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© Copyright 2011 | First Data Corporation Trends in Card Processing North Carolina Ecommerce Conference Presenter: Susan Peek, First Data October 30, 2012
2 | © Copyright 2011 | First Data Corporation Agenda Trends in Card Processing Market Trends Universal Commerce eCommerce Mobile Commerce New Payment Options EMV Fraud Protection Summary
3 | © Copyright 2011 | First Data Corporation Market Trends
4 | © Copyright 2011 | First Data Corporation Convergence of online & offline commerce Increased security threats Increased levels of regulatory change Changing technologies Consumer expectations are rising New emerging shopping behaviors Market Trends What is Changing?
5 | © Copyright 2011 | First Data Corporation –Today’s card processing environment is much more sophisticated and complex than just swiping a card at the point of sale. –Consumers are increasingly expecting an integrated buying experience that is personalized, secure, and smart. –Today’s customer wants to pay whenever and wherever they want and expect to be able to do so. –Merchants need to be ready to provide the payment types and payment channels their customers want to use while meeting compliance regulations and protecting against fraud. –The lines between in ‐ store commerce, ecommerce, and mobile commerce are blurring. We call this evolution Universal Commerce. Market Trends
6 | © Copyright 2011 | First Data Corporation Universal Commerce
7 | © Copyright 2011 | First Data Corporation Getting started with Universal Commerce Broaden payment options and build an integrated customer experience eCommerce Mobile Payments EMV Integrated Customer Experience
8 | © Copyright 2011 | First Data Corporation Redefining the POS Accepting, enabling, and settling any transaction, any service, any technology What’s your plan to upgrade and take advantage of the Universal Commerce environment at the POS? Any Payment, Any Technology Counter Terminal Device POS Software Mobile Payments EMV / Contactless Online/CNP Payments Wireless Device Mobile Acceptance Devices CREDIT DEBIT PREPAID Electronic Check Terminal PIN Pad + Contactless + Two-way + NFC + EMV
9 | © Copyright 2011 | First Data Corporation eCommerce
10 | © Copyright 2011 | First Data Corporation Always open for business eCommerce is a 24 x 7 business. Merchants need the most reliable, highly redundant payment processing partner in order to ensure that no order is ever lost due to system outage or error. Broader range of payment types online vs. POS To maximize their market, merchants are expanding the payment mix to Alternative payments including eCheck, PayPal™ and Google Checkout™. Expansion to International markets Merchants are expanding into European, Asian and Latin American markets. Need support for various currencies, various alternative payments while minimizing processing relationships. Merchants own the fraud liability eCommerce merchants assume 100% of the liability for fraudulent transactions. Delivering fraud management tools including Card Verification Service (CVV/CID), Address Verification Service (AVS) and 3D Secure Services (Verified by Visa, MasterCard SecureCode) enables merchants to manage interchange rates and liability associated with chargebacks. Flexibility to process in online or batch environment Depending on the merchant’s business model, batch or online authorization may offer the best solution at the lowest cost. eCommerce and Direct Marketing (Mail Order/Telephone Order) merchants have a unique set of payment processing needs and challenges eCommerce
11 | © Copyright 2011 | First Data Corporation Simple interactions between citizens or businesses and government -Check the status of paid or unpaid parking violations by vehicle registration number -Complete application to secure a building permit -Research higher education course offerings online More complex interactions including making a payment online - Pay unpaid parking violation or fine online - Pay building permit fee online - Pay course registration fees online Interface with third party vendors -System interfaces with parking meter hardware and software vendors -Issue and print the building permit online. -Interface with third party tuition software vendor for tuition payments E-government initiatives have moved beyond providing passive, informational web sites to developing the capability to support a variety of interactive, online transactions eCommerce
12 | © Copyright 2011 | First Data Corporation eCommerce Growth forecast of U.S. Consumers Online Activity Sources: eMarketer ; PhoCusWright, ; Glenbrook analysis; FDC analysis
13 | © Copyright 2011 | First Data Corporation Mobile Commerce
14 | © Copyright 2011 | First Data Corporation The next disruption in payments The Mobile Commerce Revolution… Payments 1.0 Cards 60’s / early 80’s Pre Plastic Magnetic Stripe Card and POS 1981 / 1995 Payments ’s to ‘00s eCommerce Chip & PIN, Contactless EMV New ways to pay New ways to be paid Ways to do more than pay Payments 3.0 ‘00s Pay at the Pump 90’s ‘00s Cards at QSR
15 | © Copyright 2011 | First Data Corporation Mobile Commerce How will your customers access the internet?
