor customers,” citing information from the bank’s annual report.

With the continuation of Operation Choke Point, the fear is that economic consequences will continue. In a white paper commissioned by ETA entitled “Economic Effects of Imposing ThirdParty Liability on Payment Processors,” Jeffrey A. Eisenach of Nera Economic Consulting explains that costs could be passed on to consumers without offering much in the way of rooting out the fraud.

“The paper concludes that imposition of third-party liability on processors is unlikely to achieve the intended result of denying access to the financial system to wrongdoers,” Eisenach writes, “but would impose significant costs on reputable businesses and the economy overall, including higher costs for merchants and consumers, utilization of alternative payment arrangements by telemarketers and other “high-risk” merchants (which may be more susceptible to questionable conduct, such as in the card-not-present environment), and a smaller pool of resources available for consumer redress.” TT John Manasso is a contributing writer to Transaction Trends. Reach him at john_manasso@yahoo.com.

TRANSACTION trends | October 2014 13

TRANSACTION trends

Mobile Commerce Providers Guide Marketing & PR Agency 17 Mobile Acceptance 17 Mobile Banking & Payments 18 Mobile Data & Analytics 20 Mobile Engagement 20 Mobile Geotagging/ Geocoding 20 Mobile Hardware/Handsets 20 Mobile Legal Services 21 Mobile Loyalty & Rewards 21 Mobile Marketing 22 Mobile P2P Payments 22 Mobile Promotions & Offers 22 Mobile Security & Risk Management 22 Mobile Software 22 Mobile Wallets 23

[ MOBILE COMMERCE PROVIDERS GUIDE ]

Who’s Who inMobileCommerce The fourth annual Mobile Commerce Providers Guide gives you the contacts to form powerful partnerships

M

obile payments took center stage last month when Apple unveiled the iPhone 6, featuring the company’s new Apple Pay technology. As consumers become more familiar and comfortable with an increasing number of mobile payment options, the push for businesses of all sizes to accommodate mobile and cross-channel options grows stronger. For merchants to be successful, they will need to integrate electronic channels into their business operations.

Today, a vast majority of consumers have a tablet or smartphone. The use of mobile devices for online payments has grown significantly over the past year. In addition, paying at a point of sale using an app on smartphones rose from 2 percent in 2013 to 11 percent in 2014, according to a report from Vantiv/Mercator.

Google statistics indicate that nearly 80 percent of smartphone owners also use their devices to shop. And three quarters of consumers express a willingness to share location data with merchants in exchange for “something valuable,” such as a mobile coupon or digital offer, according to a study by ResearchNow and mobile marketing firm Swirl. Mobile shoppers rely on their devices to inform purchase decisions and complete purchases.

There is a growing need for companies that can assist merchants in offering easy and secure mobile payments. Consumers continue to seek easier payment experiences with their electronic devices, via traditional web browsing, mobile wallets, and payments apps. Not surprisingly, Millennial shoppers show the greatest interest in mobile payments—but other demographics are embracing this option as well.

Meeting the Needs of Omnishoppers “Omniconsumers” who operate across all channels are becoming more prevalent, according to Vantiv/Mercator. Omniconsumers don’t discriminate—they embrace newer shopping strategies such as mobile and computer but continue to frequent brick-and-mortar stores.These consumers are likely to be young, technologically proficient, and affluent—with high expectations for mobile shopping experiences. Those merchants that make omnishopping easy will have a decided advantage over businesses offering more limited options.

16 October 2014 | TRANSACTION trends

Though many omniconsumers fall into the 18- to 24-year-old age group, a contingent of more mature shoppers who browse across channels also exist. Merchants of all sizes need to understand the importance of a mobile payments strategy and get properly equipped with the tools to offer multiple payment options.

Barriers to Consumer Acceptance Despite this groundswell, some consumers remain hesitant to embrace mobile payments because of security concerns. Others express frustration with the mobile payment experience. Shoppers have been disappointed by inconsistent pricing and inventory, lack of one-click checkout functionality, problems navigating the checkout process, and the inability to use coupons and discount codes. Businesses that can alleviate consumers’ fears on these issues by providing a smooth and secure payment option will earn repeat customers.

Fortunately, many consumers are taking the leap to mobile payments specifically to take advantage of mobile loyalty and rewards programs. “Consumers see more value and less risk to mobile loyalty programs,” says Elizabeth Rector, Vantiv general manager of merchant services and mobile.

Problem-Solving Strategies To take advantage of the increase in mobile shopping by consumers who rely on their electronic devices, businesses must become better educated and more prepared to offer seamless mobile payments experiences. That’s where payments professionals and their vast array of new products and payments tools come in.

This year’s expanded Mobile Commerce Providers Guide features companies with mobile offerings in a number of categories, from mobile acceptance and banking to mobile rewards, security, and wallets. Companies are arranged by category to help you locate the right company to meet your needs. The staff of ETA and Transaction Trends hopes that you will use this guide to serve you year-round and that you’ll refer to it often.

