The Mobile Wallet and the Tap to Pay System

We all have our mobile phones today, and, like our wallets used to do, the phone holds virtually everything we need: pictures, contacts, email, even bank account information. And now smartphones are trying to take one more thing out of that bulky wallet: payment cards. The mobile phone is on the cusp of becoming a mobile wallet, among all its other functions. The only thing you need to be concerned about is that you’ll never be able to use the I-forgot-my-wallet excuse again!

"The Mobile Wallet"

What is a Mobile Wallet?

A mobile wallet is also referred to as a mobile payment. Mobile payments allow you to use your phone to transmit the payment data from you credit card or debit card to the store with just a tap on the processing terminal where you would normally swipe your card.

 

The technology emerged in 2005, piloted by Nokia, and was different from payment via SMS text or through direct billing. This type of mobile wallet or mobile payment allows you to use Near Field Communication (NFC) technology to allow a special device in the smartphone to send waves to a receiver in the merchant’s payment terminal. This receiver gathers the information and transmits it to the computer to read and process it.

 

The technology for mobile payments is already in place and being used by some European countries, although their uses include paying for public parking and public transportation. You may also already use this technology if you have an EZPass for your vehicle on toll roads.

 

The proposed mobile wallets would feed off your bank account or a credit card account, and not off of a cash fund you place on the device. The mobile wallet gained a lot of ground after the initial testing done by Nokia, and now many other phone companies are rolling out smartphones with the capabilities of mobile payments.

 

Research in Motion, Google Android and LG are some of the first to announce that their upcoming phones would be capable of mobile payments using NFC of merchant to consumer transactions and by using debit or credit card information. Additionally, the manufacturers of the payment processing terminals have begun to catch on to the trend, and are now rolling out terminals that have both NFC capabilities, as well as ordinary swipe card technology. 2012 is expected to be an exciting year for mobile wallets and NFC technology system.

 

How does this help me?

 

2012 is the year when merchants should begin to get the system in place for the mobile wallet system. Ensure that your payment processor is capable of handling any changes in payment systems, and that your own terminals are up to date so that if a customer comes in and wants to just tap to pay, you are able to serve that person.

 

Everyone will benefit from this technology, especially after the initial challenges of changing systems. The mobile wallet is infinitely more secure than the credit card for both the consumer and the merchant. The card information stored on the phone can be removed within seconds of the phone being reported lost or stolen. This means less fraudulent purchases for the merchant and less hassle for the consumer. Additionally, the technology ensures security by sometimes requiring a PIN or a password to access the system and also uses waves that are encrypted and generally not readable except from a very short distance.

 

Another example of how this will help both merchants and consumers is that the smartphone has the capability to not only use the credit card information but also any coupons and loyalty card information to efficiently process the transaction giving the consumer the maximum benefit and the merchant the easiest transaction. Then all information can be stored in the computer and merchants can use loyalty card usage and coupon usage information to help them improve sales and customer satisfaction.

 

Finally the advent of NFC technology and its use as a mobile wallet will change the credit card industry and the payment systems industry, with most of the changes being something your providers will need to adjust to quickly. Currently the mobile wallet is “operator-centric,” meaning that the phone company and the consumer operating the phone are in control of the use. The credit card system will not face so many changes; it will merely have to be more prepared for use of wireless and internet transactions. Essentially the mobile wallet removes the need for swipe cards, but not the processing fees associated with it. Credit card companies will need to adjust to this change.

 

How can we help?

 

While you and your customers ponder the use of the mobile wallet, we offer a mobile payment system which may help you adjust to the idea of phones being a method to convey currency. This handy system allows you to turn your smartphone into a payment processing terminal safely and securely. Contact us today to discuss how you can prepare for the new technology and how it may affect your business.

 

When all other players in the system are changing, you can bet that your payment processor will need to change too. My POS Depot is watching this emerging technology and is excited about the changes that are occurring. As a processor we understand that the merchant, and the consumer, and the credit card company are all shifting positions, and the payment system processors will need to be prepared to shift too. As the specific use of this technology emerges and the players begin to take their places, My POS Depot will be adding mobile products and solutions for merchants to help them move forward without interrupting business.

The Impact of the Durbin Amendment on Everyday Merchants What is the Durbin Amendment?

The Durbin Amendment is an addendum to the Dodd-Frank Financial Reform and Consumer Protection Act. The Act has the overarching goal of consumer protection while promoting economic growth. The Durbin Amendment promotes these goals through capping the interchange fee for debit card transactions.

An interchange fee is the amount paid between merchants and banks to facilitate a consumer using a swipe card at the merchant’s business. This fee is used to cover administration and fraud prevention costs. The Durbin Amendment caps the interchange fee for debit cards at 21 cents plus 0.05% of the transaction. Merchants pay this fee for the privilege of having customers use their debit cards to pay for merchandise.

