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HOTEL BUSINESS REVIEW

JANUARY FOCUS: Mobile Technology

 

mPOS Expected to Replace POS

By Michael Kasavana Emeritus NAMA Endowed Professor in Hospitality Business, The School of Hospitality Business MSU | January 2014

In May 2013, Pew’s Internet Project revealed that 91% of American adults owned a cell phone of which about fifty six percent (56%) possessed a smartphone. In addition, Pew’s research also noted that thirty-four percent (34%) of cellular phone users gained access to the Internet primarily via the device. Cell phones have been regularly used to get driving directions, send email, locate and play music, send and receive tweets, play games, maintain personal calendars, as well as snap and send photos. The current trend involves using mobile phone platforms to perform purchase transactions, enact money transfers, and track loyalty programming. The recent findings of Gartner Research provide solid evidence of the increasing popularity of mobile payments as the US projects $37 billion in m-commerce for 2013. Worldwide mobile payments, estimated at $235.4 billion for 2013, are projected to surpass $431 billion in 2015; and according to Juniper Research, global mobile payments will exceed $1.3 trillion by 2017. Although mobile payments are available in a variety of platform options and capabilities, to date there has been no consensus as to which payment platform will serve as the eventual, common payment standard. To date, mobile payments have no frontrunner platform emerging from a complicated tangle of competitors. It is for this reason that several workable platforms are reviewed in this article.

