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SpendTalkThe latest payments, eCommerce and security trends from Bank of America Merchant Services

SPRING | 2019

2 | SPENDTALK | SPRING 2019

Welcome back to SpendTalk from Bank of America Merchant Services

At Bank of America Merchant Services, we’re often asked for our perspective on the trends that are reshaping global commerce. Throughout the year, in face-to-face meetings, publications and industry forums, we eagerly offer up our proprietary analyses and insights to help businesses make sense of rapidly evolving changes in consumer behavior.

SpendTalk is a seasonal publication from Bank of America Merchant Services that shares our take on a number of these trends. In this edition, we dive into ways businesses can use technology to streamline their eCommerce operations and also take a look at how retailers can harness the power of data. In addition, we provide a quick roundup of the key points from our recent cybersecurity webcast, as well as an overview of why you should consider more than click-through rates when measuring campaign success.

Consider SpendTalk a springboard for discussion with your Bank of America Merchant Services business consultant. It’s Bank of America Merchant Services’ privilege to serve you and help your business stay on top of the latest payments, eCommerce and security trends. Let’s keep the conversation going.

SPRING | 2019

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https://merch.bankofamerica.com/enterprise-merchant-services/solutions/


ContentsLess hassle, lower costs: Using tech to streamline eCommerce . . . . . . . 4

New tech helps companies harness the power of data . . . . . . . . . . . . 6

4 key observations from our cybersecurity webcast . . . . . . . . . . . . . 8

Consider more than click-through rates for campaign success. . . . . . . . 9

What businesses need to know about accepting real-time payments . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . 11


Less hassle, lower costs: Using tech to streamline eCommerce A more efficient approach to eCommerce can pay considerable dividends.

As technology advances, it continues to reshape the retail landscape. Consumers spent more than $513 billion online last year, up 14 percent from 2017.1 With more commerce moving online, businesses face growing demands for a seamless experience; attempting to meet that challenge often leads to complicated, expensive and inadequate systems on the back end.

To meet consumer demands, businesses themselves must have a proven process in place. By streamlining their eCommerce operations, companies can increase their overall efficiency, lower their costs and compete in the marketplace.

Consolidate technology Many large companies find themselves juggling multiple vendors as they try to optimize their eCommerce website. Consolidating to a single eCommerce provider can save money and increase efficiency by dramatically reducing the time a business spends managing contracts, relationships and separate sets of code.

“People often forget the back end,” says Kevin Lotfi, senior vice president of global solutions at Bank of America Merchant Services. “Using seven different acquirers means logging in to each site to access seven different statements that look and feel completely different.”

The complexity only increases for companies that are operating in multiple countries, and companies often find themselves paying for overlapping services. When companies whittle down their list of vendors and work with one provider for all their needs, they can simplify their operations, reduce IT staffing and lower costs.

Despite the potential for cost-cutting, some businesses find the prospect of consolidating vendors daunting — and for good reason. Trimming the list of vendors to work with a single provider often involves severing long-term relationships with other providers and undoing decisions that were made years ago. But Lotfi says businesses have a lot to gain by working with an expert team that can act as a partner in the transition.

For large, multinational companies, Bank of America Merchant Services typically starts with a pilot period, testing functionality with just a fraction of a company’s eCommerce customers. That gives the company and the Bank of America Merchant Services team a chance to ensure a successful integration before launching a full switch.

Integrate with omni-channel tokenizationTokenization presents another challenge for businesses. Tokens that represent a customer’s credit card information help keep critical customer data safe from hackers and data thieves. But


when in-store and eCommerce systems assign different tokens to the same credit card, the non-matching data means businesses face a gap in their omni-channel data.

Companies grappling with this problem are dealing with both an inefficient system and an incomplete view of their customers. Businesses should consider using token services that give them a single view of the customer across all channels. These systems offer businesses an efficient way to create a truly integrated customer experience.

“Selecting a common token service avoids the need for two separate tokens for a single customer,” says Wil Cothran, senior vice president of business development integration at Bank of America Merchant Services — and that’s a must-have for companies that are selling in store and online.