Despite our best efforts, some companies offering mobile commerce products or services may not have made it into this guide. To be included in next year’s edition, email transtrends@ contentcommunicators.com. TT

MARKETING & PR AGENCY Strategic Marketing 13626 S. 32nd Street Phoenix, AZ 85044 480/510-8120 www.smktg.com Peggy Olson

MOBILE ACCEPTANCE

 Apriva 8501 N. Scottsdale Road, Suite 110 Scottsdale, AZ 85251 877/277-0728 www.apriva.com Stacey Finley Tappin Apriva provides secure end-to-end transaction processing services, including 24/7 customer support. We are connected to over 35 processing platforms, supporting open-loop, closed-loop campus cards, EBT, gift, and loyalty transactions. Apriva supports some 40 devices, plus smartphones and tablets, and currently sells through its ISO/ reseller sales channels. Apriva is PCI/PA-DSS compliant. apriva.com

CardFlight 142 E. 71st Street, Suite 10A New York, NY 646/389-4450 https://getcardflight.com Derek Webster

COCARD 3401 West End Avenue, Suite 306 Nashville, TN 37203 800/882-1352 www.cocard.net Jenny Allen

Leaders Merchant Services

 eProcessing Network LLC 1415 North Loop West, Suite 1185 Houston, TX 77008 800/296-4810 www.eProcessingNetwork.com Steve Sotis eProcessing Network (ePN) offers ePNMobile, a complete suite of products and services for on-the-go merchants, enabling them to succeed in today’s competitive market. With a quick download of the ePNMobile app on their smartphone or tablet, merchants can securely process any form of accepted electronic payment from virtually anywhere.

EVO PAYMENTS CANADA 1184 St. Catherines, Suite 500-600 Montreal, Quebec H3A 3C2 Canada 514/315-2960 http://evopayments.ca Kevin Lavigne

Frontline Processing 3701 Trakker Trail, Suite 1F Bozeman, MT 59718 866/651-3068 www.frontlineprocessing.com Katie Mansfield

Google Inc. 1600 Ampitheater Pkwy.

Mountain View, CA 94043 650/253-0000 www.google.com/wallet/business/ payments/index.html Steven Klebe

Group ISO 1920 Main Street, Suite 750 Irvine, CA 92614 800/722-4476 www.groupiso.com Mike Fox

ID TECH 10721 Walker Street Cypress, CA 90630 714/761-6368 www.idtechproducts.com Jenna West

725 Via Alondra Camarillo, CA 93012 800/506-9039, ext. 105 www.leadersmerchantservices.com Don Esposito

Mercadotecnia, Ideas y Tecnología Corregidora 92 Mexico 14260 525515009003 www.mitec.com.mx Ricardo Vargas

NXGEN Payment Services 940 Spokane Whitefish, MT 59937 866/863-9977 www.nxgen.com Michael Jaffe

Payment Alliance International 6060 Dutchmans Lane Louisville, KY 40205 866/371-2273 www.GoPAI.com Terri Newton

Platinum Payments P.O. Box 150124 Ogden, UT 84415 866/921-2982 www.platinumpayments.com Brandon Alberts

 Powa Technologies Inc. 655 Hembree Pkwy., Suite G Roswell, GA 30076 678/348-6155 www.powapos.com Cathie Anderson Powa Technologies is an international commerce specialist that creates technologies enabling commerce online via PowaWeb, offline via PowaPOS, and everywhere else via PowaTag. PowaPOS, the physical retail component of the company’s omnichannel product line, features an industry-first and

TRANSACTION trends | October 2014 17

[ MOBILE COMMERCE PROVIDERS GUIDE ] multiple patent pending all-in-one tabletbased POS system, along with the world’s smallest EMV-ready card acceptance device, universal tablet OS support, and an advanced POS Software Developer Program.

Red Oak Payment Solutions 12850 Hwy. 9 N., Suite 600-312 Alpharetta, GA 30004 800/569-1789 www.redoakps.com Eric Nelson

WorldPay US Inc. 1934 Old Gallows Road, Suite 350 Tysons Corner, VA 22182 202/684-5377 Chris Harrison

MOBILE BANKING & PAYMENTS

SecureNet Payment Systems

 Apriva

12357 B Riata Trace Pkwy., Suite 150 Austin, TX 78727 512/693-3196 www.securenet.com Brad Olivier

8501 N. Scottsdale Road, Suite 110 Scottsdale, AZ 85251 877/277-0728 www.apriva.com Stacey Finley Tappin

Trident Merchant Services 164 NW Broad Street Southern Pines, NC 28387 855/252-1016 www.tridentmerchantservices.com Jennifer King

TrustCommerce – PayWithIt 9850 Irvine Center Drive Irvine, CA 92618 800/915-1680 www.trustcommerce.com Andrew Moorhead

 Vantiv 8500 Governors Hill Drive Cincinnati, OH 45249 646/770-4400 www.vantiv.com John M. Yarmy Stay a step ahead with Vantiv, a leading integrated provider of payment processing and technology solutions. Count on us for reliable, secure, and user-friendly mobile solutions that help grow your business.

