This year, the holiday season is coming on the heels of two major payments-related events: the EMV liability shift and the Samsung Pay launch. Understanding these events and their ramifications for merchants, customers and financial institutions is crucial for retailers’ success this holiday season.
As of October 2015, the United States has shifted fraud liability to whichever party – the merchant accepting payment or the customer’s bank issuing the payment card – hasn't upgraded to the EMV standard. Practically, this means that merchants might have to upgrade their point-of-sale terminals to accept new cards or face the risk of fraud expenses for not implementing new terminals to accept the more secure chip-and-sign method.
Not only should merchants be ready to accept EMV-compliant cards, they should be prepared to encounter consumer confusion about this new payment standard. In addition to integrating necessary acceptance software and hardware, merchants must brief their employees about what to expect and how to serve customers who are unfamiliar with the new card system. Merchants should also be ready to contend with the challenges of not upgrading to the EMV standard. It's probable that smaller merchants – those most likely to avoid costly EMV integrations – will be targeted by fraudsters.
EMV-compliant cards do not offer additional protection against card not present (CNP) or online fraud. Online enterprises (i.e., companies with an e-commerce offering) can expect fraudsters to specifically target them. Merchants of all sizes should be ready to efficiently and presciently identify fraud to avoid expensive holiday fiascos.
Security woes, consumer confusion and acceptance concerns will also pose challenges for merchants with regard to mobile payments. In the last year or so, Apple Pay, Android Pay and now Samsung Pay have launched, each with their own adoption and implementation requirements. Consumers eager to pay via mobile wallets are confused about where these mobile payment methods will be accepted, while merchants are unsure of which e-wallets to integrate, as each solution is tied to a specific device or operating system and requires its own acceptance mechanisms. Samsung Pay, for instance, is compatible with magnetic stripe card readers, but other e-wallets require NFC or contactless terminals.
The challenges of accepting new payment standards and technologies, integrating the software and hardware to do so, and ensuring that employees and consumers alike understand how these new systems work will be one of the more pressing issues merchants face this holiday season.
Another issue merchants are grappling with is cross-border expansion. The age of e-commerce is enabling merchants of all sizes and industries to reach global audiences, but it's also creating the need for more complex customer experience strategies. The preferences of consumers differ from culture to culture, from the payment method they like to use to the products they like to buy to the safest way to secure their data.
Even the major shopping holidays differ from country to country. While Americans might want to buy on Black Friday using their PayPal account, a British consumer is more likely to wait until Boxing Day for major shopping exploits, while Chinese shoppers tend to buy earlier in November for Single’s Day with their Alipay e-wallets.
Navigating the multiple international payment methods, cultural needs and basic technologies needed to integrate e-wallets and foreign credit card schemes are ongoing challenges. This holiday season especially, merchants will be struggling to make shopping seamless for both cross-border customers and local shoppers adjusting to using chip cards and e-wallets.
Oren Levy is the CEO of Zooz, a payments platform.