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*Source: http://pewinternet.org/Commentary/2012/February/Pew-Internet-Mobile.aspx*
**Payment Platforms** There are two adoption perspectives associated with mobile payments: 1- merchant adoption and 2- consumer adoption. From the merchant side, there is the issue of whether or not the mobile payment platform necessitates upgrading and/or replacing the retailer’s point of sale (POS) system in order to accept mobile transactions (mPOS). Hardware, software, and netware components are expensive and alterations or substitutions require capital expenditures and can be costly and time consuming. From the consumer side, the distribution of acceptable forms of payment may require the circulation of millions of new media to replace of legacy cards, fobs, and account authentication triggers. The time needed to complete a replacement process is an important element in the selection of a payment platform going forward. Mobile payment media and equipment must contribute to a high-level of security while providing a convenient and efficient process for checkout, promotions, and rewards. - **Near Field Communication (NFC)** NFC is a short-range contact-less technology embedded in a mobile device to function as a payment platform. Among the concerns associated with NFC payments is the requirement that merchants must install NFC-compliant POS equipment to accept payments. Additionally, there is also concern related to the inherent complexities involved in loading payment media into an NFC device. Unfortunately, to date the solid sales growth of NFC handsets has not been matched by the adoption of NFC payment services. In fact, many mobile operators support postponement of a widespread launch of NFC-based mobile payments into early 2014. The Strategy Analytics Wireless Media Strategies (WMS) report entitled "NFC Mobile Payments Forecast Update: 2013-2017” estimates 115 million NFC handset users will spend approximately $48 billion using NFC phones by 2017. In February 2013, handset producer Samsung announced formation of a strategic partnership with VISA Inc. but to date there is no secure payment service based on this business relationship. While adoption of contactless NFC-based payments at point-of-sale terminals has been slow, alternative methods of mobile payments through merchant friendly solutions (e.g. Bluetooth Low Energy (BLE) and QR coding) have gained traction and are beginning to fragment the mobile payment sector. It is important to note that the quiet success of ISIS, the NFC-supported mobile wallet, has also experienced successful implementation and testing. - **ISIS** ISIS is a joint venture between AT&T, Verizon, and T-Mobile that is expected to be available nationwide by the end of 2013. An ISIS mobile payment app is a no cost, contactless add-on to an NFC compatible mobile device. The mobile device must have an enhanced SIM card [or phone case with built-in antenna] to process and protect transactional data. The user creates an ISIS wallet account, downloads the app, selects a four-digit access PIN code, and then posts payment media to the ISIS wallet. One major advantage of ISIS over NFC is the fact ISIS features quicker settlement; enhanced consumer engagement; powerful location-based applications; reliable loyalty applications and promotional notifications. - **EMV** EMV is an open-standard set of specifications for smart card payments and acceptance devices, developed by Europay, MasterCard, and Visa in 1993. An EMV card contains a small embedded microprocessor that contains an operating system and one or more applications. In essence, an EMV card contains a miniature computer supporting multiple interfaces and applications that processes transaction information. Basically, EMV incorporates an application identifier (AID) that specifies card type (debit or credit) and is proprietary to each major network. The goal of EMV is to ensure wide-spread interoperability between chip-based payment cards and terminals. EMV is supported throughout Europe, Middle East, majority of Asia, Canada, Mexico, Brazil, Chile, and most of Africa. The US marketplace does not currently support EMV cards. While EMV represents a movement away from the magnetic stripe card to a more secure chip-enabled form of payment, it requires a costly change in infrastructure. According to a recent comscore.com study (Digital Wallet Road Map 2013), there are more than one billion credit and debit cards in circulation domestically. Since a vast majority of these cards contain a magnetic stripe, EMV replacement presents extreme difficulty. chip cards, which use encryption to generate unique codes each time a transaction is made, though the threat will not be truly eliminated until EMV cards no longer bear the magnetic stripe. EMV was devised by payment card companies to reduce fraudulent transactions by verifying the integrity of the payment reader along with the card’s embedded EMV chip. Unlike magnetic-stripe cards, EMV cards provide superior security for transaction settlement by authenticating an EMV card reader and an EMV card, against one another. Members of the EMV Migration Forum agree that the most significant concern with EMV conversion is the technological challenges involved in extensive POS updating as well as reissuance of payment cards by card issuers. The group believes that the implementation of EMV will reduce fraud, promote global interoperability, and provide a path to future payments innovation as an open standard. With about 1 billion Visa and MasterCard magnetic stripe credit and debit cards currently in US circulation, the Aite Group estimates a replacement distribution of at least 255 million EMV cards is needed for an effective implementation. The Aite Group foresees a 2015 deadline facing imminent postponement as the firm’s research projects the number of EMV cards circulated in the US through 2013 will total 8 million cards. Given implementation goals and current status of EMV circulation, Aite estimates a rollout of 120 million additional EMV cards in the US in 2014. Note: adding an EMV chip to a credit or debit card can increase the cost of the card by 75-99 cents; thereby raising the average cost of an EMV card to $1.60 per card. Variances in EMV card cost are dependent on the memory capacity of the EMV chip (per Perfect Plastic Printing Corp.).
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*Source: www.digitaltransactions.net*
