Why E-Commerce Gets Dissed By Retail

Written by Evan Schuman
February 8th, 2012

Pity poor E-Commerce. It’s barely 18 years old, has racked up about $200 billion in revenue last year and still has trouble getting noticed. Consider MasterCard’s and Visa’s EMV announcements. Both brands set various incentives for retailers if they process 75 percent of their transactions through EMV contact-and-contactless terminals. Of course, what MasterCard and Visa meant was in-store transactions. The idea that an E-Commerce transaction is not a real transaction should be repugnant to any retailer in 2012. But those old prejudices that stores are where serious commerce happens are apparently acceptable.

At a technical level, it’s understandable how EMV would fuel a store-only discussion. After all, there are no viable methods widely available today for supporting the chip part of EMV in an E-Commerce or M-Commerce transaction. It’s not that easy, though. Online purchases today are still a single-digit percentage of total retail revenue, which the National Retail Federation (NRF) pegged at about $2.5 trillion last year. That helps justify the perception that E-Commerce can be dismissed or at least be shunted aside as its own area.

How many chains today truly embrace the concept of merged channel, where all sales—regardless of channel—are considered equal? We also should remember that no one really knows the size of E-Commerce. Other than a few large, pure-play, publicly traded E-commerce shops (consider the $48 billion in sales that Amazon reported for 2011), most chains are vague about their E-Commerce sales. And the huge number of mom-and-pop E-tail sites, when combined, represent a non-trivial number of E-Commerce sales, almost none of which is included in national estimates.

To be clear, Visa and MasterCard do support E-Commerce. However, it has shades of the old separate but equal attitudes. Words have power, and these statements are carefully phrased. The fact that both brands felt that “transactions” would be universally seen as “brick-and-mortar transactions” reveals much more about the card brands’ thinking than they intended.


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Why Did Gonzales Hackers Like European Cards So Much Better?

I am still unclear about the core point here-- why higher value of European cards. Supply and demand, yes, makes sense. But the fact that the cards were chip and pin (EMV) should make them less valuable because that demonstrably reduces the ability to use them fraudulently. Did the author mean that the chip and pin cards could be used in a country where EMV is not implemented--the US--and this mis-match make it easier to us them since the issuing banks may not have as robust anti-fraud controls as non-EMV banks because they assumed EMV would do the fraud prevention for them Read more...
Two possible reasons that I can think of and have seen in the past - 1) Cards issued by European banks when used online cross border don't usually support AVS checks. So, when a European card is used with a billing address that's in the US, an ecom merchant wouldn't necessarily know that the shipping zip code doesn't match the billing code. 2) Also, in offline chip countries the card determines whether or not a transaction is approved, not the issuer. In my experience, European issuers haven't developed the same checks on authorization requests as US issuers. So, these cards might be more valuable because they are more likely to get approved. Read more...
A smart card slot in terminals doesn't mean there is a reader or that the reader is activated. Then, activated reader or not, the U.S. processors don't have apps certified or ready to load into those terminals to accept and process smart card transactions just yet. Don't get your card(t) before the terminal (horse). Read more...
The marketplace does speak. More fraud capacity translates to higher value for the stolen data. Because nearly 100% of all US transactions are authorized online in real time, we have less fraud regardless of whether the card is Magstripe only or chip and PIn. Hence, $10 prices for US cards vs $25 for the European counterparts. Read more...
@David True. The European cards have both an EMV chip AND a mag stripe. Europeans may generally use the chip for their transactions, but the insecure stripe remains vulnerable to skimming, whether it be from a false front on an ATM or a dishonest waiter with a handheld skimmer. If their stripe is skimmed, the track data can still be cloned and used fraudulently in the United States. If European banks only detect fraud from 9-5 GMT, that might explain why American criminals prefer them over American bank issued cards, who have fraud detection in place 24x7. Read more...

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