Are New Payment Methods Worth the Investment for Merchants?
From Apple Pay and Android Pay finally gaining traction to merchants beginning to make the switch to become EMV compliant, this year has shown significant change for the payments industry — and it’s just getting started.
The changes stem from credit card companies wanting to reduce fraud. The only problem here? Many merchants haven’t yet switched to using the technology required to accept these new methods, which puts them in danger of shouldering liability for fraudulent transactions and losing customers who are looking for increased convenience and security in payments.
In reality, the benefits of adopting new payment technology outweigh the cost of transitioning because new payment technology will reduce fraud risk due to counterfeit cards and provide greater insight into shoppers.
The Cost for Merchants is a Worthwhile Investment
Purchasing new technology can be costly, but merchants should consider the costs as a necessary investment that will grow top-line revenue.
While Javelin Strategy & Research estimates the cost for implementing EMV technology nationwide will be $6.75 billion, the benefit will be reduced retail fraud that, over time, can also lead to lower transaction fees for merchants. By increasing security with EMV, customers will feel more confident and comfortable using their cards, thus enabling the advancement of other mobile technologies that will make shopping easier.
New Payment Methods Have a Strong Case for Security
BI Intelligence estimates that the United States accounted for 51 percent of global payment card fraud costs in 2013. By October 2015, merchants and the financial institutions that have made investments in EMV will be protected from financial fraud liability for card-present fraud losses for both counterfeit, lost, stolen and nonreceipt fraud.
While there’s nothing that can guarantee total security, EMV paired with payment technologies like single-use transaction tokens significantly reduce the risk of identity theft or fraud. Tokens are secure because they reduce the amount of valuable information that hackers can attain. If hackers get access to a token, they cannot see credit card numbers or banking accounts, so the damage that can be done is minimal.
As credit card fraud rises, there’s a strong case to upgrade to a payment system that works with a smartphone or tablet and accepts both EMV chip cards and tokens.
Merchants Can Better Understand Customer Behavior
The beauty of upgrading to new payment technology is that it gives merchants a fuller picture of their customers, with access to SKU data to fuel marketing initiatives. Merchants gain access to data ranging from average basket size to how much money loyal customers spend, helping them implement personalized marketing initiatives.
In addition, payment technology gives merchants greater control over customer management because loyalty programs can be tied to the merchant rather than the card issuer. Using purchase history, merchants can strategically tailor promotions to the customer in order to maintain a loyal base. This data can also be used to blast loyalty promotions in-app and through email or snail mail. Big data analytics empowers merchants to provide a more personalized shopping experience, keeping customers coming back for more.
The best new retail management systems increase a company’s operational efficiency and revenue. For merchants that can embrace the fact that payments are changing, the transition from old systems to new will be worthwhile.
Laurence Cooke is the CEO and co-founder of nanoPay, a comprehensive payments solution for retailers.
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