- **Wallets** When a digital wallet is used for payment, the consumer relies on the capabilities of a physical device in lieu of a plastic magnetic-stripe or embedded chip card for mPOS transactions. It appears there is one general barrier to digital wallet adoption: awareness. It is a lack of awareness of purpose, acquisition, benefit, and account creation. Most industry practitioners estimate that one-half of consumers will adopt a digital wallet in the next few years; problem is identifying which wallet(s) will prevail. Presently, there are dozens of mobile/digital wallets in the mPOS marketplace. Below is a brief sampling of five digital wallets: PayPal, Google, Square, Paydiant, and Cover. *PayPal* A product receiving much attention in the mPOS space is PayPal’s Wallet that relies on Bluetooth Low Energy (BLE). BLE enables any device running Apple iOS to connect to any other device running Apple iOS (e.g. mobile phones, tablets, mPOS systems, etc.) By incorporating BLE into its solution, PayPal can enable a significant percentage of its 132 million customers (possessing Apple devices) to opt into a PayPal Wallet. Many payment eco-system experts perceive PayPal’s strategy as sufficiently interesting and disruptive. The PayPal BLE platform is referred to as Beacon and features geo-fencing capabilities. A major competitive advantage for PayPal is the ability to capture consumer payment data without requiring the shopper to physically do anything. Once Beacon detects a qualified device a notice is sent to the consumer to check-in to the PayPal app. As a result, the account holder’s name and photo should soon appear on the retailer’s mPOS terminal. The system may or may not rely on tokenization for transaction security. PayPal also provides a means for money transfers from a user’s checking account, debit card, or credit card account. *Google* Google Wallet has been designed to integrate with both iPhone and Android applications and enables users to shop online, in-store, or transfer money between account holders. The Google wallet securely stores credit/debit card accounts, promotions and offers, and can track loyalty rewards, including Google Play, and related merchant sites. Users can settle transactions with a Google Wallet account by using the ‘Buy with Google’ option at the mPOS. By simply selecting the 'Buy with Google' button, and verifying payment information, the consumer can complete a purchase transaction in just two mouse clicks. Additionally, a Google wallet app allows users to find discounts and deals from Google properties, such as Google Maps, Google Search, Google G+, and Google Offers as well as other sites across the web. A Google wallet can also be used to redeem accumulated points for immediate in-store or online rewards. Similar to PayPal, the Google wallet supports fund transfers from one user to another so long as the sender and receiver have valid Gmail accounts linked to a bank account, debit card, or credit card (wallet.google.com) account. RecentlyGoogle introduced platform support for NFC-based transactions through a technique termed “Host Card Emulation” or HCE. Host Card Emulation circumvents carrier restrictions that force the Google wallet to access the telephone company-controlled Secure Element layer. With HCE Android device apps emulate NFC smart cards that render a higher level of security for NFC transactions. *Square* A key feature of a Square wallet is its ability to enable account holder fund transfers from one debit account holder directly to another, free of charge. This application, referred to as Square Cash, allows users to exchange up to $2,500 in cash weekly through any email program instantly. This application is meant for peer-to-peer (P2P) transfers and not for merchant purchase transactions. With Square Cash, which is compatible with Visa and MasterCard debit accounts, users can only indirectly settle retail transactions (i.e. consumers split payments through interpersonal transfers) but cannot be used solely to settle retail mPOS transactions. Transfers are initiated as an email or email attachment or via a Square Cash mobile application. Only fund transfers between debit accounts are allowed. Square wallet has been described as a ‘card not present’ format thereby increasing the cost of settling payment transactions. Square (dongle) readers for iPad, iPhone, and Android devices are available free of charge and offer discounted merchant transaction fees. *Paydiant* Paydiant is a mobile wallet that works without NFC technology. Instead, Paydiant relies on Quick Response (QR) codes to initiate purchase transactions. Since QR coding moves mPOS transaction to the cloud, and away from insecure operations, it represents a uniquely secure solution for payments. With the Paydiant wallet, the consumer uses a smart phone to read a QR code displayed on a merchant POS terminal or kiosk. The code represents a transaction identifier and initiates a lead-through program that enables the user to select from among payment credentials stored on the Paydiant server. The app also contains a loyalty/rewards platform. Paydiant charges a small transaction fee as well as a merchant’s license. *Cover* Similar to Square Cash, a Cover wallet requires the consumer to employ a smart phone to settle mPOS transactions via money transfer. The Cover app, which launched in October 2013, presents a unique application of mobile payments in that it allows consumers to transfer and apply money balances as opposed to deferring payments via a bank card or