Retailers need to help themselves in the payment wars. The
solution to high swipe fees; charge backs; reversals, and monopolistic
practices of the financial services industry is creating a new form of payment
acceptance that retailers control. Some national chains attempted to do this
with the CurrentC approach, a disaster in the making because it limits consumer
choice (see http://paymentnetworks.blogspot.com/2014/10/why-retailers-cant-build-payment-systems.html).
Retailers must let consumers choose
their payment method but let the marketplace influence consumer payment choice by
controlling the pricing of payment methods. If retailers let the payment services industry
cram the EMV boondoggle in their places of business then they acquiesce to
increased costs and lower margins after spending precious capital improvement budgets
deploying the boondoggle or a haphazard response to the boondoggle.
Retailers now let the payment services industry dictate the
equipment to originate payments in stores.
Retailers need to design payment equipment with payment system
architects and point of sale (POS) manufacturers. With custom built devices and new standards
created by retailers and given as specifications to the POS equipment
manufacturers, plastic with a stripe or a chip will be an overly expensive
device that consumers rapidly abandon.
Retailers can piggy back the current requirements and
specifications to their new device and surcharge for plastic (or discount for
non-plastic) card payment by use of easy configurable settings on their custom
POS device. Further, the POS device must easily allow or disallow certain
payment options all together. If acceptance of credit card transactions is too
expensive then retailers can configure the device not to originate payment
without a personal identification number (PIN).
Configuring the device to accept the currently accepted
methods of payments though will not give retailers the real advantage in the
payment wars. The design of the POS device must accommodate payment evolution
and not just telephone currency, digital currency, and e-checks. The device
needs to accept non-chained based digital currency issued by independent
issuers of digital currency. The device must be configurable to lower risk of
payment acceptance by authenticating various elements of the payment data in
real time.
For example a customer uses an e-check application on their
phone. The POS device communicates the amount of the purchase to the e-check
application. Once the phone user authorizes the use of the e-check application
(by a method dictated by the phone and its user) then the payer application creates
an electronic signature on top of the e-check already signed with the issuing
bank’s public key. Interception of this data by an attacker is worthless
because the payer signature uses hashed data built from data within the phone (also
stored at the financial institution), the geo-code, and the local time (sent
unencrypted with the message). The FI
accepts the check in real time (after validating the signature) and settles the
money to the retailer bank on the same day. The FI notifies the retailer of the
action in real time. The FI does not need an acquirer, merchant number, or to
pay a swipe fee. The POS device routes using the routing number
stored within it (just like use of the bank identification number (BIN) used by
payment cards acceptance devices today).
If retailers architect a good solution then a POS device and
electronic wallet soon will negotiate the cheapest payment option for both the
retailer and the consumer (based on the configuration of both devices) and the
retailer or the customer may not necessarily know what method originated the
payment especially if actually resides in the same consumer account.
