Selling safely on the net

Source: Technology Digital

Date :20/06/2007 16:05:57

As we move towards a cashless society, the safety of transaction processing and the integrity of the associated technology is a major concern for retailers and consumers alike

By James Hurley

TK Maxx received unwanted column inches earlier this year when millions of people in the UK and America risked having their bank details stolen from the systems of the discount clothes store by computer hackers. Hackers put 'hidden' software on the TK Maxx computer systems that went unnoticed for 16 months – prompting the retailer to warn that at least 45.7 million people may have had there debit or credit card numbers stolen. As well as revealing the lengths to which fraudsters will go to, commentators noted that the news highlighted the failings of the systems that retailers use.

Mark Collins, Managing Director of global communications company Transaction Network Services (TNS) believes that while some level of fraud may be inevitable, breaches of this scale should be avoidable.

“Fraud has always been part of the payment model,” he says. “It has been a manageable part for the most part and it needs to be maintained that way. Someone has to pay for fraud, and ultimately this is the consumer, often in the form of buried fees.

It’s a fact of life that there will always be some element of fraud, but TNS and our colleagues in the payments industry can minimise that by keeping technologies current.”

While developments such as chip and pin are welcome, as retail trends change so the nature of the fraud threat is constantly changing.

“Chip and pin has been beneficial to the cardholder present environment,” he explains, “but it gets complex as the proportion of card traffic originating over the phone or on the internet grows substantially. That’s where fraud is now pointed. Fraud in the present cardholder environment can be down to incompetence on the part of the cardholder or the merchant not following the correct procedure.

“Over the phone, or on the internet, it’s much more difficult to control, because if you have the card number and security code, you can do a lot of damage. This is where fraud will be focused, so the industry has to be one step ahead. It’s a risk, but I believe we can stay ahead of the curve.”

TNS’s secure network is used by leading retailers, banks, processors, telecommunications companies and the financial markets. Retailers, banks and financial institutions are all looking to deliver cost savings and improve communications between offices, suppliers and customers. As controls in the payment card industry become more extensive and complex, and fraud more sophisticated, the services offered by transaction management firms are increasingly in demand.

“We’re in a world of very strict controls that are moving beyond the acquirer to the merchant, and they will move further down the merchant stream over time. Merchants often don’t have the expertise or even the financial wherewithal to invest in that side of it. And yet they might have 10,000 transactions going through in a day, and they need to be suitably covered. Recent events at TK Maxx have sent ripples around the market place and we believe we can help a lot in that area.”

If this sounds like Collins is suggesting a consultancy element to the work of transaction management companies, it’s probably because he is. “We provide value added solutions and we understand the payment offer and how transactions need to be managed. With our knowledge and focus we can bring a huge amount of benefit to a business. We haven’t quite become consultants, but I think the value we bring has a certain consulting element.”

Collins argues that it’s important that retailers need to recognise the added value factor involved in transaction management services when comparing with apparently cheaper in house solutions. TNS charges large retailers a managed fee which includes all connectivity costs and transaction fees. It also acknowledges the merits of a traditional ‘pay per click’ based model, which works well for both parties if it’s a new business as it allows a customer to settle into a new service. “The click model has been very productive, but we continue to look at the effectiveness of our models. We go with what the market dictates and we recognise that if we go on a click based model that doesn’t compete well with an in house solution, then either our model is flawed or the customer isn’t taking into account all of their costs.

“That can be a problem. Say a company has 50,000 terminals and generates 50 million transactions. If they calculate the cost of the minutes associated with managing those 50 million transactions and compares it against what TNS does, they will more than likely be able to buy those minutes cheaper. But we don’t sell minutes – we sell managed transactions and there’s a hell of a difference between buying minutes from a telco and managing a network which enables you to manage the transactions flowing from your 50,000 terminals. That can be a battle for us – we need to ensure that customers compare apples with apples when doing a cost analysis. In the heat of the hunt, when you look at the volume of minutes we’re buying and the price we can buy them at and the scale that we’re bringing to market in terms of the number of transactions we’re managing, we’re satisfied the proposition will beat any in house solution once everything is taken into account.”

Mark Collins is Managing Director of Transaction Network Services (TNS) Ireland – he has more than 25 years’ IT and banking experience.