other means. For example, with Cover a guest can simply dine in a restaurant, and settle the check to a debit account programmed for funds transfer between the account holder and the merchant (restaurant). As a result, the payment is sent directly to the restaurant’s financial account, thereby reconciling the transaction. **Alternatives** *Cashtie* Despite the fact most consumers own a mobile phone, not all point-of-sale terminals have the ability to acknowledge and process mobile transactions. To update POS systems to become mPOS compliant often results in costly changes at the point-of-purchase to enable NFC-based acceptance. As a result the time and cost involved in mPOS conversion may result in an expensive investment that might be difficult to recover. As an alternative platform, InComm has introduced a non-NFC solution that allows the acceptance of mobile payments and barcode-based transactions without requiring additional POS hardware components or software upgrading. The product entitled Cashtie Cloud Match, offers payment and coupon acceptance and works well with links to loyalty programs, digital wallets, and related acceptance applications. Remarkably, Cashtie Cloud Match appears capable of processing purchase transactions similar to established NFC-based solutions. Simply stated, Cashtie allows providers to instantly offer coupon solutions, including one-time-use coupons, to mobile users, without the need for NFC or other enhancements or upgrades. The Cashtie application programming interface ( API) requires that a retailer request a unique bar-code from the provider to enable transaction processing, coupon validation, and/or loyalty recordation. When the consumer scans the POS barcode with a mobile device, the Cashtie Cloud Match Service receives the transaction information and matches it to the retailer. The matched details are used for transaction settlement, discount application, or award loyalty points. Upon completion of matched processing, the transaction is switched to a pre-specified payment platform for reconciliation; all in real-time. Sensitive transaction data is exchanged in the cloud between the provider and the retailer using Cashtie Cloud Match. *Loop* Loop is a unique mobile solution that transforms the merchant-consumer experience by enabling the consumer to pay using Magnetic Secure Transaction (MST) technology at nearly any POS terminal, without requiring upgrading. Loop sends a magnetic transmission to a payment terminal’s magnetic stripe reader (within 4 inches) through an MST process that turns the magnetic stripe reader into a receiver, without upgrading the terminal hardware or software. Simply stated, Loop, to be released in early 2014 as a downloadable iOS and Android app, allows for mobile payments without card swiping or NFC signal exchange. With Loop, the consumer selects a payment card, that has been securely encrypted and stored in the mobile device, for use, positions the mobile device near the magnetic card reader and presses a transmit button on the mobile device. The secure magnetic stripe audio is sent and the card reader accepts the transmission as if the card were physically swiped. This communication is effective with nearly all POS terminals; exceptions being ATMs and gasoline pump payment devices. Similar to Square, Loop users can use a dongle plugged into a smart phone ($34 Loop fob) that can be placed in close proximity of a card reader, or a special Loop case device placed close to the reader, at the POS. By doing this, Loop turns the contact stripe reader into a contactless reader by emulating the strength of the magnetic signal produced by swiping the card through the reader (referred to as “contactless magstripe transmission”). The card is read as a contactless interaction without modification of the card reader. Loop thereby enables consumers to continue to use magnetic stripe cards in combination with a mobile phone, after updating the device with a proprietary add-on (customized accessory). Merchants can thereby promote the increased convenience and savings of mobile payments, without having to invest in expensive upgrades that tend to alienate consumers. Loop works with existing POS structure and therefore can be implemented at POS locations without investment. Acceptance is based on existing equipment. Loop-enabled phones parallel sliding a magnetic stripe card, what retailer sees on POS screen is the same as when the card is swiped at the POS terminal. As a card present transaction, the data transferred between Loop and POS is secure since the payment data is encoded and remains anonymous to the merchant and payment processor. The Loop platform includes coupons, offers, and other incentives. Magnetic stripe card is loaded into the phone and then activation moves the data to the POS terminal. For a Loop POS transaction, the consumer simply holds a mobile device near the reader and presses the transmit button on the Loop device. With Loop, a consumer can load credit, debit, gift, membership and loyalty cards into a fob or specially designed charge case. Additionally, the consumer can scan in identification cards, membership cards, receipts and passwords. Loop, with a planned launch in early 2014, plans to sell the Loop fobs near the point of sale in merchant locations. The devices may be sold already loaded with the merchant’s loyalty and rewards programs.
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*Loop Devices Source: techcrunch.com*
**Summary** mPOS payments provide an unprecedented opportunity for hotels and restaurants to better understand business trends, consumer engagement, product interaction, retention and loyalty activities, as well as specialized analytics. It won’t be long before mPOS replaces POS as the industry settlement standard. [1]: http://www.hotelexecutive.com/images/business_review/aaaa.jpg [2]: http://www.hotelexecutive.com/images/business_review/a8f3b_aaaa.jpg [3]: http://www.hotelexecutive.com/images/business_review/aaaaaa.jpg

