November 13, 2015
Holiday season is just around the corner with retailers getting ready to make the biggest part of their profit throughout the year. However, this holiday season will be different for Americans. Both retailers and shoppers will have a new experience shopping with renewed credit cards. EMV is actively rolling out in the US and changing the usual swipe-and-go experience. It would not be a dramatic change any other shopping day, but when it comes to the holidays, there is definitely a change to be prepared for.
The LTP team had the pleasure of interviewing Oren Levy, CEO of Zooz (a technology company that provides a data-driven payments platform for retailers worldwide), on EMV’s effect on the holiday shopping experience and the way Zooz provides value to the clients.
LTP: Please tell us about Zooz and the services you offer. What is your competitive advantage in the market and what value are you providing to your clients? Also, who are your biggest clients and how fast are you growing?
Oren Levy: Zooz is a fast-growing technology company that provides a data-driven payments platform for retailers, SaaS companies and service providers worldwide. Our greatest advantage over other payment solutions is our configurability, which enables us to best solve the problems of individual merchants as they scale. Once a merchant integrates our platform, it can dynamically connect to any financial institution or third-party service within our system as its needs change. Merchants can maintain their existing payment technology, but add additional fraud detection and risk assessment tools or connect to acquirers in other countries as they extend their global reach, ensuring higher acceptance rates and lower transaction fees. Supporting additional payment methods and acquirers, merchants can seamlessly implement cross-border commerce without facing lengthy and complex integrations.
Another major problem we solve is data storage and protection. Our platform is level 1 PCI-compliant, which means that merchants can store consumer data without the expenses and burdens of becoming PCI-compliant themselves. By securely storing consumer data using sophisticated tokenization technology, Zooz enables businesses to streamline return customers’ checkout, and detect and prevent fraud. More importantly, we enable businesses to analyze the data and leverage these insights to improve customer experiences and maximize payments performance.
LTP: How does Zooz help merchants to maximize their payments performance?
OL: Zooz provides merchants data visibility which empowers them to make informed decisions and consequently, maximize their payments performance. Payments generate considerable amounts of data about the customer journey and transaction results, but merchants generally lack the tools to access and analyze this data. Zooz creates easily digestible and actionable data reporting so that merchants can take steps to enhance business results. For example, Zooz might reveal to a merchant that 90% of Chinese consumers are abandoning purchases on its website at the payment phase. Using this data, the company could devise a strategy to encourage more purchases and boost revenues, such as starting to support the popular Chinese e-wallet Alipay.
This data also helps optimize transaction acceptance rates by indicating, for instance, the card type and payment currencies most likely to be declined by processors. Zooz enables merchants to view data from all their financial solutions and third-party integrations in a centralized portal. By analyzing decline rates, availability and response times per provider, merchants can then route transactions for optimal acceptance with our Smart Routing solution.
LTP: Holiday season is coming and it's definitely a busy time for retailers. In addition, US retailers and customers are now in the process of transition from magnetic stripe cards to chip-and-signature cards. What effect will this transition have on holiday shopping?
OL: The US’s October EMV liability shift was indeed in some regards untimely. However, the bottom line is that this is a critical move that will have a major impact on payments security for businesses and their customers for the upcoming holiday season and in the long run. Even after the EMV transition, fraud should be a major concern for merchants looking forward. EMV-compliant cards do not protect consumers against the risk of online fraud. Online merchants should expect fraudsters to target their e-commerce sites. Similarly, fraudsters know that not all merchants are upgrading their existing infrastructure with EMV compliant terminals. Therefore, fraudsters will be targeting smaller businesses which, presumably, have not replaced their old terminals. Larger businesses face less of a risk, as they have, for the most part, already updated their in-store infrastructure.
Overall, we are entering a more secure holiday season because of the EMV transition, but merchants should still be prepared for fraud attempts—those who have yet to update their online fraud detection technology and their in-store card acceptance terminals should consider doing so before the holidays.
