Snapfinger Mobile App for Restaurants Brings Data to the Table, By Bailey Reutzel, PaymentsSource Magazine, April 29, 2013Partner quoted: David W. Schropfer.

“Examples from real business cases reveal which new mobile wallet models will have the best chance of success,” said David W. Schropfer, Head of Mobile Commerce at the Luciano Group.

In 2010 David published the first book on the emerging mobile commerce industry: “The Smartphone Wallet- Understanding the Disruption Ahead.”  The book and follow-up whitepaper –  “Google Wallet and the New Retail Ecosystem” – are used by the media and business people alike to decipher the rapidly evolving mobile commerce universe.

Mr. Schropfer co-founded The Luciano Group in 2005, and heads its Mobile Commerce practice.  His unique insights have been broadcast on NPR radio, CBC radio, Talk Radio One’s “The Stephen Spierer Show,” and MSNBC.  His commentaries and research have been featured in American Banker Magazine, Fast Company, Capacity Magazine, NFC Times, Mobile Payments Today, and Payment Source Magazine.

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About The Luciano Group

Founded in 2005, The Luciano Group offers market research, consulting and management advisory services. The company serves mobile commerce companies, telecommunications companies, broadband companies, professional services companies, and government entities. The company is based in Red Hook, New York.

The Luciano Group

Press Contact

press@lucianogp.com

+1-845-384-1400

Download the PDF of this press release.

The TLG partner invited to speak at this event is: David W. Schropfer

Image Credit: The Shelby Report

It’s been called a “Surcharge,” “Swipe Fee,” “Credit Card Fee” “Interchange,” or a “Checkout fee.”  Until today, retailers were not allowed to pass these fees on to their customers.  If you heard about it in the news, you may have the impression that you will have to pay 4% more for everything starting today.  That is a myth, and it is not the only one:

Myth 1: A law creating new credit card fees became effective on January 27, 2013.

No new fees were created today, just the question of who pays those fees.  Also, no new laws were created today either.  Here is what actually happened:

For over 50 years, retailers have paid fees of about 1.5% to 3% to credit card companies (and others) every time a customer paid with a Visa or MasterCard.  Also for the last 50 years, Visa and MasterCard had a rule prohibiting retailers from forcing their customer to pay those ‘checkout’ fees.  Visa and MasterCard dropped that rule, effective today.

Why did they do that?  It took more than a suggestion.  Last July, U.S. District Court Judge John Gleeson proposed a settlement of $7.2 billion to be divided among approximately 8 million retailers, all paid by Visa and MasterCard.  This proposal came with a number of other terms; one of these terms allowed retailers to pass the checkout fees along to the consumer.

Myth 2: Every Visa and MasterCard is subject to this new rule.

As of January 28, 2013, retailers are only allowed to pass checkout fees to customers for Credit card transactions only.  Debit card fees may not be passed on to customers.

Myth 3: AMEX and Discover are excluded because the surcharge is related to the Visa/MasterCard settlement.

The opposite is true.  If a retailer wants to pass along the Visa/MasterCard credit card fees to the consumer, that retailer must do the same for AMEX and Discover credit card fees.  Here is a good explanation from the Electronic Payments Coalition.

Myth 4: This rule became effective across the USA.

Any state can pass a law prohibiting surcharges and checkout fees.  So far, ten states have: California, Connecticut, Florida, Maine, Massachusetts, New York, Texas, Oklahoma, Kansas, and Colorado.

Myth 5: Retailers are going to pass on credit card checkout fees to consumers

According to the National Retail Federation, this is not true.  Here is a quote from NBC news:

“We have discussed the settlement with many, many merchants, and not a single merchant we have spoken to plans to surcharge,” Craig Shearman, spokesman for the National Retail Federation (NRF), said in a statement.

So far, retailers like Wal-Mart and Target have loudly rejected the proposed settlement.

Myth 6: Credit card users could get socked with 4% “checkout fee”

This is not exactly a myth, but it is misleading.  Again, retailers are largely rejecting this idea, and will not charge the checkout fee to customers, despite what MSNBC had to say.

Also, most credit card fees are much less than 4%.  Visa and MasterCard products combine to about 90% of all card transactions worldwide, and it is extremely rare for this fee to reach or exceed 2.95%.  So, for the lion’s share of credit products, the maximum (likely) fee is 2.95%, because retailers are not allowed to charge customers a higher checkout fee than they actually pay.  AMEX fees, however, are higher than Visa/MasterCard, and could reach the 4% cap mandated by the settlement.