The electronic payments system is an economy in itself. This means that one factor cannot change without changing all other factors. There are consequences of changing the debit card fees, and some of these consequences will greatly affect the way you, the merchant, does business. These changes will span from debit cards, through gift cards, credit cards, and cash payments.

What merchants can profit from these changes?

The Durbin Amendment is promoted as being beneficial to merchants because it could lower the cost of doing business. The Durbin Amendment caps the debit card interchange fee so that the cost of having a customer pay for his or her purchase with a debit card is lower than the cost before the Amendment. This theoretically allows the merchant a higher profit margin.

For the savvy merchants, the Durbin Amendment allows them to lower prices and draw in new customers without changing their profit margins. If the debit card fee is set at a certain price then some merchants may be able to pass on savings to their consumers.

It falls upon each business owner to ensure he or she is saving money. These owners are calling providers to find out about changes in pricing methods resulting from the new Durbin Amendment. To try to take advantage of these new lower debit fees, merchants are out looking for new contracts with processing providers. For merchants, switching providers or shopping for new contracts can be the best way to profit from the fee restrictions.

What difficulties will arise from the Durbin Amendment that merchants should be aware of?

The Durbin Amendment has created new challenges for merchants. Merchants have previously always born the cost of consumers using debit or credit cards, through processing fees from the banks. With the new restrictions on fees for swipe cards, consumers are beginning to bear the costs of using a debit card to make purchases, through changes in their checking account fees.

The Durbin Amendment is only intended to change caps on debit card interchange fees, and not on credit card interchange fees. Because of this, banks are dis-incentivizing debit card use, and attempting to promote credit card use. So the lower debit card interchange fee may have less impact, because debit cards could have less use. Which means some merchants will be hard pressed to benefit from the Durbin Amendment.

The merchants who may face difficulties will include both large and small companies. Any company which processes transactions with a low dollar amount, such as coffee shops, small stores, cafes, and similar businesses, may find an increased cost, despite the debit card processing fee cap. Whether a large business or a small one, merchants with low ticket prices may find debit card usage has an increased cost of approximately eight cents per transaction.

Additionally, merchants may find they have more consumers avoiding using their debit cards to avoid potential bank fees. Merchants may see either a higher rate of alternative payments (credit card, cash, gift cards) or may see less purchasing occurring. You can read an impartial in-depth analysis of the challenges your company may face here.

Generally, merchants can be proactive to prevent losses and common pitfalls in the changing electronic payments market. To avoid selling less, merchants should make using any form of alternative payment easy for consumers. My POS Depot provides services to help you to use credit cards and gift cards to your advantage, and avoid losing sales.

How can My POS Depot Help the Merchant Benefit?

The Durbin Amendment is only just beginning to take effect. It has been in place for less than two months, and so opportunities to benefit from this change in legislation abound. Debit card usage is still on the rise and more and more small businesses are trying to maximize debit transactions.

Small businesses who want to benefit from the Durbin Amendment, and to lower costs can do so by finding business payment processors which will be able to explain how their pricing was adjusted to fit the Durbin Amendment. My POS Depot has changed their pricing system and representatives can help small businesses and merchants to understand and maximize the positive effects the Durbin Amendment could have on their business transaction processing.

http://www.myposdepot.com
Grant Rowlands
National Account Executive
P: (866) 480-2433
C: (215) 421-3333
F: (215) 494-0368

THE TRANSACTION PROCESS

Grant @ myposdepot.com

STEP #1
Payment
A cardholder buys goods and/or services from a merchant and presents a card as a form of payment

STEP #2
Authorization
Merchant swipes card through terminal, enters amount of transaction and sends information to Merchant
Acquirer for approval via the front-end network. The transaction is authorized or declined in seconds. If
the transaction is approved, the terminal responds with an “authorization code”, which is 6 digits, that is
printed on the sales receipt. All transactions and its associated authorization codes are stored in a
“batch”.

STEP #3
Batch out
At the end of the day, the merchant performs a function on their terminal for closing called “batching
out”. The batches are electronically sent to the Merchant Acquirer for settlement through the back-end
network. This can be performed manually or by the terminal being set to “auto batch”. A settlement
report is printed when the terminal “batches out” showing the totals by all card types (Visa, MC, Amex,
Discover, etc.)
STEP #4
Settling funds
The Merchant Acquirer will credit the merchant’s deposit account for the net amount of sales (total sales
minus fees) in 48 to 72 hours. The Merchant Acquirer’s settlement vendor, in our case Global Payments,
sends transaction information to MasterCard and Visa on a daily basis, which will reconcile the
incoming information and route them to the appropriate card issuers (bank) overnight.

STEP #5
Billing cardholder
The card issuer (bank) will post the transaction to the cardholder’s account for payment

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