LTP: The shopping habit will change with the new chip cards. Rather than quickly swiping a card, shoppers now will have to spend more time at the cashier counter. With the hustle and long lines in the stores on holidays, how do you think this shift to a different way of card usage will affect the shopping experience?
OL: In the weeks following implementation, customers and checkout clerks may face a bit more friction as everyone has to adjust to this new technology. However, practically speaking, the checkout process won’t be all that different with these new credit cards. The EMV standard does not require cardholders to submit PIN codes when they pay. In Europe, the EMV standard requires cardholders to enter a PIN code when paying, but the US system, for the time being, only requires cardholders to sign at the time of purchase, not to enter a PIN.
In the long run, once everyone is familiar with this new technology, it shouldn't slow things down at all. The transition to the EMV standard will have an overall positive impact on the checkout experience as consumers will benefit from a higher level of security for in-store transactions. They will be able to make in-store purchases with more confidence and expect fewer major data breaches like the Target data breach of 2013.
LTP: What are the major challenges retailers and payments processing companies are facing during the holidays season? What should those companies be prepared for?
OL: I think there will be three major challenges this holiday season. The first, as previously mentioned, is fraud and chargebacks—this is a problem retailers face every holiday season and year round. Fraud can have a major impact on a retailer and quickly drain their profits. When a customer’s credit card information is abused or used by someone other than the rightful cardholder (such as counterfeit magnetic stripe cards created by skimming card terminals), consumers and retailers are both very vulnerable. When the consumer becomes a victim of fraud, the ultimate liability (and expense) for the fraud is often transferred to the retailer.
This should motivate retailers to update their terminals to EMV-compliant technology, to ensure they are not held responsible for data breaches at the point-of-sale. At the very least, in-store checkout clerks should be checking cardholder identification to prevent fraud. Online, retailers must also be prepared to confront fraud issues. Ahead of the holiday seasons, merchants should be making sure their fraud detection technology is up-to-date and high-quality.
Another major challenge merchants may face this holiday season is consumers looking to pay via mobile payments. In the last year, many prominent companies have emerged with their own mobile wallets, including Apple, Android, Google, and most recently Samsung. It could be that consumers will want to experiment with this technology without really understanding how it works. This might be a challenge for retailers as not all retailers have terminals equipped to accept mobile payments and not all employees have been trained to facilitate mobile payment acceptance.
Finally, the holidays are a major cross-border shopping season. Whether merchants have international visitors shopping at brick-and-mortar locations or consumers shopping cross-border online, there will be an influx of customers who want to pay with foreign credit cards and regionally preferred payment methods, such as e-wallets and direct bank transfers. Retailers have to be ready to resolve the needs of cross-border shoppers so that their experience is as frictionless as possible. Doing so could prove a great opportunity moving forward both for customer acquisition and higher cross-border revenues.
LTP: Holiday season is the time to expect an increase in security and fraud issues. How do you think the statistics will change with chip cards? And how soon? Should we expect less fraud since chip-cards are considered to be safer?
OL: As I mentioned, there will likely be issues with chip cards this holiday season both because fraudsters are especially active during the holidays and because they know the new fraud-prevention system in place does not protect online transactions or stores that haven’t updated their terminals. Fraudsters will likely target small businesses, which are unlikely to have updated their terminals because of the expense. Large businesses—which, for the most part, have updated their terminals—will be less of a target and should be safer.
LTP: Anything else that you would like to share with LTP readers about the industry in general?
OL: It's an exciting time to be in the payments industry. In the past year alone, there has been so much innovation, and we can expect even more moving forward into 2016. This is an industry that is forever improving its offerings and molding itself around creating a more seamless customer experience based on customers’ needs, and the coming year will introduce new technology and build on existing innovation.
My hope for this year is that we see more mobile wallet adoption and, more specifically, the introduction of a truly device-agnostic e-wallet. Too many of the existing mobile payments players offer device/operating system-specific technologies, which discourages adoption on the part of both merchants and consumers.