The bottom line: when you use a credit card, read your receipt, and look for an extra fee which may be called a ‘checkout fee’ or a ‘processing fee’ or simply a ‘credit card fee.’  If you are charged these fees at a given retailer, you only choice is to not patronize that retailer in the future; otherwise you will have to pay.

More likely, you may see “Cash discounts” offering a small discount to customers who pay cash instead of using a credit card, just like many gas stations in the US.  This may also be an opportunity for retailers to initiate tender steering through in-store promotions or through mobile commerce.

Myth #7: This decision is final.

All of this is not quite final.  Judge Gleeson is expected to render a final decision on September 13, 2013.  After that, the appeals process probably begins and will drag on until about 2015.  Does that mean the checkout fee rules will change?  No one knows.

Author: David W. Schropfer

Published: January 27, 2013

Green Dot’s GoBank ‘Reinvents’ Banking in U.S. with Fee-Optional Mobile Bank Account, 

Excerpt from the article:

At least one analyst suggests Green Dot may have trouble sticking
to its plan of offering banking services for only a voluntary fee.
“Banking is not free,” due to the underlying costs of dataprocessing
and account management, David W. Schropfer, head of
mobile commerce for advisory firm The Luciano Group, tells
Paybefore. “Given that Green Dot does not have loan products,
the company may find itself in a difficult position if consumers
equate GoBank with a free checking account and choose to pay
nothing each month. If that happens, Green Dot will need to kill the
option of paying its optional $9 monthly fee or add some of the traditional bank fees,” Schropfer suggests.

“Given that Green Dot does not have
loan products, the company may find
itself in a difficult position if consumers
equate GoBank with a free checking
account and choose to pay nothing each
month.”
—David Schropfer, The Luciano Group

The TLG partner invited to speak at this event is: David W. Schropfer

The TLG partner invited to speak at this event is: David W. Schropfer

The TLG partner invited to speak at this event is: David W. Schropfer

Google Buys Custom Coupon Startup, By Rachelle Dragani. November 29, 2012. Partner quoted: David W. Schropfer.

Over 56% of all countries experienced growth in 2012 international voice minutes for the first three quarters of 2012.

International voice traffic for the first three quarters of 2012 was 8% greater than the same period in 2011 according to Global Voice Tracker, our independent industry tracking service. This is double the 4% annual growth rate the industry experienced last year.

Terminating minute volumes showed growth to nearly all regions of the world, with the Indian Subcontinent, Africa, and Middle East exhibiting the largest percentage gains. These increases offer a positive sign that the global recession may be ending.
Traditional international voice has been under assault from a host of new technologies and social trends, such as free calling, texting, and social media. This 2012 data may be an indication that international voice telephony still represents a growth product for global telecom carriers. However, it is important to note that nearly all of the increase is occurring in the wholesale sector as many traditional carriers are showing little to no growth in retail minutes.
GV Tracker research indicates that 56% of all countries exhibited growth in international termination minutes and 44% showed a decline. 131 countries demonstrated an increase for the first three quarters (average + 12% growth rate), while 102 countries experienced a decrease averaging more than – 8%.

Over 58% of all international calls were terminated on Mobile Phones according to the latest data from GV Tracker.

The data also indicates that 58% of international calling terminates into a mobile phone.

Global Voice Tracker utilizes the actual calling volumes from participating global carriers who report their international voice minutes terminating to all countries each month. The data is subdivided by fixed versus mobile terminations and wholesale versus non-wholesale in order to monitor traffic changes and highlight overall industry trends.

GV Tracker Service is provided by the data division of The Luciano Group.  Click here to contact a representative.

Click download.

For all of the good and not-so-good features of Square’s new app, remember that it is Square’s “Model T Ford.”  They are just getting started in the world of feature-rich apps for consumer use.  Also, integration with traditional POS systems is new for Square.  Overall, this is a good start that Square will use as a foundation for future development.  Here are the eight key elements of Square’s new smartphone app, including its use at Starbucks:

1)     IT WORKS:  The fact that this system functioned on launch day is remarkable, given Starbucks’s 7,000 stores have been working on this implementation for only three months. There is always the possibility of a major software problem with the product launch on such a large-scale.  But, software glitches did not happen with Square & Starbucks. [Do you have information to the contrary? Just comment on this article.]

