Card Present vs. Card Not Present

Before you accuse me of luring you to this post with the promise of a "present" and a "card" simply fill out the poll on the right and send me your email and shipping address. You'll get your "card present" enabling SAFETPIN device for free. Take a look at the right sidebar or above for more details.

A recent post by Ed Kountz at the Forrester Blog which made me realize that one of the biggest impacts of a utilizing a hardware vs. software device is simply this. Interchange.

HomeATM is the only company in the world which can provide e-tailers with a PCI 2.0 PED and thus "card present" TRUE PIN Debit rates. Why do I say true? Because our transactions are conducted in the same manner as a traditional retail location.

In addition, because our device is "ALREADY" PCI 2.0 PED certified, and employs DUKPT key management, we would effectively remove e-tailers from the scope of PCI DSS as no cardholder data is transmitted during the transaction.

Once the consumer has our low cost device, they become a "card present" buyer. They swipe their card, they enter their PIN and therefore the e-merchant benefits from not only dual-authentication, but also benefit from significantly lower interchange fees.

Example:

$200 order at Amazon. Card Not Present Rate: 2% + .25 cents = $4.25
$200 order at Amazon Card Present/ PIN Authenticated: = .75 cents. Savings = $3.50 (In this example an 88% savings!)

Now, add security, (PCI 2.0 PED) add convenience (isn't swiping the card 14 to 16 times faster than typing in your 14-16 digit card number?) deduct chargebacks, add familiarity (don't you swipe your card in the store) and our SafeTPIN s a compelling value proposition.

On the flip side, a software based PIN Debit application would still be a "card not present" transaction. The CNP PIN rate doesn't exist, but the EFT networks could create one. Of course, it will be exorbitantly higher than a Card Present PIN transaction. Remember when transactions were done with the device pictured on the left? Well unlike that device, HomeATM's SAFETPIN is built for the long run...and provides safer, more secure and thus lower rates.

So at the end of the day, our device (which is also EMV ready) is built with both the consumers, banks and merchants in mind. A software application is built with only the EFT Switches in mind. So it's no wonder the EFT switches are backing it. It's like Microsoft paying people to use Live Search with their Cashback program. The EFT switches are getting paid to push a software application. But what will be the public's uptake? And where's the benefit to the merchants? A tiny savings on Interchange...in exchange for a higher risk of liability in the instance of a breach? It's all interesting. I would think that the merchants would want a bigger savings and less risk, which is what HomeATM's PCI 2.0 PED provides. Wouldn't you? We'll see...

Here's the article showing the pent up frustration with Interchange Fees from the NRF, the NGA and NACCS. (The Big 3) They are all bricks and mortar organizations and are still throwing a fit about Interchange Rates. When will the Internet Retailer 500 band together and start demanding that they at least be afforded the opportunity to enjoy the rates the "Big 3" are unhapppy with.

Transacting Value: The Impact of Credit Industry Challenges on Card Marketing
Ed Kountz - April 6th 2009

Early on in this blog, I predicted that 2009 would see an increase in the number and stridency of calls for reforms to the U.S. credit card market, particularly in terms of types and amounts of acceptable fees. The Federal Reserve’s December 2008 card industry changes certainly made clear that this was happening. But now, the long-simmering brew appears to be spreading.

Two recent events serve to validate the premise:

--The National Retail Federation (NRF), the National Grocers Association (NGA) NACCS Angle Against Interchange. Recently, the NRF, NGA and NACCS -- together, the big three of retail associations -- recently held what their release billed as a “telephonic press conference” announcing the creation of “unfaircreditcardfees.com,” as well as an associated public interest campaign, to encourage consumers to press legislators for reforms to the “unfair and hidden credit card fees called “interchange””. This approach muddles the issue, in my opinion, as it uses language that ties the interchange dispute to consumers’ raw emotions at the account-fee issue, without identifying the (basic but relevant) differences in those topics. Whatever the ultimate impact, the directness of the appeal is impossible to miss.

--Senate Banking Committee Approves Card Reforms. On March 31, the Senate Banking Committee gave one-vote approval to measures designed to rein in certain credit card industry practices. The bill would include most of the Federal Reserve Rule changes passed in December, such as bans to universal default and double cycle billing, but would add fee restrictions and protections for borrowers under 21. Bill sponsor Chris Dodd said he was going to work over the recess to garner “broad support” for the effort.

As recent delinquency trends suggest, economic conditions continue to impact credit card usage and growth at a macro level. But increased scrutiny of long-held credit card industry practices will add additional pressure to an industry already feeling the strains.

Continue Reading at the Forrester Blog for eBusiness & Chennel Strategy Profressionals

PIN Debit, PCI 2.0, PCI DSS, NACS, NRF, Forrester Research, card present, card not present