Evan Schuman's StorefrontBacktalk

As giftcards have soared in popularity in recent years—some $25 billion in giftcards are expected to sold this holiday season alone—the attempts to use them fraudulently have also soared. But some of the theft techniques being described to consumers are woefully out-of-date.

Does this mean that giftcards are secure financial tools for retailers and consumers? Not necessarily, but today's giftcards are certainly no less secure than traditional credit cards, with most retailers and issuers willing to be flexible with consumers who have been burned.Read more...

Survey results released Wednesday officially report what virtually all E-Commerce execs already knew: It doesn’t take very many bad online experiences to send a consumer to a rival site.

Web-traffic-tracking firm Gomez surveyed 1,173 people in the U.S. last month and found 24 percent will abandon a Web site after the first failed transaction, while most consumers—53 percent—will come back a second time, but will ditch the site after they are burned a second time. About 17 percent of consumers will come back a third time and it will take a third purchase failure to turn them away. (I want to get that last group into a poker game.)

The survey also suggested that 75 percent would immediately jump ship if a site loaded too slowly. Beyond the official reality disclaimer that consumers tend to tell surveyers what they want to tell the sites and not necessarily what they’ll actually do–and that Gomex charges retailers to track online performance so they may not be the most non-biased source for how quickly consumers will abandon slow sites–the results here are likely fair. But if an E-Commerce exec needs a survey to learn that customers will be unhappy if their transactions fail, that exec should probably rethink their dayjob.…

The 1,400-store chain Toys “R” Us is adding identity verification software to 832 of its U.S. stores, according to documents filed with the SEC on Tuesday, the Associated Press has reported.

The software, revealed in an SEC filing from the software vendor (Intelli-Check), will start being used at chain’s customer service counters, but will then move to POS lanes, the AP story said. Intelli-Check typically uses government identification–usually military IDs and state-issued driver’s licenses–to authenticate consumers.…

This is a different kind of blurb. Received an E-mail from a reader that I'd like to throw up to the group for advice. Any takers?

Here's what your fellow reader/fellow retailer wrote: "A customer places a order for a Laptop through our eStore. The order was rejected due to the store not being able to verify his billing address. The customer was upset and continued to contact us over a months time. As it turns out, he is from Costa Rica, in the US working."Read more...

Transaction processor Debitman officially changed its name this week to Tempo Payments, in part to support non-debit transactions but also to get away from a name that the CEO dubbed “fairly polarizing.”

What were the objections to the six-year-old name? “One was that it sounded like a superhero, which in some sense was the intention,” said CEO Mike Grossman, adding that it showed his company “struggling against the evils of interchange” but was also viewed in some circles as not serious. The other concern? Some apparently found the name sexist as “a lot of the cardholders are women.”

The core reason, though, was to signal to customers that the company wasn’t limited to handling debit networks, Grossman said.…

Just in time for the holidays, data thieves are giving big brightly-colored wrapped gifts to Visa, MasterCard and AmericanExpress every time they seal their steal.

The traditional credit card companies are fighting for their lives against a plethora of new alternatives, ranging from debit cards, non-credit-card contactless payment, cellphones, eCheck, PayPal and Bill Me Later, not to mention new-fangled hybrids that merge loyalty/CRM, giftcards, incentive coupons and POS card, such as a pilot at the Subway chain.Read more...

Despite consumer—and even some IT executive—beliefs that E-Commerce poses a much greater security risk than store-based point-of-sale systems, a new Gartner report concludes that the opposite is true.

Gartner is reporting that, by 2008, most attacks will be on physical point-of-sale systems and that even by 2009, only one out of three such systems will comply with current security standards. "Device vulnerabilities are often overlooked by enterprises, who tend to focus on enterprise servers and systems when securing their environments," wrote Gartner security analyst Avivah Litan, adding that data transmissions are also closely monitored and "typically ignored by many companies are the devices that hang off of corporate networks where data are either collected or output, particularly point-of-sale devices and printers located throughout enterprise systems."Read more...

In 2006 alone, retailers lost almost $2 billion because of consumer security fears, with about one-half of those losses ($913 million) coming from people who avoided sites that seemed to be less secure and the rest (about $1 billion) came from consumers who were too afraid to conduct E-Commerce business at all, according to a Gartner survey of 5,000 U.S. adults in August that the research firm will publish on Monday.

The report is startling in the sense that it confirms what many retailers have long feared. It's a frustrating problem because so many legitimate security defenses are invisible and the most visible security features—such as displaying a sign noting security standards compliance—does little to truly secure the site. Also, credit card purchases are overwhelmingly protected against theft so the true risk for consumers is quite small.Read more...

The U.S. government is not alone is trying to push a national ID card program to try and improve security and reduce security fraud. But efforts to do so in the U.K. were set back on Thanksgiving when a prominent British Parliament member published government answers on the true cost.