Partner with us for the latest in mobile acceptance, integrated mobile solutions, and related value-added services. Expect More.

Growth.

18 October 2014 | TRANSACTION trends

Apriva provides secure end-to-end transaction processing services, including 24/7 customer support. We are connected to over 35 processing platforms, supporting open-loop, closed-loop campus cards, EBT, gift, and loyalty transactions. Apriva supports some 40 devices, plus smartphones and tablets, and currently sells through its ISO/ reseller sales channels. Apriva is PCI/PA-DSS compliant. apriva.com

Authorize.Net P.O. Box 8999 San Francisco, CA 94128 866/437-0491 www.authorize.net Allison Stahl

BitPay Inc. 3405 Piedmont Road NE Atlanta, GA 30305 706/570-6459 www.bitpay.com Emily Vaughn

Blackstone Merchant Services Inc. 11600 NW 34th Street Miami, FL 33178 305/639-9590 www.blackstonemerchant.com Janet Sancho

 Bluefin Payment Systems 8200 Roberts Drive, Suite 150 Atlanta, GA 30350 678/894-2639 www.bluefin.com Joy Savula QuickSwipe is a secure mobile POS solution for iOS devices. Featuring an encrypted magstripe reader, QuickSwipe provides the highest level of security for payments, with rich functionality including cataloging, cash transactions, branding, and easy user administration. QuickSwipe also features SDKs for iOS and Android, enabling simple integration into software platforms.

Cimbal Inc. 126 South Clark Avenue Los Altos, CA 94022 650/302-2513 www.cimbal.com Peter Mills

Clear2Pay 4110 N Scottsdale Road, Suite 310 Scottsdale, AZ 85251 800/931-0777 www.clear2pay.com Donna Pontorno

CRi 2120 S. 72nd Street, Suite 1300 Omaha, NE 68124 402/926-2000 www.clientresourcesinc.com James Hoshor

Custos Mobile Sociedad de Condueños, 21 28804 Alcalá de Henares Spain 973/930-0331 www.custosmobile.com Dale Laszig

ePaisa Level 1, Trade Centre, Bandra Kurla Complex Mumbai, Maharashtra 400052 India +91 22 2642 6911 www.epaisa.com Aaryan Behl

EVO PAYMENTS CANADA 1184 St. Catherines, Suite 500-600 Montreal, Quebec H3A 3C2 Canada 514/315-2960 http://evopayments.ca Kevin Lavigne

Forte Payment Systems 500 W. Bethany Drive, Suite 200 Allen, TX 75013 866/290-5400 www.forte.net Rachel Barnes

Meritus Payment Solutions

On-Line Strategies Inc. (an InComm Company)

Mocapay 1743 Wazee Street, Suite 250 Denver, CO 80202 303/444-1771 www.mocapay.com Gina Gilbert

7920 Belt Line Road, Suite 1150 Dallas, TX 75254 214/466-1000 www.olsdallas.com Todd Hemphill

Moneris Solutions 3300 Bloor Street W., West Tower Toronto, Ontario M8X 2X2 Canada 416/734-1000 www.moneris.com Rob Cameron

 ONPEX Beichstrasse 5 Munich 80802, Germany +49 89 416143110 www.onpex.com Christoph Tutsch

MySingleLink 618 Bluff Trail San Antonio, TX 78229 210/494-5465 www.mysinglelink.com Gopal Nandakumar

ONPEX is a payment infrastructure and services provider that procures and manages merchant accounts for global card and alternative payment processing. Its secure, PCI-certified white-label platform offers: mobile payments services, including oneclick checkout; mPOS services, including EMV processing; and SDKs for developers to simply embed payments into their apps.

North American Bancard

250 Stephenson Hwy. 2600 Michelson Drive Troy, MI 48083 Irvine, CA 92612 877/387-9615 949/788-1010 www.gonab.com www.merituspayment.com Rita Feldman Ryan Wess apriva_chicago_transaction_trends_half_pg_horz_ad_2014_v1.0_printer.pdf

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[ MOBILE COMMERCE PROVIDERS GUIDE ] ROAM™ | part of Ingenico Mobile Solutions 280 Summer Street, Lobby Level Boston, MA 02210 888/589-5885 www.roamdata.com

Shift4 Corporation 1491 Center Crossing Road Las Vegas, NV 89144 800/265-5795 www.shift4.com/VT4 Sales Team

Spindle Inc. 8700 E. Vista Bonita Drive, Suite 260 Scottsdale, AZ 85255 800/560-9198 www.spindle.com John Tharpe

Strategic Merchant Solutions 4500 E. Thousand Oaks Blvd.

