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While credit card rules that favor consumers necessarily require more technology to protect merchants against friendly fraud, processors of electronic checks note that they offer a payment option that protects merchants and does not require additional steps. “The e-check is less vulnerable to consumer fraud because the consumer has to go down to his bank and sign an oath in front of a bank officer that he did not perform the transaction,” Kerlin says. “Criminals do not go down to banks, sign affidavits and take oaths.”
Checks as a preference
E-check guarantees are not automatic, however. Merchants can choose the level of guarantee and authorization they want to pay for with checks. Each has a different need and each must weigh the costs and benefits. “Every merchant has a different need and level of capability,” says Shirey of Paymentech. “In a high-value order with anything suspicious about it, the merchant will want full authentication and i.d. verification,” he says. With Paymentech, merchants can choose the service they want by transaction, setting certain parameters that trigger a higher level of authorization.
While checks still constitute only a small minority of online transactions, web merchants have been receptive to the notion of accepting checks, processors say. “We point out to merchants that there is a large group of people who prefer to pay by check and will continue to do so,” says Certegy’s Whitfield. In fact, an estimated 37% of the adult population of the U.S. do not have credit cards and online shoppers probably mirror that level, researchers say. Certegy also encourages online merchants to look at the total cost of accepting credit cards, including not only the discount fees, but also chargebacks and the internal costs of reviewing chargeback data. “We tell them: ‘Understand what you’re paying for credit card transactions and understand the people you are not reaching if you’re not accepting checks,’” Whitfield says.
Whether processors are authorizing checks or credit cards, the goal is the same: reducing online payment fraud to a level equal to offline. “That’s the golden vision and definitely what we’re trying to do,” says Renzulli of First National. “It’s going to mean a huge benefit for online merchants: more advertising of the web, more upselling and a lot more web shopping.”
CCH places its bets on the future of online sales tax
As it evolves, online retailing is becoming more like real-world retailing. Retailers are trying to make the shopping experience-from finding products, to cross-selling to checking out-more like the store experience.
That is even likely to extend to one area where there has been huge disagreement about whether the web should reflect store-based retailing-the collection of sales tax.
Taxation has been a hot topic almost since the commercialization of the Internet. One camp is adamantly opposed to any kind of taxation-even sales tax-because, they contend, taxation will kill a still-developing technology. Another camp is equally strong that Internet commerce should be taxed like other commerce, especially, they argue, since the web is not just creating new transactions but is diverting transactions from other channels.
CCH Inc., provider of tax information, is betting on the future of sales tax. Last year, it acquired esalestax.com and is offering its automated tax calculation product integrated into a retailer’s payment process. When a checkout transaction occurs, the retailer’s server contacts the CCH server, which then calculates the sales tax, based on ship-to address, and sends the amount back to the retailer. Every time the customer updates the shopping cart, the retailer’s server contacts the CCH server for an update. Round trip on a tax calculation takes about 0.6 seconds. All data is moved under SSL encryption. “We have very elaborate security,” says Mike Blandino, CCH’s chief technology officer.
CCH’s acquisition is clearly a bet that sales tax will become part of doing business on the Internet. To that end, it has submitted esalestax.com’s system to the Streamlined Sales Tax Project as a solution to how to sort out the tax demands of 7,500 jurisdictions. The Streamlined Sales Tax Project is a coalition of 30 states and the District of Columbia that is working, as its name implies, to simplify taxes for online sales. With CCH’s software available to instantly calculate sales tax from all jurisdictions, CCH believes the role of the Streamlined Sales Tax Project should be to simplify the definitions of products rather than simplify the taxes. “What is really needed is universal product definitions,” Blandino says. “We need universally accepted policies and practices.”
In addition to calculating the sales tax applicable on each transaction, CCH also automatically records all sales tax collected for each jurisdiction, provides the forms for filing and facilitates payment of tax through the ACH. It also maintains all the detail data so retailers can drill into the data to understand what they owe, why and to whom.