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Industry Insider:Cyber PI |
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Steven Peisner didn’t intend to become an expert in credit card fraud. Instead, the 24-year veteran of the credit card industry seemed more than happy in his role as vice president and director of Acquiring Solutions International Inc., an independent sales organization based in Calabasas, California. That is, until he got a wake-up call in early 2004.
“We handle the processing for a number of large Internet merchants that do between $1 million and $2 million in business each month,” Peisner says. PeopleData.com was one of those merchants.
“One day, we got a call from a processor that said PeopleData’s chargebacks were going through the roof,” Peisner continues. “We were told that if we couldn’t fix the problem, we’d have to terminate the account.”
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When it comes to contactless and mobile forms of payment merchants in the United States need a big carrot to lure them to these payment solutions. In other countries, ISOs have attracted merchants by combining a rewards or loyalty program with contactless and mobile payment technology. In Japan, for example, these transactions quadrupled last year, reports JBC, leading credit card issuer and acquirer in Japan. Rewards programs just may be the ticket for boosting contactless payments in the United States.
In fact, Discover Card is creating a substantive contactless infrastructure with rewards programs as the cornerstone. “As an industry, we are changing the basic infrastructure of payments and that’s not been done for 50 years,” says Beth Horowitz, vice president of product management for Discover, which is investing in chip technology and launching a marketing campaign aimed at promoting to merchants the value in contactless and mobile solutions. “For the first time in many years, there is dramatic new technology at the point of sale. Mag stripes have ruled, but now we are introducing a chip that allows you to do things that previously we were dependent on back office systems to facilitate,” says Horowitz.
The biggest change in the contactless arena is that companies like Discover are helping to deliver value more quickly and easily to the consumer. That’s because consumers care more about relevant and timely rewards. If a consumer can acquire rewards at the point of sale, that translates to loyalty—and gets merchants on board.
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Differentiation Through Specialization |
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Twenty years ago, many ISOs tried to be all things to all merchants. But today, many highly successful agents have scaled back their approach and instead do more for fewer businesses.
That “wholesale mentality” may have been a sound strategy back then, especially for larger ISOs, suggests Greg Cohen, president of Moneris Solutions USA, but today it’s only worthwhile if your strategy is to go out of business. That’s because it’s costing small and medium-sized ISOs a lot more than it used to. “These ISOs used to be able to hire contractors and be profitable from the first or second month with a merchant,” Cohen says. “Today, they pay bounties for bringing in merchants, give away free terminals and share a huge amount of the revenue stream from the merchant with the sales channel.
“It doesn’t take a genius to figure out that the ROI isn’t as good as it used to be for ISOs still using that tactic,” he continues. “In order to succeed in that arena today, you have to have pretty deep pockets just to cover the up-front costs needed to acquire merchants. All of which makes it pretty difficult for small and even medium ISOs to succeed by following the ‘old way.’”
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The key to evolutionary success in nature is to keep what works but be flexible enough to respond when the landscape changes. The 2008 ETA Annual Meeting & Expo planners have taken that lesson to heart.
“The Program Planning Committee has done a fantastic job of streamlining the ETA Annual Meeting & Expo and revitalizing its content, while keeping its core value proposition intact,” says ETA Executive Director Carla Balakgie. “This year’s meeting will be fresh and exciting, and best of all, make more efficient use of the time our attendees and exhibitors devote to the event.”
This year’s event, held once again at the Mandalay Bay Hotel and Casino, features many significant changes but remains true to its primary purpose: bringing together top payments professionals in an environment that’s designed to nurture the personal and professional relationships that drive the industry. Activities begin Tuesday, April 15 and wrap up on Thursday, April 17.
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Risk in Review: Is Your Risk Monitoring System Risky? |
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One of the older schemes in merchant fraud is issuing credits/refunds with no offsetting sales. Over the years, the scheme has changed as the industry catches up and updates the monitoring systems.
In the earliest version of the fraud in question, perpetrators would just issue refunds with no offsetting sales to credit cards. The industry learned to look for negative batches. The fraudsters then began issuing credits with no offsetting sales and would then run a charge for the exact same dollar amount on a stolen credit card. This would make the batch zero or slightly positive. The industry caught up by making the risk monitoring systems look at all credits and reconcile them to offsetting sales on the same card numbers.
Along the way, the fraudsters learned that if you run the returns on check cards, they would have access to almost instant cash instead of having to wait around for the issuers to send checks out. All of the earlier frauds were performed using the credit card networks.
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