2)     SECURITY AT STARBUCKS:  So far, Starbucks is using a static QR code solution, similar to the method used with

Square App ready for use at Starbucks

Starbucks’ original app.  But Square adds another layer: Geofencing.  The idea is that if you are not standing near (or in) a Starbucks, the Square app will not let you pay.  Unfortunately, if someone steals a screenshot of my Square QR code, the stolen QR code will work at POS whether the authorized phone is at that location or not – which was a small source of fraud for Starbuck’s original app.  In the future, an obvious upgrade for Square is to reject a transaction if the QR code and the geolocated phone are not at the same place at the same time.  Even if you are not in a Starbucks, a bad guy can steal your QR code by simply putting your phone into ‘airplane mode.’  Why?  Without a network connection, the Square app automatically displays the Starbucks QR code.  So, Square did not create any new security problems compared to the original Starbucks app, but Square did not yet fix this problems either.

3)     SECURITY AT OTHER RETAILERS: According to the Square app, a customer should be able to go to any retailer that uses the Square dongle and say, “Put it on [your name here].”  In theory, an image if the customer’s face should appear on the merchant’s Square-enabled mobile device, and the merchant should be able to process the transaction with neither the customer’s square app, nor the customer’s credit card; just a password.  Square calls the feature “Hands-Free Checkout.” Unfortunately, none of this seems to work yet, despite what the

Square's "Hands-Free Checkout" feature

Square app claims. The retailer I visited had no option on their square app to allow for this, and they had no updates to the retailer’s Square app available to enable this.  [If anyone has used this successfully, please leave a comment.]  The square app lists all of the local merchants that use the Square dongle, but none of these merchants are compatible with the Square app or the pay-by-face feature…yet.

4)     NO STORED VALUE CARD. To use the Square product, the funds come from a credit/debit card that you link to the app. So there is nothing for the customer to reload, unlike Starbuck’s original app, which is convenient.  But, that means there is no buffer either.  One of the security layers that I enjoyed about the original Starbucks app is that I replenish funds manually (not automatically).  So, at any given moment, I have about $30 available on my Starbucks App – if someone steals it, $30 is all they can get.  Square, however, is linked to a credit card that has an available balance of much more than $30, which means that technically my exposure is a lot more, too.  As Square adds more security layers to their app, and to their POS software, that concern will dissipate.  And when the Square software allows the cashier to see my picture on their screen (an upcoming Square feature), that concern is virtually eliminated.

5)     RECEIPT ON MY PHONE. This is a convenient feature.  As Square migrates to other retailers, the application will be obvious; no more paper receipts to retain because all of the data is available on the Square smartphone app.

6)     FULL MENU: This is simple but convenient feature.  All of Starbucks’ menu items are easily visible through the Square App.

7)     NO LOYALTY PROGRAMS, YET.  I like my stars on the Starbucks app.  They are credited automatically whenever I use my Starbucks app, and I get the (nearly) instant gratification of being able to see the reward points – little gold stars – accumulate on the Starbucks app.  Square does not yet have the ability to add ongoing reward programs, although some retailers are able to offer discounts through the Square app.

Starbucks menu available on Square app.

8)     NOT EMV COMPATIBLE.  This debate is only getting started: Is a cloud-based transaction (like Square) inherently less secure than an EMV transaction?  We have plenty of data that tells us the EMV is more secure than a magnetic stipe card (witness the sustained 70%+ drop in face-to-face fraud in the UK).  However, we have no such data showing that applications that store credit cards in the cloud (like Square) are more or less secure than EMV transactions.  We know that the current QR codes used by Square are much less secure than EMV, but Square can fix that as new technology like NFC/TSM and biometrics become more available for consumers and merchants alike. Square’s ‘pay-by-face’ method is actually a bio-metric solution, which will be effective in fighting face-to-face fraud.

Regardless of the shortcomings of Square’s 1.0 app, I am confident that future iterations of the Square app and Square POS will overcome these hurdles, and add many more benefits for the consumer.  Stay tuned to Square; they are only just getting started.

Author: David W. Schropfer

Published: November 9, 2012

© 2012 by David W. Schropfer