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What is Residual Income?

If you understood residual income, you would walk through a brick wall to get it. -Art Jonak

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Fun fact!

It has begun

LOS ANGELES TIMES:

Samantha Masunaga 
Contact Reporter

Starting Thursday, most shoppers will no longer be swiping their new credit and debit cards into merchants' card readers to make purchases. They'll be inserting them instead — chip side first.

The new pieces of plastic that banks and other card issuers have been sending to customers contain a tiny metallic chip designed to reduce counterfeiting, just as similar Europay credit cards have cut such fraud throughout Europe.

The technology in the microchip makes it more difficult for criminals to forge fakes and easier for merchants to authenticate cardholders.

On Thursday, the credit card industry will add bite to its rollout by shifting liability for covering counterfeits to the party that has not adopted chip technology — either the merchant or the credit card issuer.

"To the extent that this cuts down on fraud, it's probably a win for everyone," said Michael Simkovic, an associate professor at Seton Hall University School of Law.

For merchants, this means ensuring their sales terminals accept the chip technology and contain a slot in their readers for the new cards. Unlike a card swiped quickly, a chip-enabled card must remain in the reader until the machine OKs its removal.

That longer processing time has made some customers uneasy. At a Home Depot in Burbank, Robert Montanez said he worried it would give criminals a greater opportunity to steal his data if the sales terminal were hacked.

About 70% of credit cards will be chip-enabled by the end of the year, said Doug Johnson, senior vice president of payments and cybersecurity policy at the American Bankers Assn., the leading bank trade group."I don't trust it as much," said Montanez, 39, of San Fernando. "I leave it in way too long. The swipe is faster."

Prepaid cards also are moving toward chip technology, but at a much slower rate because of a wider variety of offerings, lower value limits and less risk for merchants and card issuers, said Brian Riley, a principal executive advisor at research firm CEB TowerGroup.

Some prepaid cards, such as those for international travel, already carry the chip technology, but many others, including low-value branded gift cards and incentive cards, will probably never convert to EMV, an industry term named after the three companies that created and developed the chip card in the 1990s: Europay, MasterCard and Visa.

The standard magnetic stripe cards will probably remain in circulation for years, said Seth Ruden, senior fraud consultant for the Americas at ACI Worldwide, a payment systems company. Full compliance on the merchant side won't happen until 2017 when automated fuel dispensers are also required to have payment terminals that read the chip cards.

The change comes as card fraud has more than doubled in the U.S. over the last 15 years while falling in much of the rest of the world where chip-enabled cards have been in place for much of that time.

The cost of fraud in the U.S. rose to 12.8 cents per $100 last year from 5.6 cents in 2000, according to the Nilson Report, which analyzes the global card and mobile payment industries. Last year, the U.S. sustained 48.2% of the world's card fraud.

The Federal Reserve further broke down some of these numbers in its 2013 triennial study of non-cash payments in the U.S.

The Fed calculated a total of about 13.7 million fraudulent credit card transactions in 2012 totaling $2.3 billion in charges. About 52% of those transactions involved cards that were presented to retailers for purchases; the rest were attributed to online and other fraud where the card isn't used at a store.

It is that on-site fraud that the chip technology is designed to prevent. About two-thirds of the fraud against Visa involves counterfeit cards, said Stephanie Ericksen, vice president of risk products at Visa Inc.

Though the chip technology won't end all types of credit card fraud, experts say it's a needed first step.

"We're hoping that once we get the magnetic stripe out of the equation that we'll properly secure the environment," Ruden said.

Throughout the 2000s, chip cards were rolled out across Europe, and Britain fully implemented EMV technology in 2006. Counterfeit fraud in Britain dropped to 10% of all fraud from 26% over the decade ended 2013, CEB TowerGroup said.

Even though chip-enabled cards are difficult to counterfeit, anti-fraud experts would like to eliminate that possibility altogether. Many already are looking at mobile payment systems as possibly offering better protection.

Using a cellphone also could curtail the online fraud that chip cards can't touch, said the ABA's Johnson. Online credit card fraud has skyrocketed to 67% from 29% of all card fraud in Britain over the 10-year span through 2013, a CEB report found.

"What we're seeing in the U.S. is moving more toward mobile payments," Riley said.

For now, though, the chip card will become the predominant piece of plastic in consumers' wallets.

Large retailers such as the Home Depot Inc., Target Inc. and Wal-Mart Stores Inc. said the transition to sales terminals for chip cards is complete or on track to finish by Thursday's deadline.

But many small businesses said they aren't ready.

According to a Wells Fargo/Gallup survey in July, 49% of small-business owners said they were aware of the looming shift in liability. But only 31% said their current readers accept chip cards, and only 29% said they intended to make the change before Thursday. One-fifth said they aren't planning to upgrade at all.

Cost is one factor. Prices for the new readers alone range from $50 to $600.

Madelyn Alfano would have to pay up to $25,000 to update the sales terminals in her 10 Maria's Italian Kitchen restaurants throughout the Los Angeles area.

She said she will probably get one or two readers for each location in the next few weeks, which could slow down daily operations since the staff usually operates from five sales terminals at each restaurant.