16 | © Copyright 2011 | First Data Corporation Mobile Commerce It’s been a question of when, not if…until now… Share by Major PlayerSmartphone Adoption Curve Javelin Research 2009-forward
17 | © Copyright 2011 | First Data Corporation Mobile Commerce - Smart Devices Devices enabled with the latest integrated, cloud-based applications and the most advanced security capabilities Mobile Devices Accept credit and debit payments using your smart phone or tablet Mobile Devices Accept credit and debit payments using your smart phone or tablet Smart Devices Global Terminals Accept virtually any type of payment, plus gift and loyalty cards securely with EMV and TransArmor ® solutions Global Terminals Accept virtually any type of payment, plus gift and loyalty cards securely with EMV and TransArmor ® solutions Multi-function Peripherals Take the PIN pad beyond debit acceptance to enable current and future technologies like contactless, offers and mobile payments Multi-function Peripherals Take the PIN pad beyond debit acceptance to enable current and future technologies like contactless, offers and mobile payments Contactless Terminals Allow your customers to check out with a single tap of a mobile phone, card or fob Contactless Terminals Allow your customers to check out with a single tap of a mobile phone, card or fob
18 | © Copyright 2011 | First Data Corporation Mobile Commerce Introducing Google Wallet Make your phone your wallet
19 | © Copyright 2011 | First Data Corporation A Revolutionary Partnership Google, First Data, Citi, and MasterCard collaborated to bring the latest innovation in commerce to life…together, we’re launching Google Wallet to millions of tech savvy consumers and merchants Initial Network Brand Terminal & Merchant Funding Support Value Added Services Initial Consumer Credit Accounts New Accounts/Apply Now Consumer Marketing Funding Lead Merchant Acquirer TSM/OTA Services (Citi & Google) Merchants/Contactless Readers Prepaid “Card” (by Money Network) Merchant Marketing Funding Welcome Kit Fulfillment Open Mobile wallet and offers platform NFC Android Handset(s) Google Terminal Specification Marketing Funding NFC Android Handset Distribution Consumer Marketing Funding
20 | © Copyright 2011 | First Data Corporation New Payment Options
21 | © Copyright 2011 | First Data Corporation Ecommerce and Mobile commerce require a comprehensive suite of payment capabilities including alternative payment types and advanced services designed specifically for ecommerce merchants to help grow their business while providing the payment options today’s customers expect and demand. These payment types and advanced services may include: New Payment Options –PayPal TM –Multicurrency processing –Bill Me Later®–Dynamic Currency Conversion –Google Checkout TM –Fraud Protection Tools –Acculynk PaySecure–Hosted Recurring Payments –eCheck/ACH–Robust Electronic Reporting Tools –Gift or Loyalty Cards –Level III processing –Retail/Card Present processing –Encryption and Tokenization Solutions
22 | © Copyright 2011 | First Data Corporation EMV
23 | © Copyright 2011 | First Data Corporation Global interoperable standard for chip-based payment cards created by Europay, MasterCard and Visa - Now maintained by EMVCo, LLC EMV payment cards improve security over magnetic stripe technology through an embedded computer chip. - Interacts with EMV-enabled POS terminal - Validates the card is legitimate, protecting against counterfeit cards - Cardholder verification authenticates the cardholder, reducing fraudulent transactions resulting from lost or stolen cards - EMV standards support either contact (insert) or contactless (tap) - Authentication can be either “chip & PIN” or “chip & signature” - Supports issuer options to allow offline authorization with PIN validation What Is EMV?