Westlake Village, CA 91361 888/614-6300 www.strategicmerchant.com Bo Ngubo

MOBILE DATA & ANALYTICS Apriva 8501 N. Scottsdale Road, Suite 110 Scottsdale, AZ 85251 877/277-0728 www.apriva.com Stacey Finley Tappin

Apriva 8501 N. Scottsdale Road, Suite 110 Scottsdale, AZ 85251 877/277-0728 www.apriva.com Stacey Finley Tappin

MOBILE GEOTAGGING/ GEOCODING Apriva 8501 N. Scottsdale Road, Suite 110 Scottsdale, AZ 85251 877/277-0728 www.apriva.com Stacey Finley Tappin

 Total-Apps Inc.

At Total-Apps, we’re known as the “rocket scientists of payment processing.” Our commitment to payment innovation is based on the vision of our executive director and co-founder, Rey Pasinli, an engineer who contributed to the design of the International Space Station—a real rocket scientist!

TriSource Solutions LLC 220 E. 72nd Street, 28th Floor New York, NY 10021 212/780-9092 James J. Fenske

20 October 2014 | TRANSACTION trends

1184 St. Catherines, Suite 500-600 Montreal, Quebec H3A 3C2 Canada 514/315-2960 http://evopayments.ca Kevin Lavigne

MOBILE ENGAGEMENT

MOBILE HARDWARE/ HANDSET 30 Enterprise, Suite 100 Aliso Viejo, CA 92656 951/274-8975 www.Total-Apps.com Rick Garvey

EVO PAYMENTS CANADA

 Infinite Peripherals 2312 Touhy Avenue Elk Grove Village, IL 60007 847/818-1260 www.ipcprint.com Bill Elrich Infinite Peripherals Inc. (IPC) is revolutionizing the retail, health-care, supply chain/ warehousing, transportation, ticketing, and hospitality industries through its unique Linēa-pro and Infinea Tab® products, which maximize the functionality and convenience of Apple®’s iOS devices by adding a 1D or 2D barcode scanner, magnetic stripe reader, and RFID. These mPOS devices, demanded by many major retail stores, increase conversion rates, productivity, and eliminate the need for POS counters.

nCLOSE Inc. – POSenclosures. com 1274 Willowgreen Court Westlake Village, CA 91361 310/264-4096 www.POSenclosures.com James Durham

 Epson America Inc. 3940 Kilroy Airport Way 90806 Long Beach, CA 562/981-3840 https://pos.epson.com Michelle Jordan Epson offers a range of printers for your merchant’s mobile printing needs. The ultracompact Mobilink P20 provides 2-inch receipt printing and the Mobilink P80 provides 3-inch receipt printing, WiFi or Bluetooth, compatible with iOS, Android, or Windows. All Epson POS printers are available with wireless interfaces and support leading mobile technology platforms.

 Simply Charged Inc. 8417 Washington Blvd., Suite 100 Roseville, CA 95678 916/789-1333 www.simplycharged.net Mark Mullan Simply Charged Inc. is your source for PCI and EMV level 1 and 2 compliant POS and mobile hardware. We specialize in restaurant and retail POS tablet solutions along with magstripe/EMV Bluetooth pin pads for merchants on the go. Call us about our White label hardware solutions.

Star Micronics 1150 King Georges Post Road Edison, NJ 08837 732/623-5500 www.starmicronics.com Sales Department

MOBILE LEGAL SERVICES Aschettino Struhs LLP 1500 Broadway New York, NY 10036 212/354-7600 www.aschettinostruhs.com Stephen Aschettino

Jaffe Raitt Heuer & Weiss, P.C. 27777 Franklin Road, Suite 2500 Southfield, MI 48034 248/351-3000 www.jaffelaw.com Holli Targan

Lukas, Nace, Gutierrez, & Sachs LLP

EVO PAYMENTS CANADA

8300 Greensboro Drive, Suite 1200 McLean, VA 22102 703/584-8680 www.fcclaw.com Brooks E. Harlow

1184 St. Catherines, Suite 500-600 Montreal, Quebec H3A 3C2 Canada 514/315-2960 http://evopayments.ca Kevin Lavigne

Thurman Legal

Opticard

1055 East Colorado Blvd.

Pasadena, CA 91106 626/399-6205 www.thurman-legal.com Michael Thurman

3260 N. Hayden Road, Suite 204 Scottsdale, AZ 85260 877/331-2900 www.opticard.com Sales

MOBILE LOYALTY & REWARDS Apriva

 Vantiv

8501 N. Scottsdale Road, Suite 110 Scottsdale, AZ 85251 877/277-0728 www.apriva.com Stacey Finley Tappin

8500 Governors Hill Drive Cincinnati, OH 45249 646/770-4400 www.vantiv.com John M. Yarmy Stay a step ahead with Vantiv, a leading integrated provider of payment processing and technology solutions. Count on us for reliable, secure, and user-friendly mobile

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pos.epson.com/financial TRANSACTION trends | October 2014 21

[ MOBILE COMMERCE PROVIDERS GUIDE ] solutions that help grow your business.

Partner with us for the latest in mobile acceptance, integrated mobile solutions, and related value-added services. Expect More.

