Merchant Services: What to look for this year.¹

Merchant Services: What to look for this year.

Technology is always moving forward and as a business owner it can sometimes be a struggle to keep up with change. As our consumers adopt new technology, we need to adopt the technology and grow with them. This is very true in the world of merchant services. 

Merchant services are the services business owners use to process payments. These can include in store, mail order, telephone order, online and on the go solutions for processing credit and debit card transactions, electronic check service, gift cards and more.

The two most talked about changes in the world of merchant services in the coming year will be mobile wallet payment options such as Apple Pay™ and the move away from traditional swipe credit cards to new chip/smart cards or EMV (Europay, MasterCard®, Visa®) cards.

One of the newest and most talked about forms of mobile wallet payment options hitting the market is Apple Pay. It is still early to predict how fast Apple Pay adoption will occur in various merchant categories, but according to a recent New York Times report from November, specialty grocer, Whole Foods saw more than 150,000 Apple Pay transactions across its 384 stores in the first three weeks following the launch.

So what is Apple Pay?

Apple Pay is an extension of Apple’s® Passbook app into a digital wallet within the Apple iPhone 6 series and the new iWatch available in 2015. Consumers import eligible payment cards from their iTunes® account, or use the iPhone’s camera to upload additional cards to the passbook account.  The Apple Pay app incorporates a Touch ID™ fingerprint reader that is embedded in the device’s home button and a Near Field Communication (NFC) transmitter designed to encrypt each user’s payment transaction information.

The customer’s transaction data goes through a chip inside the Apple Pay enabled device to the NFC reader at the point of sale.  The point of sale device allows customers to make a payment with a tap of their mobile device. The built in Touch ID requires a customer’s fingerprint to verify their payment authorization.

Not only is Apple Pay convenient for users and business owners, it is also provides a higher level of fraud protection with the combined use of biometrics, encryption, and tokenization.

Biometrics and tokenization have been around for a number of years. What’s new is the combining them in a platform that allows users to authenticate their identity while removing credit card data and replacing it with a token.  A token is a dynamically generated number that replaces the actual card data for each contactless payment making the information useless to hackers.

Once the phone authenticates the user, the encrypted payment information is then passed at the point of sale and on to the payment networks (Visa, MasterCard, etc) which then decrypts the data and passes it to the issuer to further decrypt and authenticate the payment.

This level of security can offer businesses and their consumers a piece of mind in today’s changing marketplace.

Apple Pay is not the only form of mobile payment available today. Examples of other mobile payment applications include Visa PayWave®, MasterCard Pay Pass™ and American Express® ExpressPay.

So how do you prepare to accept these mobile payment applications? Businesses that have an NFC capable terminal, which is also called a contactless reader, may already have acceptance capability. Terminals with this technology include:

VERIFONE

INGENICO

VX520 Countertop terminal

iCT250 Countertop terminal

VX680 3G GPRS Long range wireless

iWL250G GPRS Long range wireless

VX680 Bluetooth Short range wireless

 iWL220B Bluetooth Short range wireless

VX820 External PIN Pad

iPP320 External PIN Pad

MX915 Multi-Lane terminal

iPP220 External PIN Pad

 

iSC250 Multi-Lane terminal

If you do not see your terminal on the list you may need to purchase a PIN pad, or upgrade your terminal to new hardware that is NFC capable.  You can contact your Union Bank representative for more information.

Another new technology change on the horizon in the United States is the use of chip/ smart cards or EMV cards and the migration to EMV technology. These smart cards are credit or debit cards that use chip technology imbedded on the front of the card to store card data rather than a magstripe on the back of the card.  These cards have been used all over the world for many years and are more secure than the traditional magnetic strip cards. 

To provide enhanced card data security, the major card brands are pushing for widespread EMV adoption in this country. In fact, in October 2015 a liability shift will be effective for fraudulent card present losses which could have been detected through the EMV cards and terminals. If your business accepts and processes a counterfeit card transaction on a non-EMV terminal which would have been detected with the EMV terminal you are the one responsible for incurred fraud losses-not the card issuer. 

To be prepared for this change please check and see if your current terminal is EMV enabled. If not, Union Bank can help mitigate this risk with a wide range of EMV –enabled terminals available for    upgrade well in advance of the scheduled liability shift.  Many EMV terminals are also NFC enabled which would allow for mobile wallet payments and carry a magnetic stripe reader for those legacy cards which have not been reissued as an EMV enabled card.  

This is an exciting time and the New Year will bring many changes, these are just a couple of examples of the new technology available in the merchant services arena. The world of merchant services constantly evolves and as a business owner you can stay ahead of the game by remaining informed and embracing change. Remember, our consumers are looking to us to provide solutions that make transactions more convenient while providing peace of mind and protecting their mobile wallet.