For example, if one token is linked across the board, a customer can complete an

online order with a debit or credit card and then return the item in store with the swipe of a card.

“If you have both online transactions and a brick-and-mortar store, you need a technology that can share a token between the two,” he says.

The solution also gives companies a comprehensive understanding of their customers — complete with data showing their shopping habits, which payment methods they use and how they use reward points and loyalty programs.

Let customers buy online, pick up in storeDelivery is another wrinkle in eCommerce that many businesses are experiencing. While consumers enjoy receiving products delivered right to their doorstep, Cothran says, that method isn’t cost-effective for companies. That’s why many are offering the option of “buy online, pick up in store,” or BOPIS.

This option can cut businesses’ shipping costs in half by eliminating expensive last-mile delivery costs.2 And there’s another value for businesses: It gets shoppers in the door.

“You’re driving an extra visit to your business when it’s increasingly hard to get customers into the store,” Cothran says.

Being inside the store could lead customers to make impulse purchases. And just offering BOPIS may help improve customer loyalty — 65 percent of shoppers who have used BOPIS say it improved their experience.3

The right technology can go a long way in reducing costs and helping a business run more efficiently. And when it comes to eCommerce, streamlining technology systems solves problems and eliminates the overhead needed to manage a complex, disjointed back end. The result? Smoother transactions for consumers and fewer headaches for businesses.

Are there ways your business can streamline its eCommerce operations?

THOUGHT STARTER

“Businesses should consider using token services that give them a single view of the customer across all channels.”


New tech helps companies harness the power of dataRetailers collect massive amounts of data from customers. Here’s how to make the most of that digital information.

Of all of the technological advancements that have shifted the retail landscape in recent years, one of the most striking is the sheer volume of customer data available to businesses. Companies can gather information on a customer’s demographic, location, buying patterns and even personal spending habits.

All of that information represents a valuable commodity that businesses can use to create a more intuitive and personalized experience for consumers. And as retailers work to set themselves apart from their competitors, data can be a considerable differentiator.

“The clients we work with are concerned with the growing complexities of their markets and refining their value proposition to their customers,” says Raoul Aranha, vice president of security, fraud, and analytics services at Bank of America Merchant Services. “They know the data can point them in the right direction.”

To take full advantage of that data, however, businesses need two things: the technology to help them effectively collect and analyze that data, and strategies to protect that critical personal information.

The benefits of new techFor retailers, the power of data is clear: Each piece of

information they collect helps them paint a more complete picture of an individual customer, from their purchasing behaviors to the types of retail experiences they prefer. Companies may collect data directly from their customers as well as through third-parties, payment partners and others.

Aggregating that data can give companies a more holistic view of their customers, from individual buying preferences to broader retail trends, and help them make smarter operational decisions. And if retailers don’t have the capabilities to aggregate data, partners such as payment service providers may be able to help.

Once they understand that data, businesses can turn to emerging technologies to leverage that information. For instance, an online retailer can use behavioral algorithms that rely on machine learning to make more sophisticated product

“They know the data can point them in the right direction.”


suggestions to consumers. And a coffee shop can use mobile-based location services to push coupons to smartphones of people passing by.

“This just-in-time approach is getting more popular for the more competitive retailers,” says Aranha. “It can drive up connections with the brand as well as sales.”

Protection mattersBut Aranha also notes that while technology is letting them do more with data, companies also understand the vitality of protecting customer data. That means investing in security and clearly communicating to consumers how their data is handled, stored and used.

When organizations fail to keep data safe, the consequences can be severe. Large companies pay nearly $9 million on average to clean up the damage after a data breach.4 And

companies’ reputations are on the line: More than 50 percent of customers say they’re more loyal to companies that make a commitment to protecting their data.5

Companies are also beginning to face stricter regulatory environments. New regulations enacted in the European Union give consumers more say about how companies can collect and use their personal data, and lawmakers in California recently passed similar legislation that will be enacted in 2020.

