Merchant year in review: Trends that defined 2012
Merchants
had a lot to contend with in 2013, from an explosion in mobile payment apps, to
EMV adoption, to new tax forms.
Did
you have trouble keeping up with all the changes in the payments industry in
2012? Here's a quick look back.
Mobile
payments: There's an app (or a dongle) for that
The
field of mobile payment technology flourished in 2012 as multiple vendors
introduced new (or newly improved) systems designed to make it easier for small
merchants to accept payments wherever and however they choose. The new systems,
competing with those from current providers such as Square and GoPayment, employ
a variety of technologies to complete the transactions, including near field
communications (NFC), quick response (QR) codes and even GPS.
-
Introduced in
March, PayPal Here enabled merchants
to process credit card payments via a card reader or phone camera. In an
attempt to one-up portable card reader competitor Square, PayPal coupled the
card reader with a cash-back debit card and a slightly lower swipe fee.
-
Ticket seller Eventbrite began offering
its At
the Door payment service in April. The portable register system (which
uses a card reader, wireless printer and iPad) focuses on sales of tickets to
special events and on the food, drink and merchandise sales that go with those
events.
-
Google
Wallet
received a cloud-based
makeover in August that enabled it to accept credit and debit cards from
all the major issuers by linking them to a virtual MasterCard. The improved
system was an attempt to increase consumer and merchant acceptance of Google
Wallet, which has grown slowly since its release in September 2011.
-
Financial services technology provider Fiserv
introduced its SpotPay
mobile card reader in September. The company is positioning the product as the
first designed specifically for financial institutions to offer to their small
business customers. In other words, rather than using a card reader from a
third party, merchants can get a SpotPay reader directly from the banks that
already provide their merchant accounts.
-
After about a year of delays, the Isis mobile wallet, debuted
in two test markets -- Salt Lake City and Austin, Texas -- in October. The
mobile wallet is significant in part because of the companies behind it:
AT&T, Verizon and T-Mobile on the telecom side and Visa, MasterCard,
Discover and American Express representing the card networks. These powerful
allies, Isis, hopes will give it an edge over its main competitor, Google
Wallet.
Like Google Wallet, the Isis app stores
consumers' credit card and debit data in a digital wallet on certain NFC-chip
equipped smartphones.
Still
lost? Check out our mobile
payment app cheat sheet.
Loyalty
programs go digital -- and get more data
2012 also saw the expansion of several sophisticated digital customer loyalty
programs that make it easier for customers to get rewarded for their shopping
habits. These programs also provide merchants access to more-detailed
information about their customers.
Some
services,
such as Swipely (which expanded its services this year) and Ox&Pen (which
launched in March), reward shoppers who share information via social media about
the purchases they've made.
LevelUp,
meanwhile, allows users to pay by scanning a QR code with their phones to make
payments and rewards them -- once they achieve certain spending levels -- with
exclusive discounts. In September, LevelUp stood out from the crowd by allowing
merchants to customize
the app with their own branding.
Incentives
for adopting EMV technology
MasterCard,
American Express and Visa stepped up efforts to encourage U.S. merchants to
upgrade their payment systems and accept "smart" credit cards with embedded EMV
microprocessors. EMV technology is already widespread in Europe.
The
credit card companies are using a carrot-and-stick approach in the U.S. The
first incentives went into effect in October: Merchants processing 75 percent
of their transactions using EMV-compliant terminals no longer have to go
through the annual process of proving they are compliant with PCI-DSS,
the security standards that govern the payments industry. Over the next few
years, merchants will also get relief from penalties and from fraud liability
if they process their transactions using EMV terminals.
Check
out our EMV
incentives time line for merchants.
Credit
card networks settle with (some) retailers
In
July, Visa and MasterCard announced a proposed settlement in a seven-year,
class-action legal battle with retailers. Merchants had taken the card issuers
to court, claiming they were violating federal antitrust laws through
price-fixing. The lawsuit focused on swipe fees charged to merchants for credit
card transactions and on the card companies' refusal to allow merchants to make
up for those fees by charging more for credit card transactions than for cash
purchases.
In
the proposed settlement, MasterCard and Visa agreed to pay retailers $5.2
billion and reduce transaction processing fees for eight months. They also
agreed to drop requirements that retailers charge the same price for cash and
credit card purchases. In return, retailers would agree not to bring antitrust
lawsuits against the card companies.
Although
the settlement won tentative approval from the courts in November, not all
retailers are buying into the terms. Wal-Mart, Target and approximately 1,200
retailers and trade organizations are appealing the limitation of their right
to bring antitrust lawsuits against the card networks in the future.
The
settlement also leaves merchants in a predicament. Even if they can charge
extra for card transactions to recoup their costs, would doing so turn
off their customers?
z1099-K:
New tax forms sent to online sellers
The
Internal Revenue Service began getting more information this year about the
money made by people and businesses that sell their products online via sites such
as Etsy and eBay. The new
1099-K forms, which made their debut in early 2012 (for tax year 2011) are
now issued to sellers who have merchant accounts through their banks or who use
third-party payment processors such as PayPal to handle their payments.
The
1099-K form is specifically designed to help reduce under-reporting by the
large volume of workers who now earn their incomes and livelihoods via the
Internet.
Banks, merchants
adjust to Durbin Amendment
The
Durbin Amendment, which capped the fees that most banks could charge to
merchants for debit card transactions, went into effect in the fall of 2011, but it continued to impact
the payments industry throughout 2012.
Although
many merchants have benefited from the change -- paying a maximum 24 cents per
transaction in swipe fees instead of a percentage of the sale -- merchants that
have multiple purchases under $20 are actually paying more under the new law.
Banks and card networks are losing money because of the change, and industry
experts believe that they will continue to look for new ways to make up those
losses. One alternative may be to encourage consumers to use credit cards
instead of debit cards, since the fees on credit cards are not limited.
Visa
finds a way to increase its bottom line
Visa
announced early in 2012 that it would assess a new Fixed
Acquirer Network Fee (FANF) as of April 1, 2012, and simultaneously revamp
its pricing structure for credit card acceptance. The FANF has a complex
structure, with fees varying based on what type of business the merchant is
operating and whether it is a card-present or a card-not-present (that is, online)
operation. Although Visa says that most merchants will benefit overall from the
changes, industry observers are dubious about that claim. The U.S. Department
of Justice shares that concern; it announced in May that it would be looking
into the FANF fees to see if they are an antitrust violation.
See
related: Will
new rules for Visa and MasterCard really help merchants?, SXSWi:
Mobile payment adoption hurdles; Isis launch
Published: December 28,2023
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