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We expect all users of our Site to take responsibility for their own actions and cannot and do not assume liability for any acts of third parties which take place at our Site. By utilizing the Good Samaritan procedures set forth herein, you waive any and all claims or remedies which you might otherwise be able to assert against hotelexecutive under any theory of law (including, but not limited to, intellectual property laws) that arise out of or relate in any way to the content at hotelexecutive or our response, or failure to respond, to a complaint.

E. Investigation/Liability Limitation

You agree that we have the right, but not the obligation, to investigate any complaint received. By reserving this right, we do not undertake any responsibility in fact to investigate complaints or to remove, edit, disable or restrict access to or the availability of Content. We will not act on complaints that we believe, in our sole discretion, to be deficient, incomplete, or otherwise questionable. If you believe that Content remains on HotelExecutive which violates your rights, Your sole and exclusive remedy shall be against the user or other party responsible for said content, not against HotelExecutive. your sole and exclusive remedy against HotelExecutive shall be to terminate your use of HotelExecutive and service.

Digital Millennium Copyright Act Compliance. As set forth in Subsection (b), you must contact our agent if you believe that a work protected by a U.S. Copyright which you own has been posted on our Site without authorization or that our Site, in some material way, contributes to its infringement. It is our policy in appropriate circumstances, if possible, to terminate the access rights of repeat infringers and other users who use HotelExecutive in an inappropriate or objectionable manner.

9. COOPERATION WITH LAW ENFORCEMENT

HotelExecutive reserves the right to fully cooperate with any law enforcement authorities or court order requesting or directing HotelExecutive to disclose the identity or other information regarding any user or member alleged by any governmental entity to be using HotelExecutive or any Content or materials available in, at, through or in association with HotelExecutive in violation of any law or regulation, or in violation of this Agreement, including, without limitation, the posting of e-mail messages, or publishing or otherwise making available any such materials. By accepting this agreement you waive and hold harmless HotelExecutive from any claims resulting from any action by HotelExecutive during, or as a result of, its investigations, and from any actions taken as a consequence of investigations by either HotelExecutive or law enforcement authorities

10. APPLICABLE LAWS, VENUE, JURISDICTION & MANDATORY ARBITRATION

If any provision(s) of this Agreement is held by a court of competent jurisdiction to be contrary to law, then such provision(s) shall be construed, as nearly as possible, to reflect the intentions of the parties with the other provisions remaining in full force and effect. HotelExecutive's failure to exercise or enforce any right or provision of this Agreement shall not constitute a waiver of such right or provision unless acknowledged and agreed to by HotelExecutive in writing. The section titles in this Agreement are solely used for the convenience of the parties and have no legal or contractual significance. This Agreement may be assigned in whole or in part by HotelExecutive. This Agreement may not be assigned in any manner by you without the express, prior written permission of HotelExecutive.

Any and all disputes or controversies of any kind, including but not limited to any performance, duty, obligation or liability arising under or related to this Agreement which are not first resolved informally, shall be determined by binding arbitration in San Francisco, California, in accordance with the rules of the American Arbitration Association. The final award in any such arbitration proceeding shall be subject to entry as a judgment by any court or competent jurisdiction, provided that such judgment does not conflict with the terms and provisions hereof. The jurisdiction of the arbiter (or arbiters) with respect to legal matters shall be limited only by the statutory and common law of the State of California and the United States.

Notwithstanding the foregoing, any and all disputes, which the parties cannot informally resolve, regarding the scope of issues or matter with the jurisdiction of the arbitrator, shall be resolved by a separate dispute resolution process whereby HotelExecutive, in its sole discretion shall elect the dispute to be resolved by either (1) a court of competent jurisdiction in the State of California or (2) a panel of three new arbitrators.

This Agreement shall be governed by and construed in accordance with the laws of the State of California notwithstanding any conflict of laws provisions. You and HotelExecutive agree that the venue for all legal disputes, controversies, actions of any kind arising under or related to this Agreement shall be San Francisco, California. You and HotelExecutive further agree that in case of any litigation regarding this Agreement, you irrevocably and unconditionally (i) consent to submit to the exclusive jurisdiction of the state and federal courts in the County of San Francisco, California for any litigation or dispute arising out of or relating to this Agreement, (ii) agree not to commence any litigation arising out of or relating to this Agreement except in the California Courts, (iii) agree not to plead or claim that such litigation brought therein has been brought in an inconvenient forum, and (iv) agree the California Courts represent the exclusive jurisdiction for all litigation relating to this Agreement.