Growth.

MOBILE MARKETING Apriva 8501 N. Scottsdale Road, Suite 110 Scottsdale, AZ 85251 877/277-0728 www.apriva.com Stacey Finley Tappin

MOBILE P2P PAYMENTS Apriva 8501 N. Scottsdale Road, Suite 110 Scottsdale, AZ 85251 877/277-0728 www.apriva.com Stacey Finley Tappin

BitPay Inc. 3405 Piedmont Road NE Atlanta, GA 30305 706/570-6459 www.bitpay.com Emily Vaughn

Bluefin Payment Systems 8200 Roberts Drive, Suite 150 Atlanta, GA 30350 678/894-2639 www.bluefin.com Joy Savula

Intel Corporation 5000 W. Chandler Blvd.

Chandler, AZ 85226 480/554-8080 www.intel.com/retail Marcie Miller

Shift4 Corporation 1491 Center Crossing Road Las Vegas, NV 89144 800/265-5795 www.shift4.com/VT4 Shift4 Corporation Sales Team

22 October 2014 | TRANSACTION trends

MOBILE PROMOTIONS & OFFERS

MOBILE SOFTWARE

Apriva 8501 N. Scottsdale Road, Suite 110 Scottsdale, AZ 85251 877/277-0728 www.apriva.com Stacey Finley Tappin

MOBILE SECURITY & RISK MANAGEMENT Apriva 8501 N. Scottsdale Road, Suite 110 Scottsdale, AZ 85251 877/277-0728 www.apriva.com Stacey Finley Tappin

ControlScan 11475 Great Oaks Way Alpharetta, GA 30022 800/825-3301 www.controlscan.com Mark Hayward

ID Analytics 15253 Avenue of Science San Diego, CA 92128 858/312-6200 www.idanalytics.com Laura Trotter

PCI Compliance LLC 8547 E. Arapahoe Drive, Building J, Suite 201 Greenwood Village, CO 80112 866/949-9777 www.gotpci.com Corey

SecurityMetrics 1275 W. 1600 N. Orem, UT 84057 801/995-6860 www.securitymetrics.com/mobilescan David Meyers

 Apriva 8501 N. Scottsdale Road, Suite 110 Scottsdale, AZ 85251 877/277-0728 www.apriva.com Stacey Finley Tappin Apriva provides secure end-to-end transaction processing services, including 24/7 customer support. We are connected to over 35 processing platforms, supporting open-loop, closed-loop campus cards, EBT, gift, and loyalty transactions. Apriva supports some 40 devices, plus smartphones and tablets, and currently sells through its ISO/ Reseller sales channels. Apriva is PCI/PA-DSS compliant. apriva.com

BridgePay Network Solutions 600 Northlake Blvd., Suite 260 Altamonte Springs, FL 32701 866/322-9894 www.bridgepaynetwork.com Carlee Hudachko

retailcloud 2702 Clayton Road Concord, CA 94519 925/288-4300 www.retailcloud.com Sheena Shastri

Shopify 126 York Street, Suite 200 Ottawa, Ontario K1N 5T5 Canada 888/329-0139 www.shopify.com Head of Payments

WorldPay US 600 Morgan Falls Atlanta, GA 30350 678/779-5706 www.worldpay.com Ben Lebedin

MOBILE WALLETS Apriva 8501 N. Scottsdale Road, Suite 110 Scottsdale, AZ 85251 877/277-0728 www.apriva.com Stacey Finley Tappin

ď ´ Vantiv 8500 Governors Hill Drive Cincinnati, OH 45249 646/770-4400 www.vantiv.com John M. Yarmy Stay a step ahead with Vantiv, a leading integrated provider of payment processing and technology solutions. Count on us for reliable, secure, and user-friendly mobile solutions that help grow your business.

Partner with us for the latest in mobile acceptance, integrated mobile solutions, and related value-added services. Expect More.

Growth.

1101 6th Street NW, Suite 402 Washington, DC 20036 202/828.2635 www.electran.org ETA CEO Jason Oxman Advertising Sales Linda Baker Advertising Sales Manager Phone: 703/964.1240, ext. 13 Fax: 866/466.9187 Lbaker@conferencemanagers.com Alison Bashian Phone: 800/335.7500 Fax: 440/232.0398 alisonb@bashian.com Editor Josephine Rossi

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TRANSACTION trends | October 2014 23

12

»

Startup Stories:

National Benefit Programs

High-Touch Meets High-Tech How National Benefit Programs leverages buying power to add value to processors’ and merchants’ businesses

By John Manasso

F

Diane Vogt Faro, president

National Benefit Programs Founded: September 2009 Location: Atlanta, Georgia Business: The company provides benefits in 28 major business categories through more than 50 participating affiliated partners.

24 October 2014 | TRANSACTION trends

or six years, Gary Alloy lingered in a state of semi-retirement.

After years of running his ISO business, he grew disillusioned with the industry.