MP Stewart Hosie on Thanksgiving said that the British government's "claim that ID cards could save up to £1.7 billion of identity fraud in the UK economy was totally false" because "there are no costs calculated for the private sector use of ID cards" and that fact "has totally destroyed the credibility of the Government's claims on ID cards," Hosie said, according to a story in PublicTechnology.net. ""Indeed the admission that there are no costs to deploy the system in either the private or public sector without the Home Office makes any claims of savings meaningless. To read the full story,

Millions of Canadian consumers who have moved to debit cards instead of credit cards learned that no payment system is perfect on Black Friday, when Royal Bank of Canada debit cards wend out of service for nearly three hours. The outage began around 4 p.m. EST and lasted until about 6:45 p.m. EST, Royal Bank spokeswoman Beja Rodeck told the Canada.com news service.

“All I can say is that it was a technical glitch and we’re looking at the root cause,” she said, adding that the problem was mostly at POS systems and did not impact the banks’s ATM network. Debit cards from Canada’s other big banks also appeared not to be affected, the news report said.…

More in-store POS-related security reports surfaced this week, with a Mchigan convenience store chain, the latest to apparently be hit. This is the latest in a series of well-publicized retail victims, including OfficeMax as well as Dollar Tree and Sam’s Club.

The latest incident reportedly involves Wesco, a gas station and convenience store chain with 51 locations in Michigan. Computerworld reported this week that several financial institutions canceled thousands of credit and debit cards in Michigan because of fraud concerns related to the retailer’s apparent data compromise. Wesco’s Web site confirmed “the possibility of credit card fraud associated with card use at our facilities” and that the U.S. Attorney’s Office and the Secret Service were investigating transactions between July 25 through Sept 7, 2006.…

The U.S. Census Bureau is reporting that brick-and-mortar retail sales are increasing four times more slowly than their online component. Specifically, E-Commerce sales for the third-quarter jumped 20.4 percent compared with last year’s identical quarter, while all retail sales jumped only 4.8 percent.

Perhaps more telling are the actual quarterly revenue figures, which give $27.5 billion in online revenue and almost $1 trillion ($991.7 billion) for all of retail.

Web sales may be comparitively small but E-Commerce is hardly a startup anymore. If it’s still bringing in this kind of growth after a dozen years, brick and mortar managers better take notice and get their customer service acts in gear.…

Just in time for the holidays, those wacky partying people at the National Retail Federation introduced on Tuesday their latest data-exchange XML schema, with the backing of some key retailers–including Blockbuster, Circuit City, RadioShack and Target–and suppliers, including Reebok and IBM.

The new standard replaces the previously-released Digital Asset Management (DAM) schema, according to a statement from the NRF’s Association for Retail Technology Standards (ARTS). The schema’s goal is to more efficiently create and manage images and text used to present products to consumers everywhere from shelf-edge and digital signs to catalogs, E-Commerce sites and kiosks.…

Is a standard cellphone format for contactless payment in the offing? Unlikely, but some major players are going to make a lot of noise trying. Sony and NXP Semiconductors (formerly Philips Semiconductors) on Monday announced that they will work together to–by mid-year 2007–“plan, develop, produce and market a secure chip that will include both Mifare and Felica operating systems and applications, as well as other contactless card operating systems and applications.”

That’s quite an undertaking. The pair officially got the backing of the GSM Association, a major telco organization representing 14 mobile network operators: Bouygues Telecom, China Mobile, Cingular Wireless, KPN, Mobilkom Austria, Orange, SFR, SK Telecom, Telefonica Móviles España, Telenor, TeliaSonera, TIM, Vodafone and 3. The Sony/NXP objective, according to a joint statement the companies issued, is to combine what they will create with an NFC chip to create a universal contactless IC platform for cellphones.

To be fair, these kinds of relationships are essential for truly interoperable mobile payments systems to be deployed. But the hurdles on doing something like globally are huge. Then again, so are the incentives.…

StorefrontBacktalk was asked to pen a column about the impact of the cellphone on today's retailers for the Retail Systems Alert Group.

We argued that those devices are taking on lives on their own in a myriad of ways, from using their photo lens to read barcodes on advertisements to acting as a portable POS to an integrated loyalty card and coupon-generator. To read the full column,

As RFID engineers try to struggle to get the tags to do more with less power, researchers at the Rensselaer Polytechnic Institute have come up with a novel twist: solar power.

The sunny-thinking folk (who are hopefully not singing “When I Wish Upon A Star”) have teamed with the New York State Department of Transportation to use these solar-powered mobile RFID interrogator that will monitor traffic flow by reading EZPass tags attached to passing cars, according to an interesting story in Friday’s RFID Journal. An mGate interrogator collects the data powered by a single 100-watt solar panel and could be used to reroute traffic when roads are overly congested.

The outside-based system isn’t ready for year-round use yet, though. The story said that winter is bad time for testing as snow plows could endanger the readers.…

Gift card sales are projected to $24.81 billion this holiday season, according to a survey done by the National Retail Federation and published Friday, and the NRF reports that as the largest gift card sales projection they’ve ever given. Indeed, that’s $6 billion more than they reported just last year. That survey also projects that “average consumers” will spend significantly more on gift cards than they did last year–$116.51 vs. $88.03 in 2005.

