US-based e-commerce platform provider Shopify is launching an EMV-enabled physical mobile point-of-sale (mPOS) reader in the UK, according to the firm.
The new reader will accept chip and magnetic stripe-based cards as well as contactless solutions. The new reader could make it easier for Shopify’s UK merchants, which are likely largely digital-first, to transition into offline sales if they so desire. The firm launched an EMV reader last September.
Omnichannel commerce is growing in popularity. Fifty-four percent of merchants accept payments through digital channels, compared to just 46% five years ago or at the time of their founding, which indicates that digital-only merchants like many of Shopify’s clients may be inclined to go offline if given an easy opportunity to do so.
The new reader could give UK merchants a simple mechanism for adding card-present payments functionality while staying within the Shopify ecosystem. That ultimately translates to a new revenue stream for both Shopify, who earns from reader sales and per transaction fees, and its merchants,
The move will help Shopify make the UK into a larger business segment. Here’s how:
- EMV has long been the card-present payment standard in the UK market. Unlike the US, which only formally shifted the liability for non-EMV compliant transactions last fall, the UK implemented EMV over ten years ago. As a result, the standard is nearly ubiquitous in the market there — 84.3% of cards and 97.3% of card-present transactions in Europe Zone 1, which includes the UK, were EMV-complaint in 2015.
- Meeting those needs will help the company grow its UK footprint. Shopify has 30,000 merchant clients in the UK, making it the firm’s second-largest market. But the UK is only 10% of Shopify’s business, so introducing a reader that accepts the most common forms of payment could help Shopify grow its presence in the country.
Fraud cost U.S. retailers approximately $32 billion in 2014, up from $23 billion just one year earlier. To solve the card fraud problem across in-store, online, and mobile payments, payment companies and merchants are implementing new payment protocols that could finally help mitigate fraud.
John Heggestuen, senior research analyst for BI Intelligence, Business Insider’s premium research service, has compiled a detailed report on payment security that looks at how the dynamics of fraud are shifting across in-store and online channels and explains the top new types of security that are gaining traction across each of these channels, including on Apple Pay.
Here are some of the key takeaways from the report:
- EMV cards are being rolled out with an embedded microchip for added security. The microchip carries out real-time risk assessments on a person’s card purchase activity based on the card user’s profile. The chip also generates dynamic cryptograms when the card is inserted into a payment terminal. Because these cryptograms change with every purchase, it makes it difficult for fraudsters to make counterfeit cards that can be used for in-store transactions.
- To bolster security throughout the payments chain encryption of payments data is being widely implemented. Encryption degrades valuable data by using an algorithm to translate card numbers into new values. This makes it difficult for fraudsters to harvest the payments data for use in future transactions.
- Point-to-point encryption is the most tightly defined form of payments encryption. In this scheme, sensitive payment data is encrypted from the point of capture at the payments terminal all the way through to the gateway or acquirer. This makes it much more difficult for fraudsters to harvest usable data from transactions in stores and online.
- Tokenization increases the security of transactions made online and in stores. Tokenization schemes assign a random value to payment data, making it effectively impossible for hackers to access the sensitive data from the token itself. Tokens are often “multiuse,” meaning merchants don’t have to force consumers to re-enter their payment details. Apple Pay uses an emerging form of tokenization.
- 3D Secure is an imperfect answer to user authentication online. One difficulty in fighting online fraud is that it is hard to tell whether the person using card data is actually the cardholder. 3D Secure adds a level of user authentication by requiring the customer to enter a passcode or biometric data in addition to payment data to complete a transaction online. Merchants who implement 3D Secure risk higher shopping-cart abandonment.
In full, the report:
- Assesses the fraud cost to US retailers and how that fraud is expected to shift in coming years
- Provides 5 high-level explanations of the top payment security protocols
- Includes 7 infographics illustrating what the transaction flow looks like when each type of security is implemented.
- Analyzes the strengths and weakness of each payment security protocol and the reasons why particular protocols are being put in place at different types of merchants.
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