Amid the direct risks of data breaches and the challenges of tighter consumer data rules, businesses should take the opportunity to reevaluate their data practices, including what information they collect from consumers and how they protect that data. The first step is ensuring they fully understand the breadth of personal data they store in-house or with a third party. That includes knowing what data is collected, how it’s secured and — most importantly — how that data is used.

Does your business have the tools it needs to effectively analyze your data and protect your customers’ personal information?

THOUGHT STARTER


4 key observations from our cybersecurity webcastIn 2018, on average, a data breach cost companies $3.86 million globally, up more than six percent from the year before.⁶ Bank of America Merchant Services recently hosted a cybersecurity webcast to help businesses recognize current trends, tactics and techniques cybercriminals are enacting to access payment card data, and offered insights to help companies safeguard their payment environments. Here are four key observations:

1 The difference between fraud and a data compromiseIn its literal sense, fraud is a criminal deception intended to result in financial gain. In the payments industry, fraud is a result of identity theft. Fraud can occur when a physical debit or credit card is stolen, or it can occur on eCommerce sites when stolen data is used to make fraudulent purchases.

A data compromise involves a breached system or network environment in which cardholder data is processed, stored or transmitted. There are three types of breaches: physical, skimming and electronic.

In a physical breach, sensitive information like documents or files on a computer can be accessed if the information is not physically secured. In a skimming scheme, fraudsters place devices (called skimmers) over legitimate card readers that then read, and steal, card data.

Finally, an electronic breach could be the result of a user falling victim to a phishing email. In these cases, the email sender is typically disguised as a trustworthy entity, tricking the user into believing its legitimacy. By opening the email and following the prompts, a user unknowingly gives hackers access to download personal information.

2 How cybercriminals operateIn addition to deploying phishing emails, cybercriminals are experimenting with new tactics to gain entry into businesses’ private systems. They’re targeting internet-exposed remote access systems, conducting network reconnaissance using diagnostic tools and creating custom attack scripts inside networks.

Once they’ve accessed the system, cybercriminals use malware to extract payment card data and remove any trace of their activities. Using these techniques, cybercriminals are able to steal passwords, credit card numbers, bank account information and social security numbers. They then monetize the payment card data by using it to commit fraud.

3 As eCommerce grows, so does card-not-present fraud With global digital commerce transactions projected to reach $5.8 trillion by 2022,⁷ more fraudsters are looking for ways to hack into businesses’ online environments. And they’re succeeding — fraud volume targeting digital goods compared to physical goods is at an all-time high of 36 percent.⁸ These fraud schemes can be in the form of account takeovers, identity theft and reshipping.

As cybercriminals begin to focus more on infiltrating eCommerce sites, businesses must rely on enhanced security tools to protect customer card data.

4 Consider a holistic fraud and security strategyFraud can occur at any stage of the payment lifecycle both in-store and online. For this reason, a comprehensive fraud and security strategy includes multiple lines of defense.

To help avoid accepting fraudulent transactions, incorporate machine learning tools to help prevent fraud in real time. The right pre-authorization setup can aid in reducing direct fraud costs and increasing revenue by preventing false positive card declines. Rigorous requirements make dispute management cumbersome and costly for businesses; to protect card data after the transaction, automate elements of your post-authorization fraud prevention strategy to help increase effectiveness and lower costs.

For card-present transactions, Bank of America Merchant Services recommends implementing data encryption, tokenization and EMV® technology to help limit the effects of a data breach. Achieving and maintaining compliance with Payment Card

Industry Data Security Standards (PCI-DSS) is another way to help protect your business, reputation and customers from criminal activity.

For card-not-present transactions — particularly those in the eCommerce space — we recommend enacting fraud mitigation tools, consumer authentication, velocity filters, Address Verification Service (AVS) and card security codes to help keep your eCommerce site safe from cybercriminals. Using just one fraud tool isn’t enough; layered fraud mitigation is essential to help protect against fraudsters in an eCommerce environment.