He recalls fond memories of his entry into the payments business decades ago when ISOs could charge merchants 2 percent of a transaction and could earn even more by leasing equipment to them.Years of competition have cut that margin in half, he says, and the ability to charge for equipment also has gone away.

During his semi-retirement, Alloy kept three different portfolios from three different processors that he serviced when necessary, which was not often. He relaxed and enjoyed himself. All the while, he remained current on the latest industry news, reading the trade publications, and pondered perhaps the central question facing the industry: How is anyone going to make money only selling credit card processing?

The answer—National Benefit Programs (NBP)—was born in September 2009. The company works with payments processors on one side and creates benefit packages that help to make merchants’ businesses more efficient via discounts with major corporations on the other. NBP has created partnerships with more than 50 companies, including UPS, Hewlett Packard, Office Depot, Sprint, and ADP. In all, the company has

partners creating discounts for merchants in 28 major business categories.

NBP’s processor partners include Merchant Warehouse and Prodigy Payment Systems. NBP has another agreement in the works with a major processor that it expects to announce in the fall.Alloy, who serves as chief executive officer, says that processors that partner with NBP have cut their attrition by 3 percent.

Foundations While it took a while for NBP to gain traction, the company has enjoyed a 500 percent increase in business over the past 12 months, says Alloy.

“We’re growing like kudzu,” he says from his office, which sits about 15 miles north of downtown Atlanta.

When he first approached potential discount partners, Alloy had one unusual stipulation: He wanted the right to resell their products or services for less than anyone else but he wanted no commission. And as NBP adds new processors and increases volume, Alloy continues to negotiate for larger discounts.

While the company needed several years to get off the ground, it has picked up the pace recently with the addition of other payments industry veterans. In 2011, Diane Vogt Faro, who served on ETA’s Board of Directors

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for nine years and was president in 2004-2005, came on board.

Vogt Faro, a partner in NBP and the company’s president, whose role is to oversee sales, says the target for NBP’s discounts is the small-to-mid-sized merchant.

“We have exclusive contracts with some of these providers that we deliver merchants value that they depend on to run their businesses, their lives, and they can’t do it on their own,” she says. “They don’t have the buying power. They can’t walk into UPS and say,‘Will you give me the discount?’ that we can.”

Aside from essential services like payroll and shipping, NBP’s partners also include car rental, legal, and travel companies. In some ways, the possibilities—and the potential size of the discounts—are limited only by the imagination.

“We continue to look at the verticals within these markets on how we can continue to work with vendors,” says Vogt Faro. “We’ve got some key processors as our clients today, and… we continue talking every day to vendors or we go back to our existing vendors and we say, ‘Hey, we’re bringing you a lot of business. You need to look at the discount and improve upon it.’”

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26 October 2014 | TRANSACTION trends

Not surprisingly, NBP’s operation relies on a highly technical side—one that must link these vendors to the processors and the merchants themselves. NBP “white-labels” the websites for its customers, which can be expensive and time-consuming, depending on the level of customization needed. Some have taken as long as four months to complete. However, the IT team can complete relatively simple requests in about a week.

“Typically, the bigger the client, the more systems in place that we have to integrate with, and it just takes longer,” says Rob Riggs, chief technology officer and the third partner in NBP. “But we do have the ability to really go custom or to really go streamline, in terms of the process and approach to the portal site that the merchants are logging into. So that’s where there are some economies—when we’re working with smaller clients versus larger.”

NBP performs its IT work in-house, a process that began when Riggs joined the company. Previously, he ran a web development company and NBP was a client. That experience provided him with an inside look at the company’s potential, which is why he says he elected to accept Alloy’s offer to join.

“It blossomed really quickly,” Riggs says.“That’s been really encouraging to see the growth and the potential here, and it’s caught our team’s attention in terms of where we’re heading. It’s exciting.”

Riggs says that the work that NBP does is so specialized that it requires a learning curve even for experienced programmers. His goal is to grow the systems not only to serve NBP’s current clients but also to integrate the most recent technology to offer something that competitors do not.

“Hiring is a tremendous investment up front,” he says.

“It’s a niche market in a niche industry, so it takes some-

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CPD 214027E 9/14

body several weeks to really even get the process into the system. I can have a developer look at code and build bases, etcetera, but it can really take a while to grasp what we’re doing.”

In many ways, NBP represents a marriage of high technology with an old-fashioned approach.Alloy quotes a maxim that his father told him: Price is about the fifth most important thing in business, with service coming first. NBP also has a moneyback guarantee—part of that commitment to service—that Alloy says the company has never had to use.

While it might be possible for a competitor to come along and try to duplicate what NBP has done, Alloy feels confident in his business model.With that old-school mindset, he knows one thing that cannot be duplicated is relationships.That is what he and Vogt Faro bring.

“It’s almost impossible to get past the gatekeeper in this business,” he says. “You have to know somebody and have a relationship with them, and we’ve had relationships over the years with a lot of these people.They know us, and they trust us.”. TT John Manasso is a contributing writer to Transaction Trends. Reach him at john_ manasso@yahoo.com.

