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Card present goes Ecommerce

In the card acceptance business a big change is happening. More and more transactions that should be card present transactions are processed as ecommerce transactions, or better: card-not-present-transactions. Though, why is this and why does this not violate rules and regulations.

I just give you a sample of an awesome experience I had recently. I registered at Uber-Taxi Service. Uber is a very good taxi service with an exceptional service quality. I can recommend everybody to give it a try and make their own experience. Anyway, you have to subscribe and register your credit card with Uber. Then you download the Uber-App and you are ready to order a taxi. Once the taxi arrives, they welcome you by your name, they even offer you a drink. They drive you to your desired location. They give you a warm good bye and that’s it. No payment, no bills, no cards, no coins. You just get out of the car and that’s it. Fantastic. Now your Uber-App tells you that they just charge amount x on your card. They send you a receipt by email containing a map with your journey plus all payment details. I love this, since I can use this receipt easily for my business expenses.

But why do I tell you this long story, and what has it to do with credit card business? Usually this transaction would have been Chip and Pin transaction (card present at EFTPOS Terminal). But since I am a registered user it was converted into an ecommerce transaction, without 3D Secure or Chip and Pin or any other security issues.

The same example happens thousands of times every day and a lot of card present transactions are converted into ecommerce or distance payments. Other examples are cinema tickets that are purchased through the internet and printed at home. Some days ago you would have to pick up the tickets and pay at cash register. Now it is all mobile and therefore a “card not present” transaction. There are a lot of business cases you can think off where you could easily improve the customer experience by converting card present transactions into card not present transactions.

What does this mean for the card business. Is the security getting weaker at card transactions? Will fraud rise on these transactions since there is almost no security?

The answer of the card industry to this phenomena is “MasterPass” and ““. These are centralized wallets that hold your card information and allow you to pay anywhere, anytime, even hands free. If you think a little bit into the future, you might get to the result, that EFTPOS Terminal are not necessary anymore since everything will be pay out of your MasterPass or wallet. Is this the death of the terminal industry? Or do you have to enter the PIN into the terminals to access the MasterPass or wallet? Or is this all useless since payment is already enough convenient these days?

A lot of questions. Please feel free to leave your comment and share your thought.


Comments: (4)

Ian Simmonds
Ian Simmonds - FIS - Frankfurt Am Main 24 March, 2014, 13:311 like 1 like

Nice article Daniel.

Also makes you think about those statistics about fraud on CNP transactions - the shift to convenience like the examples given, meaning more CNP and thus higher total volumes of fraud.




A Finextra member
A Finextra member 24 March, 2014, 13:36Be the first to give this comment the thumbs up 0 likes

The big issue in payments is cost of processing for businesses, and adding value. There are no incentives for businesses really to start embracing these types of solutions, especially as in many cases cost the busienss more than the good old chip and pin scenarieo.

Wallets like and MasterPass do nothing for the consumer really, nor do they do anything for the merchant. Throw in the challenges and complexities of securing card data and things don't look good. Also, the poor old merchant is also the one that is exposed to the risk of these transactions.

I think the future of payments is away from trying to use existing schemes for digital, rather schemes that are more dynamic, flexible and secure in a digital world will change consumer behaviour.

A Finextra member
A Finextra member 26 March, 2014, 12:121 like 1 like

These are good observations and point first to the growing importance of the remote commerce experience, but second to the undoubted trend towards convergent experience. The mobile platform has been the critical enabler of this and the example of Uber shows how the payments part of the transaction benefits most by seemless integration - something becoming increasingly difficult with the card/terminal form factor or as you say "card present" transaction. Increasingly the card will not be physically "present" in transactions, even if, as in your Uber example, the cardholder (or shall we say the customer of payer) most definitely is present (although there is  flexibility for the payer not be present or even the passenger in the cab). To my mind this points, inevitably, to future payment methods where the same basic transaction and underlying process can be used either remotely or in physical proximity and can better support the multi channel innovation already embarked upon by retailers. To me this implies that the focus of retail payments on a card based form factor looks set to change - and not just to the development of a wallet to put your cards in. The real opportunity is to re-engineer the payments process to one which is inherently more secure and flexible than the card model, and one where financial credentials do not need to be surrendered to wallet providers, retailers or PSPs.

Mark McMurtrie
Mark McMurtrie - Payments Consultancy Limited - Woking 28 March, 2014, 11:21Be the first to give this comment the thumbs up 0 likes

This is a great example of consumers using new devices and payment technologies to improve the user experience and convenience.

It does though highlight the need for card processig rules to keep up with current options and practices.

The economics of card acceptance underpin the whole card payments industry. These dictate the costs and who has to pay them. Many stakeholders do not have this specialised knowledge and so are unaware of the cost implications. Changing from Face to Face to Customer Not Present means different rates will apply.

Who will the winners be? The card issuer; merchant acquirer; merchant or consumer? The ones impacted most are likely to be those least aware of the intracies.



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