Evaluating Processing Infrastructure, Support & Costs Leveraging Changes in Technology for Improved Customer Experience & Profits Transactions are the lifeblood for convenience stores. From the customers perspective, they want to get what they need, make their purchases and be back on the road quickly. For multisite businesses, transaction processing has always been a key concern, but there are even more options and issues to consider today: Brand partner requirements Payment options (mobile, ACH, etc.) Data security Transaction path/infrastructure changes This paper will review some of the hottest topics related to payment processing to help retailers chart the course that will most benefit company operations and customers. 1 EVALUATING PROCESSING INFRASTRUCTURE, SUPPORT & COSTS
Historical Options There have been different options for point-of-sale (POS) equipment for a long time, but in the past, most choices focused on a serial connection that required a payment gateway or similar device to send the transactions from the store to the processor. Many retailers were required to push customer payments from the store to a third party, which then sent those transactions to the processor over a leased line. That round-about path could add extra costs, points of failure and security concerns. STORE #1 INTERNET PAYMENT GATEWAY BACKHAULER STORE #2 PROCESSOR STORE #3 In the past, satellite connections were often a fuel brand or processor requirement, but they carried higher costs and security issues. For example, some retailers reported having their satellite connection interrupted because criminals would put tinfoil over the satellite dish to temporarily halt transaction processing. With the connection unavailable, POS systems would move into store-and-forward mode, so the transaction data wouldn t be confirmed until the satellite was available. Thieves would then make purchases inside the store and leave. When the satellite was able to process transactions again, the charges would come back as declined. Changes & Choices for Processing Support Infrastructure The liability shift set for October of 2015 is driving one of the bigger changes in transaction processing: EMV (Europay MasterCard Visa). It is important to note that the move to EMV is not a requirement, but a choice for retailers. Visa s websites states in-store counterfeit fraud liability will shift to the party either the issuing financial institution or the merchant that has not adopted chip technology. 2 EVALUATING PROCESSING INFRASTRUCTURE, SUPPORT & COSTS
Moving to EMV processing support will include real costs for retailers, so some companies might want to evaluate their history of fraudulent charges to see if it makes sense to move quickly, especially since much of the required infrastructure is just hitting the market. If a multisite retailer has only had a small number of fraudulent charges over the past few years, they might want to delay the equipment purchases and deployments. Waiting will give POS vendors time to improve their equipment and retailers will also have more time to evaluate their options. It is a risk, though, because the retailer will be responsible for fraudulent charges, depending on the fuel brand partner or processor. Another trend is that many POS vendors are shifting to IP or Ethernet enabled equipment for transaction processing. Depending on the supplier, retailers should see benefits of much higher transaction speed, fewer devices required at the store, and/or options for remote support, among other possible benefits. These technological advances for processing support are creating more choices for retailers to select the POS that best fits with their business operations. Most companies look to their brand affiliations as the driver for their POS decisions, but fuel brands often have more than one option. Another consideration is the processing paths available from the processor themselves. Most companies are familiar with back hauling transactions, i.e. sending charges from the store to a third party, which then forwards the transactions on to the processor. However, a new option is starting to get attention: going direct. In this case, charges go from the store right to the processor. Both methods have pros and cons, but multi-site businesses are best served by working with suppliers that can support both methods because the retailers can shift to a different processing configuration when business conditions drive them in that direction. 3 EVALUATING PROCESSING INFRASTRUCTURE, SUPPORT & COSTS
More Purchasing Methods Consumers are being tempted with different ways to purchase items in a store. Credit cards, cash, checks and debit cards have been in use for a long time, but using cell phones as a mobile payment system and implementing an automated clearing house (ACH) transaction program are additional options to consider. Mobile payments have seen a ton of press coverage, but most of it has focused on the benefits/challenges for the consumer. For retailers, it is important to note that most mobile payment methods will leverage traditional credit card infrastructure and that includes the transaction fees. Additionally, adding these types of payments will probably require a new or additional device in the stores. The biggest concerns focus on the consumer themselves. What system will they use (Google Wallet, ApplePay, etc.) and what percentage of a retailer s potential customer base requires this infrastructure to make purchases? The consumer will probably drive retailers where they need to go because their needs will have to offset any equipment/software costs and the price of ongoing support. ACH transaction programs are already in use by retailers, mostly in the form of loyalty or incentive programs. Multi-site merchants promote these programs to customers and, in turn, they complete the registration form that includes sharing their checking account information. The merchant gives the customer their loyalty card and it can be used to purchase fuel or products at the company s stores. Because ACH transactions are much less expensive for retailers, they 4 EVALUATING PROCESSING INFRASTRUCTURE, SUPPORT & COSTS
can offer incentives back to customers, such as a reduction on fuel charges. ZipLine is one company that supports this type of program. Summary This paper has focused on just an overview of key issues related to transaction processing for multi-site merchants. Some companies have focused on their brand partnerships as ways for getting information about new technology, options and challenges, but retailers do their own research, too. Payment systems are critical infrastructure that can require a big investment, both in terms of upfront costs as well as ongoing maintenance. Understanding the different opportunities for processing transactions will be a competitive advantage, both for creating a better shopping experience and reducing costs. About Acumera Acumera provides managed network security and automation services for the payment systems and operations of multi-site businesses. Our clients focus on growing their companies by using Acumera s remote systems visibility, strong data security, and simplified compliance services. Since 2002, Acumera has been our clients trusted network partner. To learn more, see http://www.acumera.net. 5 EVALUATING PROCESSING INFRASTRUCTURE, SUPPORT & COSTS