Is it just me or does this take away almost all of the holiday magic of gift-giving? Isn’t the whole point that the gift-giver thinks about the recipient enough to select the ideal item? Well, there’s one consumer benefit: No needs to wonder about how much you spent.…

Praying that the “if we build it, they will come” cliché is true, MasterCard PayPass confirmed Thursday that it is adding some 5,000 additional self-service POS terminals—including a lot of vending machines—to its contactless repertoire, in Philadelphia, New York City, Dallas, Chicago, Las Vegas, San Francisco, Los Angeles, Boston, Washington D.C., Denver, Seattle, Miami and Orlando.

MasterCard dubbed the deployment “the largest rollout to date of contactless technology in self service point of sale and vending machines.” That would be a more impactful claim if we were seeing tons of companies stampeding to get into that space. …

An interesting report was published Tuesday by CyberSource, in the form of its annual E-Commerce fraud report. Beyond touting some $3 billion in fraud in the U.S. this year—a 7 percent increase compared with 2005—the report talked about 1.4 percent of retail revenue lost to fraud this year, a slight decrease from the 1.6 percent reported the year earlier.

What's interesting is not the percent drop (a 0.2 percent change is not likely statistically significant) but this claim in the news release accompanying the report's release: "Approximately one percent of accepted orders ultimately turn out to be fraudulent, but merchants also reject four percent of their incoming orders due to suspicion of fraud—some valid orders are almost certainly being left on the table."Read more...

A consulting firm’s recent report that credit card interchange fees are weighed against retail interests may help push alternative payment methods. That might put pressure on the credit card players to soften their fee requirements.

The report from the Chicago-based Diamond technology consulting firm found, for example, that some 44 percent of interchange costs are used to fund credit card rewards programs even though “merchants get nothing out of these programs because they are competitive tools for issuers. Merchants likewise pay about 3 percent of their interchange dollars for association branding costs. Meanwhile, processing— the original reason for interchange—comprises only 13 percent of interchange costs. Given the merchants’ lack of perceived value for what they pay, the situation is clearly unstable.”

The report holds out hope for contactless payment options, cellphone payment and other alternative vendors including PayPal, Debitman and PayByTouch.…

The City of Brotherly Love may be among the first places to have taxis accepting contactless credit cards. The freeway-fond Philly financial falderol comes courtesy of a deal between the Philadelphia Parking Authority, MasterCard, VeriFone and Taxitronics and promises to equip some 1,600 cabs with “networked fleet management capabilities and consumer services including wireless credit and debit payment transactions, navigation, scheduling, trip logs, lost & found tracking, and panic button alerts,” according to a joint statement the group issued.

Because transactions worth less than $25 will require no signature, VeriFone said that it estimates the system will cut about 45 seconds off the transaction time in taxis when compared to cash and 15 seconds when compared to swiping a traditional payment card.…

Retailers experimenting with fingerprint identify verification have seen ample anecdotal and survey evidence suggesting consumer resistance to the idea. A new survey from Harris Interactive (funded by Diebold, a vendor with a strong interest in the results) announced Tuesday has a hint of good news for fingerprint fans, with 72 percent of 2,000 consumer respondents last month saying that fingerprint-scanning ATMs would give them “a positive or very positive feeling toward their bank.”

There are, however, reasons to be suspicious of such data. First, beyond the vendor-involvement in the research, the company’s statement said the 72 percent was for all biometrics. The wording of the question did indeed ask about biometrics, but the question only offered one example and that example was fingerprinting. If the consumer didn’t know what biometrics meant–and not that many do–they would likely answer it solely relating to fingerprints (as opposed to facial recognition, retina scan, voiceprint, etc.).

That all said, it’s an unusual survey that shows such a strong consumer preference for fingerprint scans. Might be a trend worth watching.…

Traffic monitoring firm Hitwise reported Monday that traffic to the nations’ 100 largest E-Commerce sites increased 6.2 percent for the week ending November 11, 2006 compared with last year’s identical period.

“Online retail strengthened in Q3 and in the six weeks since October 1, 2006 visits to the Hitwise Retail 100 Index have been up an average of 5.7 percent, which indicates strong growth for online retailers during the 2006 holiday shopping season,” said Bill Tancer, general manager of Research at Hitwise. “Historically, Thanksgiving Day is the peak day for market share of visits to the retail category, and this year, based on our data, is poised to surpass 2005. The strongest pre-Christmas spike should come the second weekend in December.”

The top sites–in order from most visited–were Amazon, Wal-Mart, Target, Overstock, BestBuy, JC Penney, Toys R Us (U.S.), BizRate, CircuitCity, Sears, QVC, Shopping.com, Half, Shopzilla and HSN. …

Hull, England-based ADS Worldwide, an 18-year-old 235-employee vendor selling tags, labels and trim for apparel manufacturers and retailers, will be taken over by Checkpoint Systems for $8.5 million in cash, plus closing costs, Checkpoint announced Tuesday.

The acquisition is expected to add more than $20 million of revenue in 2007 and be neutral to slightly accretive to earnings per share, due to integration costs in the first year and purchase accounting, the statement said. ADS was initially focused on barcode service and more recently has been offering on-line ordering and tracking facilities.…