If you’d like to receive invitations to our educational webinars, please email [email protected]

How is your company protecting your customers’ payment data, both in-store and online?

THOUGHT STARTER


Consider more than click-through rates for campaign success

It’s every marketer’s dream: a catchy slogan with dynamic visuals that are certain to not only catch a consumer’s attention, but live in the back of their mind for days or weeks to come. What can quickly distract from that dream, however, is tracking how those marketing efforts impact sales.

In online advertising specifically, click-through rate (CTR) is often used to measure a marketing campaign’s performance. While CTR can provide insight into the amount of consumers who engage with an advertisement, it’s difficult to determine whether those interactions increased sales.

Bank of America Merchant Services’ Solution Partner, Commerce Signals, helps bridge that gap by allowing companies to connect digital advertising impressions to their aggregated payment transaction data. Businesses can then use that information to measure a marketing campaign’s impact on sales.*

In a case study conducted by Commerce Signals, a top U.S. retailer used the marketing insights provider’s analysis to measure incremental sales driven by a series of digital marketing tactics. It found that three of the 10 tactics helped increase sales lift both in-store and

online. The chart below illustrates the percentage of sales lift the retailer would have missed — more than half — if it focused solely on CTR optimization as the main metric for success, compared to Commerce Signals’ method.

line item click-through rate sales lift insights

Tactic 1 0.55% 0.6%

Tactic 2 0.52% 0.8%

Tactic 3 0.50% 2.2%

Tactic 4 0.49% 3.9%

Tactic 5 0.49% 0.8%

Tactic 6 0.48% -0.8%

Tactic 7 0.35% -1.0%

Tactic 8 0.33% 2.4%

Tactic 9 0.32% 0.1%

Tactic 10 0.28% -1.0%

1.2% Lift with CTR optimization

3.0% Lift with sales optimization

The highest CTR did not drive a significant sales lift

The highest sales lift does not stand out with CTR

A great sales lift tactic may have been cut by a CTR focus

More than doubleThe sales lift vs CTR optimization when

spend was shifted using Commerce Signals

Data provided by Commerce Signals based on results for their clients and is not specific to Bank ofAmerica Merchants Services’ clients. Results may vary.


The Internet Advertising Bureau UK (IAB) is one of the strongest advocates for additional campaign measurement methods, going so far as to send a letter to more than 100 popular brands asking them to “adopt better measurement standards for online advertising.”⁹ Describing CTRs as a “vanity metric,” the IAB claims CTRs fail to provide a holistic view of a campaign’s performance. Instead, it recommends integrating multiple tools to provide an actionable insight at each point of the marketing journey.10

“By focusing solely on your click-through rate, you may miss improving upon elements that can significantly impact lead acquisition,” said Monica Kozak, senior vice president of digital strategy and execution at Bank of America Merchant Services.

“While attention to CTR is important, it’s also critical to examine the quality of the leads you’re generating. The amount of users clicking through is insignificant if they’re not converting.”

In addition to CTRs, optimizing based on factors including the creative messaging, ad type, customer segment or geography could contribute to a greater profit. These should also align with the campaign’s overall objective.

Fast access to the campaign’s performance is vital to growing sales as well. When campaign performance insights are delivered across digital channels in near-real time, marketers can pivot mid-campaign and adjust their tactics to better serve the business and customers.

While CTR can be an indicator of success for online marketing campaigns, it should not be the sole factor. To maximize the impact of a marketing campaign spend, analyze the tactics that are driving sales and optimize accordingly.

* Banc of America Merchant Services LLC and Commerce Signals, Inc. are separate, unaffiliated companies. Although their services are complementary, they are provided by each provider independent of the other under separate contracts between the merchant and the respective provider. All descriptions of the Commerce Signals services described in this article are provided by Commerce Signals.

“By focusing solely on your click-through rate, you may miss improving upon elements that can significantly impact

lead acquisition.”


What businesses need to know about accepting real-time paymentsFaster delivery. Faster networks. Faster payments?