WORDSTOTHEWISE � Explore niches. “People always say that the growth is not like it used to be,” says National Benefit Programs President Diane Vogt Faro. “I don’t buy any of that. I still think there are niche markets that need to be sought after. I believe in value-add, my program, other value-adds. We need to do what we’ve done for the major retailers in years past. We need to start looking at the unpopulated niche markets… and not just concentrate on the payments’ side of the business. The payments side of the business will always be there, but we need to start looking at what we can do to lower attrition and retain our customers longer.” � Focus on your marketing strategy. Vogt Faro came from large corporations where the norm was to lay off marketing departments during periods of downsizing—a strategy with which she disagrees. She emphasizes the importance of networking at ETA events.

“Early on coming into it, we didn’t market ourselves properly,” she says of NBP, “and I think marketing is key to telling your [story]… . [Large corporate layoffs] hit marketing, they hit areas where they think it’s more frivolous. I think that hurts because people don’t know who you are… . No one’s just coming and knocking on our door because we’re a value-add company. You need to be out there building relationships.” � Delegate. “Ten years ago, I would rather have done something myself and not pay someone $12 per hour or whatever,” says NBP Chief Technology Officer Rob Riggs. “But what I found was that the more I released things into the hands of others—everyone’s trying to do a good job—I [could] move onto something more strategic that I can spend my time on. At the end of the day, you’re paying someone to do what you can do yourself, but it’s really amazing what you can accomplish when other people are doing the lower-level work.”

ADVERTISERS INDEX Company

Page

Phone

Web

@Pay

30 505-998-9600

www.atpay.com

Apriva

19 877-277-0728

www.apriva.com

Authorize.Net

C2 866-437-0491

www.authorize.net

Bank of America

25

855-833-3614

www.merchant.bankofamerica.com

1

855-600-2437

www.chfs.us

Discover Network

31

800-347-2000

www.discovernetwork.com

eProcessing Network LLC

23

800-296-4810

www.eprocessingnetwork.com

Epson America Inc.

21

562-981-3840

pos.epson.com/financial

800-227-3794; 516-479-9000 (international)

www.evopayments.com

C&H Financial Services Inc.

EVO Payments International

2

First Data

27

800-813-8744

www.firstdata.com/isoprogram

Magtek Inc.

14

562-546-6603

www.magtek.com

National Merchant Association

5

866-509-7199

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RISK IN REVIEW

Why PCI Compliance Isn’t Working The industry needs two carrots, not two sticks

By Darrel Anderson, CIPP/C, CIPP/US, ETA CPP

A

fter almost 10 years of applying the PCI compliance process across the industry value chain and trying to enforce data security and privacy tenets for merchants of all sizes, it has become abundantly clear that the “two-stick” model isn’t working.

According to a Wall Street Journal article, “Hackers Shift to Small Firms,” Visa estimates that 95 percent of data breaches today occur at small businesses. Other industry-related surveys provide similarly revealing statistics. For example, just 11 percent of small businesses are PCI compliant, and many of them fall out of compliance between assessments, according to Verizon’s 2014 PCI Compliance Report. Meanwhile, 33 percent of businesses don’t have a data protection plan in place, according to the Ponemon Institute’s 2013 study, Is Your Company Ready for a Big Data Breach?, and 61 percent of small businesses don’t even use antivirus protection on their systems, says Symantic’s 2011 SMB Threat Awareness Poll.

Why have we failed so badly? You have to understand the typical two-stick compliance model merchant acquiring entities are using to answer that question. It goes something like this: “I have a carrot-and-stick model for encouraging data security compliance among my merchant customer base; except, there are no carrots, only sticks. Stick one is the process of PCI compliance.

It is hard, confusing, and distracting from your core business, Mr. Merchant.

The tools I provide are difficult to use, unclear, arbitrary, and in many cases unreliable. Stick two is fees, fines, and punishment. If you don’t get past stick one, and you won’t, I will hit you with stick two. If you have a data incident,

we will penalize you and then probably abandon you. And if you are lucky, we’ll provide you with insurance coverage, but in many cases, it will be payable to us first. Please sign here.”

Changing the Model The two-stick model treats our clients like adversaries, not partners. It assumes merchants are too distracted, or even too inept, to appreciate the serious-

ness of data security, privacy, and compliance. That’s why I’m advocating we move to a “two-carrot” approach.

The first carrot is the process of compliance and security validation itself. We need to ensure it is easy for nontechnical business people to understand, and we need to give them adequate time to complete the program. Education during the process, and after, also is key, as is creating an overt benefit for their TRANSACTION trends | October 2014 29

business in terms of leveraging security and compliance with their customers.

We also need to incent them when they begin, finish, and continue the process.

The second carrot comes into play when bad things happen. We must stand shoulder to shoulder with our merchants, lending expertise and project management skills to solve the problems related to a data incident before it gets out of hand. We should provide public relations and legal support, equipment replacement, and a host of related, valuable solutions and services. We can put

an actionable and affordable incident program in place for merchants to cover all of the bases, not just the ones that protect us.