"It's another expense, another cost of doing business," she said.

Target's bill was $100 million to install the payment devices, update the software and issue new credit cards with chips, said spokeswoman Molly Snyder. The National Retail Federation trade group estimated that across the nation, the cost of the new readers, software and other installation costs could hit $35 billion.

Retail associations also pointed out that the U.S. adoption of chip technology is not quite as it was in Europe.

In Europe, customers make purchases by inserting their chip card and punching in a personal identification number, or PIN. U.S. banks can issue cards that require either a signature or a PIN. Retailers and security experts said the chip-and-PIN is more secure because anyone could scrawl a signature with a lost or stolen chip card.

"It's like locking the front door and leaving the back door wide open," said J. Craig Shearman, spokesman for the National Retail Federation.

A PIN, however, isn't foolproof.

"If you're entering your PIN number in more places, there also are more opportunities for it to be stolen," said Seton Hall's Simkovic.

samantha.masunaga@latimes.com
Twitter: @smasunaga

U.S. Mobile POS Installations Forecasted To Reach 17.4 Million by 2019

U.S. Mobile POS Installations Forecasted To Reach 17.4 Million by 2019

By Kevin Woodward

Installations of mobile point-of-sale devices in the United States and Canada will hit 17.4 million in four years, forecasts 451 Research in its “Mobile Point of Sale: Smart Devices Earn a Growing Share of Global Payment Acceptance” report released Thursday.

If it proves accurate, that forecast will yield a 155.9% increase from the current base of 6.8 million devices. On a compound annual growth basis, the market is expected to grow 21% over each of the next five years.

Globally, the forecast for growth is more pronounced, with expectations of 54.03 million mPOS devices by 2019, compared with 13.3 million now, a 306.2% increase.

451 Research defines mPOS as a smart phone, tablet, or other consumer-oriented mobile device that functions as a point-of-sale terminal and enables payment card transactions via a card reader.

A number of factors influence the forecast. “At a high level, one of the biggest drivers is increasing card penetration, and that’s primarily in emerging markets,” says Jordan McKee, the report author and senior analyst for 451 Research’s mobile payments coverage. As more cards are issued and placed in consumer hands, the more demand that creates for places to use them, he says. “Mobile POS has emerged as the bridge between the card base and the point of sale.”

Another factor is that merchants are finding new ways to use payments, often outside of how they traditionally might use them. One example is e-commerce giant Amazon.com Inc.’s Local Register, a mobile POS service it launched in 2014. Another is Shopify Inc., an e-commerce platform company, which began offering an mPOS product in 2014, too.

“You even see it in retail where merchants have leveraged mPOS to bridge the gap between the virtual and physical stores,” McKee says. He cites as an example grocer Harris Teeter, a Kroger Co. subsidiary, which offers online ordering that can be paid for on a Web site or upon pick up at the store via an mPOS device. “We’re starting to see retailers look more closely and integrate [mPOS devices] more holistically.”

Tablet POS devices, in particular, are finding favor among retailers, he says. Providers such as First Data Corp.’s Clover, ShopKeep.com Inc. and Powa POS from Powa Technologies Ltd. are making significant inroads with retailers. “We really see tablets as the next frontier for the point of sale in the small and mid-size space.”

It's always exciting to see one of our partners growing.

Electronic Payments lands $5 million, expands facilities

Electronic Payments Inc. secured $5 million in growth funding from Super G Funding to ramp up its strategic initiatives. "Since November 2006, our processing volumes have increased organically to over $6 billion with nearly 117 million transactions processed last year," said Michael Nardy, Chief Executive Officer of Electronic Payments. He noted that the company boards more than 750 new merchants monthly, and access to capital will help ensure the continued delivery of cutting-edge technology.

"Mike’s operation was one of the few of his size that was debt free, profitable and has well below average merchant attrition," said Darrin Ginsberg, CEO of Super G. "We were able to put together a great program for EPI that will be their backstop for any time-is-of-the-essence transactions such as buyouts, acquisitions, and will be there to fund their fast growth trajectory."

In another development, Electronic Payments reported that the success of its Clover Placement Program and other POS ventures necessitated its expansion into a facility dedicated only to deployment. Located across the street from the regional FedEx hub, the new facility in Calverton, N.Y., boasts 4,600 square feet, increasing by four times the amount of space Electronic Payments is able to use for deployment and provisioning for its POS and terminal programs.

from Greensheets

Black Friday news from EPI

Black Friday is closer than you think! As the countdown to the biggest grossing holiday season begins, your merchants will need to be ready for the impending sales blitz. According to a recent National Retail Federation (NRF) survey*, the average consumer will spend $172.14 on gift cards, with total spending forecasted to reach $31.74 billion. In preparation, we have created a new Holiday Countdown feature on eGiftSolutions.com to help your merchants stay ahead this holiday season.



eGiftSolutions offers fully customizable gift cards and gift card holders to suit the unique needs of every merchant. Orders received by Thursday, October 1st ensure that gift cards are received well in advance of Black Friday.

Contact Tara Kelly, eGiftSolutions Coordinator, at (800) 966-5520 – Option 7
to start placing holiday orders for your merchants.