24 | © Copyright 2011 | First Data Corporation EMV $8.6 billion – Estimated total cost of fraud per year in the United States (0.4% of the $2.1 trillion card payment industry) 32% - Lost/Stolen, Counterfeit & Non-receipt fraud account for 32% of 2008 US fraud losses, representing approximately $2.9 billion 95% - EMV deployment in the US is estimated to eliminate 95% of lost/stolen fraud 90% - An estimated 90% of counterfeit card fraud could be eliminated with EMV deployment in the US Source: Aite Group, “Card Fraud in the United States” – The Case for Encryption, January 13, 2010
25 | © Copyright 2011 | First Data Corporation EMV Important dates to remember: October 1, Visa will expand its Technology Innovation Program (TIP) to the U.S. TIP will eliminate the requirement for eligible merchants to annually validate their compliance with the PCI Data Security Standard for any year in which at least 75 % of the merchant’s Visa transactions originate from chip- enabled terminals. To qualify, terminals must be enabled to support both contact and contactless chip acceptance, including mobile contactless payments based on NFC technology. Contact chip-only or contactless-only terminals will not qualify for the U.S. program. April 1, Visa will require U.S. acquirer processors and sub-processor service providers to be able to support merchant acceptance of chip transactions no later than April 1, 2013 October 1, 2015 – Visa intends to institute a U.S. liability shift for domestic and cross-border counterfeit card-present point-of-sale (POS) transactions. Currently, POS counterfeit fraud is largely absorbed by card issuers. With the liability shift, if a contact chip card is presented to a merchant that has not adopted, at minimum, contact chip terminals, liability for counterfeit fraud may shift to the merchant.
26 | © Copyright 2011 | First Data Corporation Fraud Protection
27 | © Copyright 2011 | First Data Corporation Fraud Protection $139 Billion lost to Fraud in For every $100 in fraudulent transactions, retailers incurred $310 in total losses 1 While EMV is a global standard that is proven to reduce card fraud, it isn’t the all-encompassing security remedy that the payments industry would like to have Additional layered safeguards are still needed—in particular for data security beyond the POS, and also for eCommerce and other card-not-present (CNP) situations Merchants are looking for solutions to lower their PCI compliance costs and responsibilities 1 LexisNexis, 2nd Annual True Cost of Fraud Study
28 | © Copyright 2011 | First Data Corporation 78% of breaches focused on stealing payment card data in breaches occurred between 2004 and with another 760 happening in 2010 alone In 2010, the average cost of coping with a data breach rose to $214 per compromised record 2 Merchants have spent more than $1B on PCI-DSS compliance 3 1 Verizon, 2011 Data Breach Investigations Report, Verizon Business RISK Team in cooperation with the U.S. Secret Service, Ponemon Institute, LLC, 2010 Annual Study: U.S. Cost of a Data Breach, March Letter to Bob Russo of the PCI Security Standards Council from the National Retail Federation, et. al., June 9, PCI Compliance requires significant – and on-going – effort and is no guarantee of security against a breach Fraud Protection Industry Trends
29 | © Copyright 2011 | First Data Corporation Fraud Protection -TransArmor Move burden of protecting payment card data to First Data using a multi-level defense The Solution Combines encryption and tokenization to protect data at every processing stage Complimentary to Card Authentication technologies Removes payment card information from merchant by replacing Permanent Account Number (PAN) with a ‘Token’ Maintains all the merchant’s business benefits of storing the payment card data without the associated risk Warrants Token against compromise and fraudulent use The Opportunity Reduce number of places where card data exists Point-of Sale systems CRM systems MIS databases / reports Remove burden of protecting payment card data from merchant Reduce Card Data Environment and PCI compliance efforts
30 | © Copyright 2011 | First Data Corporation What is the TransArmor Solution? TransArmor is a combination of encryption and tokenization technologies Secures the transaction with encryption Removes card data from the merchant environment with tokenization Works as a part of the payment transaction In most cases, does not require merchant to buy new systems
31 | © Copyright 2011 | First Data Corporation Summary
32 | © Copyright 2011 | First Data Corporation Join the Universal Commerce Revolution Please stop by the First Data table to receive more information on solutions to meet all of your Universal Commerce needs All trademarks, service marks and trade names used in this material are the property of their respective owner.
33 | © Copyright 2011 | First Data Corporation Thank you for your time and attention today!
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