Better Solutions It is time to get evangelical about the issues of compliance, privacy, and data security. We need to rethink the “us against everyone else” mentality because if it’s truly “us against them,” our customers are part of the “us.”

Consider these sobering statistics culled from the Ponemon Insti-

tute’s study and from a 2012 National Cyber Security Alliance and Symantec study on the cyber security practices, behaviors, and perceptions of small businesses: • Fifty-nine percent of small business owners and operators do not have a contingency plan outlining procedures for responding and reporting a data breach loss.

• Only 10 percent of businesses carry cyber or breach insurance, yet 75 percent of businesses indicate they understand their brand and reputation will suffer if an incident occurs.

• A lmost half of businesses today don’t encrypt their data.

• A lmost 40 percent of companies that have experienced a breach indicate they still don’t have an incident plan in place.

• S ixty-five percent of companies have no method in place for contacting injured customers post-incident.

So what can we sell to our clients that might offset the cost of being more proactive in incenting our merchants to get serious about data and privacy protection? What could possibly pay for the all of the carrots that I’m advocating handing out?

A plethora of ideas can be assembled, including cyber/breach insurance, encryption services, data incident management programs, credit reporting services, and consulting services.

There are solutions out there for solving every aspect of the data compliance, security, and privacy battle. You already may be a provider of such services, like I am, or a buyer of them. But the notion of making our customers perform tasks they don’t understand, don’t have time for, and don’t enjoy has long passed. Although the endeavor isn’t easy, it certainly is worth it. After all, we’re talking about protecting the viability of hundreds of thousands of businesses, and the livelihoods of millions of employees and their families. TT Darrel Anderson, CIPP/C, CIPP/ US, ETA CPP, is president and chief executive officer for Conformance Technologies. Reach him at danderson@conformancetech.com.

30 October 2014 | TRANSACTION trends

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THE LAST WORD

Lame Ducks, Mathematics, and Midterms Election results may drive November’s congressional agenda

By Scott Talbott

W

hile ETA members are gathered for the 2014 Strategic Leadership Forum to discuss the major innovations, trends, and challenges facing the payments industry, scores of other strategic leadership dialogues are occurring throughout the United States. These conversations are taking place between candidates and voters, and the result could have lasting impacts on ETA’s members for the next two years and beyond.

In September, the 113th Congress returned from its five-week summer recess for 12 business days before adjourning in early October. After November’s mid-term elections, the legislators will return to our nation’s capital for a “lame duck” session. What Congress will address at that time is anyone’s guess, but ETA is positioning industry issues for attention during this unpredictable policy window of opportunity.

Lame Duck Defined After the general election in even-numbered years, but before the newly elected legislators take office, the already-seated Congress may convene to consider various legislative issues. Because some of the legislators will not be returning for the next Congress (due to retirement or election loss), they are considered lame duck members.

In recent years, lame duck sessions have had legislators debating time-sensitive and controversial fiscal policy issues. Such emergency legislative considerations do not appear to be the drivers of the 2014 lame duck session. Many current political disagreements exist, but we do not expect them to be tackled during this period.

Additionally, when an executive branch leader such as the president or governor is either not running for re-election or ineligible to run for reelection, the time period before the end of the executive’s tenure is often referred to as the lame duck period. President Barack Obama is ineligible to run for re-election.

Adding to the uncertainty of this year’s lame duck agenda is the potential for a change in party leadership in the U.S. Senate from Democrat to Republican.

32 October 2014 | TRANSACTION trends

Also worth consideration: If the Republicans do take control of both chambers, the power of the president to advance his legislative agenda is likely to be compromised. However, this scenario could hasten activity on the federal regulatory front, something which ETA and the payments industry are quite familiar with via the administration’s Operation Choke Point initiative.

Calculating a Lame Duck Agenda All of this adds up to even further uncertainty over the lame duck legislative agenda and has many groups jockeying for Congress’ attention. ETA is strategically positioning its priority issues to be considered in the lame duck session.

Recent reports of data breaches continue to keep the issue top of mind for legislators.The Home Depot incident and the Apple iCloud/iPhone vulnerability (which led to leaked nude photographs of several celebrities) have generated renewed attention on issues of privacy and notification.

ETA and its members have been meeting with relevant legislators and staff both in Washington, DC, and in the districts about the proposal for a Uniform National Standard for Breach Notification.

Ready for Election Day? You already know that your right to vote for your government representatives is essential to being an American. But take a few moments to consider the responsibilities that come with this right—the responsibilities to be a registered voter, to be an informed voter, and to be an active voter. ETA’s Voice of Payments has the online tools to make sure you and your employees are prepared to make your voice heard.

For more information about voter registration, links to your candidates, and casting your vote, go to www.voiceofpayments.org and select your state on the map. TT Scott Talbot is senior vice president of government affairs for ETA. Reach him at stalbott@electran.org.

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