World Retail Congress 2014: Omni-channel Security

On the second day at World Retail Congress 2014, I was fortunate enough to moderate a panel discussion looking at what steps the industry is taking to ensure security across the variety of transactional channels that exist today. Providing the perspectives were Ajay Bhalla, President, Enterprise Security for MasterCard, Pingki Houang, COO with showroomprive.com, and Terry Duddy, the former CEO of Home Retail Group.

I began by asking the panellists what they believe the biggest market trends and threats that affect payments are today, and how do they could impact retailers. Bhalla noted a few key trends, and started by saying that, from a global perspective, the movement of payments to plastic from cash is accelerating in a big way.

Secondly, Bhalla noted that payments are moving towards digital and that within this space mobile is becoming an important transaction method. Almost 30% of digital transactions are now mobile. However, digital still only accounts for around 10% of total transactions, so there is clear potential for this area to grow.

The third big trend Bhalla noted is that security is top of mind for consumers following the number of data breaches over the past 12 months. He said that there has been a 67% rise in data breaches, and more than 500 million identities have been affected by these breaches over the past year. Houang agreed that the threats are everywhere - in payments, through fishing and spoofing, while also commenting that data protection is a critical issue.

Duddy said that a big trend from the point of sale perspective in the UK is the growth of contactless payment options. Currently the limit on a contactless payment is £20, and Duddy commented that a rise in that limit to £30 could help drive even more contactless payments. Duddy also noted that Argos, part of Home Retail Group, still has around 33% of its sales paid for by cash. Cash isn't going away, despite its many inefficiencies.

Turning to look at the main priorities in the security space, Bhalla commented that this has to start with the consumer. MasterCard has taken a number of to build consumer confidence. For example, Bhalla said that in the US, MasterCard has introduced zero liability protection for consumers if there are any fraudulent attempts to use their card.

In terms of payment fraud, Bhalla noted that while today 50% of this comes from the digital world, the digital world itself only accounts for around 10% of transactions. On the 50% of fraud that occurs on the physical side, 90% of that comes from counterfeit and lost or stolen. EMV technology is a solution for that which has worked very well in Europe. The only large market in the world that doesn't use EMV, but Bhalla said that there are agreements in place to roll out almost 600 million EMV cards in the US next year.

Identity verification also emerged as a key priority for the industry. Bhalla said that products such as SecureCode could verify the consumer as they are initiating the transaction. He also said that MasterCard is looking at biometrics and how this can be made as simple as possible for the consumer. MasterCard has recently a solution called MDES (MasterCard Digital Enablement Service) that ensures you can make a mobile payment without storing your card number on the phone. This means that if your phone is compromised in any way, the consumer does not have to worry that their card numbers will be exposed. Apple Pay will use MDES.

Houang commented that his company has a lot of priorities, and that this is one of their challenges - it is a question of budget.  He said that there are a lot of concerns if security isn't managed correctly, pointing out that you could have the securest system in the world, but if this does not provide a simple and seamless retail experience for the customer then they are unlikely to want to shop with you.  Duddy noted that reputational risk has to be managed - it doesn't matter how small a data breach might be, it can have a very negative and lasting effect on your organisation's reputation.

Looking at security solutions in the transactions space, Bhalla commented that MasterCard works very closely with the retail community in developing solutions. He said that it is important to create a consistent experience for the consumer. At the same time, it is important to remember the interconnected nature of the payments system - retailers will face problems if have banks have a problem, and vice versa. One of the products that MasterCard recently launched is SafetyNet. Bhalla said that this solution is a response to the amount of banks and processors that are being compromised. The solution is designed to create an extra level of protection for the consumer. If a processor or a bank is compromised, this solution screens and blocks the transactions before it becomes a problem.

For Duddy, there is also a big issue about how, in an omni-channel world, retailers think about refunds on transactions and returns to store. Retailers need to think about how the return is transacted and how the exchange is made. With all of the developing methods of payment, this can be a complex scenario. Customers are looking for speed and certainty. The problem with this area is that you can lose trust quickly. Having built that trust up with a consumer base, Duddy noted that retailers don't want to give it away too easily.

The panel agreed that many of today's challenges would be with us in one form another in the future. Duddy said that in 2025, ease and speed of use, and trust, will continue to be the big issues. At the same time, he noted that cash would still be in use.

Bhalla commented that device penetration would continue to grow. He predicted that device commerce - such as printers that order ink or refrigerators that order food, for example - would take off in a big way. The technology exists for this to happen, but Bhalla noted that the industry needs to ensure that the safeguards are in place for this to happen in a safe and secure fashion.