11. MEMBERSHIP FEES

Hotel Business Review Subscriptions

If you choose to purchase a subscription, member subscription payments can be made in U.S. Dollars, as well as a variety of international currencies. Membership terms are Annual Recurring, and Monthly Recurring. The Annual Recurring subscription is an annual commitment and subscribers will be charged each consecutive billing cycle. Annual Recurring subscriptions can be cancelled after the first billing cycle and within 30-days of the billing date for a full refund. Monthly Recurring subscriptions are ongoing and subscribers will be charged each consecutive monthly billing cycle. Monthly Recurring subscriptions can be cancelled after the first month and within 7 days of the monthly billing cycle for a full refund.

12. PAYMENT AUTHORIZATION

Payment for the services provided to you in, at, through or in association with HotelExecutive may be made by automatic credit card, debit card, direct debit, bankwire or Paypal and other approved payment means offered in, at, through or in association with HotelExecutive, and you hereby authorize HotelExecutive and its agents to transact such payments on your behalf.

You hereby authorize HotelExecutive's Internet Payment Service Provider to charge your credit card to pay for your membership to HotelExecutive. You further authorize HotelExecutive's Internet Payment Service Provider to charge your credit card for any and all purchases of products, services in association with HotelExecutive. You agree to be personally liable for all charges incurred by you in association with your access or other use of any content provided by HotelExecutive or any third party in association with HotelExecutive. You acknowledge and agree that your liability for all such charges shall continue after termination of your access or any type of membership arrangement with HotelExecutive.

In the event that you have chosen to have your membership automatically rebilled, unless and until you notify HotelExecutive that you wish to cancel or terminate your membership to HotelExecutive, you hereby agree and authorize HotelExecutive's Internet Payment Service Provider to automatically renew your membership to HotelExecutive on a continuing basis and to charge your credit card (or other payment means you have selected) to pay for the ongoing cost of your membership. You hereby further authorize HotelExecutive's Internet Payment Service Provider to charge your credit card (or other approved payment means you have selected) for any and all purchases of products, services and entertainment provided to in, at, through or in association with HotelExecutive.

13. PRIVACY POLICY

The following is the Privacy Policy for HotelExecutive

We can be reached via telephone, email, or online at our contact page. When you visit our site we do not log any information regarding your domain or email address. Information Sharing: We do not share user information with any third parties other than via press release distribution as described below.

Hotel Newswire is a newswire service that distributes press releases on behalf of our users. If you decide to submit a press release for distribution through our system we will transmit your entire press release including any personal information therein contained to our media contacts and online distribution points including search engines. This is the only redistribution of your information that we engage in. Your submission of press releases through our system indicates consent with this policy. The information we collect during your registration process is used to notify users about updates to our service and inform users of any special events hosted by Hotel Newswire. This information is not shared with other organizations for commercial or non-commercial purposes.

Cookies: Our system requires the use of cookies to enable the user to log back into our website to access information from the newswire, without having to log in each time using the required username and password.

If you do not want to receive email from us in the future, please let us know by following instructions included in our communication with you. Users who supply us with telephone numbers online may receive telephone contact from us regarding their account, or informing them of new products and services available on the HotelExecutive website. If you do not wish to receive such telephone calls, please edit your account and remove your phone number from your account profile. This can be done from your user account menu.

Ad Servers: We do not partner with or have any relationship with any ad server companies. From time to time, we may use customer information for new uses not previously disclosed in our privacy notice. If our information practices change at any time, we will post the policy changes to our website to notify you of these changes and provide you with the ability to opt out of these new uses. If you are concerned about how your information is used, you should check back at our website periodically.

Upon request we provide site visitors with access to all information (including proprietary information) that we maintain about them. Users can access this information by logging in to their account.

Security: We always use industry-standard encryption technologies while transferring and receiving user data exchanged with our site. We have appropriate security measures in place in our physical facilities to protect against the loss, misuse, or alteration of information that we have collected from you on our site. We do not store credit card information in our systems.

If you feel that this site is not following its stated information policy, you may contact us.

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