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“There are as many best practices around fraud prevention and detection to be managed as there are around compliance,” says Manten.
Without question, compliance can be just as complicated for retailers to manage as fraud detection. Data security standards such as PCI and Sarbanes-Oxley affect not only retailers but the vendors with which they do business. Making sure that all touch-points the retailer has with other companies are secure is essential to creating consumer trust in e-commerce, according to Netgiro’s Bäck.
Of concern is that hackers can find their way into the retailer’s database where customer account information is stored through vendors with which the retailer does business by exploiting holes the vendor may have unwittingly opened in their networks through the addition of an application, for instance, or adding another page to a web site, or the entry of a new employee access code.
“Data security is more complex and has a more extensive reach beyond the retailer’s business,” says Netgiro’s Bäck. “Publicly traded retailers even have to worry about Sarbanes-Oxley.”
Sarbanes-Oxley (SOX), which went in effect in 2002, establishes external auditing standards to ensure, among other things, data security standards. PCI was created by Visa Inc., MasterCard Inc., American Express Co. and Discover Financial Services to protect cardholder account data stored by transaction processors and retailers that hold that information for use in chargeback disputes. The standard requires processors and retailers to meet certain minimum standards of security for storage, processing and transmission of cardholder data over their networks.
Because Netgiro provides hosted payment applications as one of its offerings, it stores transaction and customer account data, thereby sparing retailers the cost and time to conduct data security audits. “It can be very cost-inefficient for a retailer to have to perform security audits on its business partners in addition to itself,” says Bäck. “We can remove those inefficiencies by centralizing compliance with security standards for the retailer.”
Although PCI is a data security standard it is really more a baseline for overall data security. Retailers can benefit immensely by receiving reports from their processor that benchmark their data security performance against that of their peers.
“By providing merchants with best practices information, we are able to give them insight into operational and policy decisions that retailers can make to improve their overall performance,” says Paymentech’s Worch. “The same goes for interchange and chargeback management. Retailers should expect their processor to not only understand their business but to have deep experience with similar merchants in their industry.”
Caution in choosing a processor becomes especially important for retailers expanding internationally. There are many overlooked costs associated with cross-border sales. One of the more important is the cost of currency conversion during settlement. This fee is a percentage of the settlement amount and usually runs north of 1%, according to Bäck.
“If the retailer has local suppliers or employees to pay in another geographic market, it makes more sense for them to deposit the funds generated from transactions there directly into a local account rather than convert them into another currency, as it can save them money,” says Bäck.
Chase Paymentech’s international processing capabilities provide its merchants with significant advantages. Chase Paymentech offers multi-currency products allowing merchants to sell products in 150 currencies and be settled in a foreign currency.
“For merchants with significant operations outside the U.S., it makes no sense to convert cross-border sales revenue into U.S. dollars and then pay to convert it back again to pay suppliers in the same geographic market,” Chase Paymentech’s Worch says. “This is a tool that lowers the overall costs of acceptance and that’s something retailers ought to be looking at when selecting a processor.” The savings from such a move can be substantial depending on the amount of revenues generated.
Chase Paymentech’s international products also allow retailers to support cross-border sales by being able to price items in local currency as opposed to dollars for every geographic market in which the retailer does business. This eliminates having the shopper perform their own currency conversion.
“The customer does not necessarily want to perform currency conversion calculations at the point of sale. There is a comfort in the knowledge that the transaction will be settled in their local currency, as credit card issuers now often charge the cardholder a currency conversion fee,” says Worch. “This is a helpful convenience for the shopper.”
Chase Paymentech’s suite of alternative payments also offer a competitive advantage to retailers. “In addition to the more established payment types, we offer fully integrated acceptance of PayPal, BillMeLater, Green Dot and electronic check solutions for our customers,” says Paymentech’s Worch. “This gives retailers the opportunity to customize their payment solution to fit their financial and customer service goals.” Merchants increasingly are accepting various alternative payment solutions as a way of reducing transaction expense, chargebacks and shopping cart abandonment.
Another competitive advantage is offering local payment options. One of the more popular payment types emerging outside the United States is online real-time bank transfers from a shopper’s bank account, according to GlobalCollect’s Manten.
These payments connect a shopper directly to his bank account when clicking on the payment icon on the retailer’s site. What makes this attractive to retailers is that they eliminate the risk of fraud since the shopper must identify himself to his bank using a password or another identification method. Funds are then transferred to the retailer immediately.
“These are low-cost, no-risk transactions for the retailer because they are non-reversible,” says Manten “We have seen several of these types of options launched in Europe the past couple of years.”
Given the rapidly changing payments landscape it is no wonder processors offer such extensive services to help retailers keep pace. “Managing payments is becoming increasingly complex,” says Worch. “Selecting the right payment processor is about getting access to the tools that lower the overall cost of acceptance and allow the retailer to enact best practices that can help them better manage their risk.”