In recent months, the desire for faster or even real-time payments has been a hot topic in the industry. Last fall, new rules expanded same-day ACH (Automated Clearing House) capabilities,11 which enable electronic payments to be debited directly from a customer’s account. In addition, at the end of 2018, Walmart and Target asked the Federal Reserve to implement a solution to help companies get paid faster.12

Robin Reodica, product management executive at Bank of America Merchant Services, has kept a close eye on this quickly evolving corner of the payments ecosystem. In this Q&A, Reodica shares his insights on recent innovations in real-time payments and how businesses can best leverage them.

Q. What does the term “real-time payments” mean?Real-time payments, also known as faster payments, have been described by the U.S. Faster Payments Council as payments in which the transmission of the payment message and the availability of final funds to the payee occur in real time or near-real time.

Examples of these solutions in the U.S. are same-day ACH, where funds are made available to the recipients by 5 p.m. local time if disbursements were sent by the daily cutoff times, and real time payments, which process each transaction disbursement posted in near-real time.

Real-time payments also allow the recipient of the funds to access their money 24/7/365. With advancements in

payment technologies and channels such as mobile that are always connected, consumer and business requirements have changed, and different solutions from traditional and upstart players are emerging.

Q. How did real-time payments come about?Since the beginning of electronic payments, consumers and businesses have been requesting faster and faster access to funds.

Due to more manageable and capable systems, the international markets have been rolling out solutions within their local markets in the past decade.

In 2008, for example, Pay.UK (a retail payments authority in the U.K.) went to market with its faster payments platform

where customers can schedule single, recurring and forward-dated payments. Corporate entities can also securely send payment instructions any time of the day for processing and immediate funding to beneficiaries.

In 2014, Singapore introduced 24/7 bank-to-bank transfer transactions through its Fast and Secure Transfer (FAST) solution13, and Vocalink, a Mastercard real-time payments solution, has gained a foothold in the European Union.14

In 2018, Australia introduced its New Payment Platform (NPP). This service is similar to Zelle, a payment method introduced in the U.S. in 2017 that allows bank customers to move their money electronically with email addresses or mobile phone numbers.


Q. You have already talked about the international market for real-time payments. What about the U.S. market?It is apparent that the U.S. market needs to have a faster payments solution to compete in the global market and to meet the expectations of consumers and businesses.

Some of this work is already underway. A Federal Reserve task force started in 2015 recommended more collaboration between financial institutions, which is reflected in the Zelle product. Additionally, Nacha, an association of financial institutions, completed its three-phase rollout supporting credit, debit and rule updates to support same-day payments for payees. The Clearing House, another banking association, also has a real-time payments (RTP) system that can manage bank-to-bank payments.

We’ve seen reports of increased adoption of Zelle and same-day ACH. Both products are starting to play a more prominent role in the business-to-consumer (B2C), government-to-consumer (G2C), and business-to-business (B2B) spaces.

Q. What impact do you think real-time payments will have on the overall payments ecosystem?Real-time payments solve the longstanding slower processing times of the past and speeds up innovation. Initially, however, the impact of implementing faster payment solutions will require significant investments and time, as organizations transition from past practices and systems.

It will be a similar impact for businesses and acquirers who use legacy POS equipment and system technologies. After making upgrades, however, organizations can support new innovations (API integration, for example) and more quickly implement solutions (Agile methodologies) for their customers.

“It is apparent that the U.S. market needs to have a faster payments solution to compete in the global market and to meet the

expectations of consumers and businesses.”


MethodologyBank of America Merchant Services SpendTalk report does not indicate nor represent Bank of America Merchant Services’ financial performance.

SpendTalk is provided as a courtesy and is to be used for general information purposes only. No representation or warranty, express or implied, is made as to the accuracy or completeness of such information and nothing contained herein is, or shall be relied upon as, a representation, whether as to the past, the present or the future. Bank of America Merchant Services assumes no liability for loss or damage as a result of your reliance on information in this publication. Our goal is for the content within this publication to be accurate as of the date this issue was printed. We do not guarantee the accuracy or completeness of the information presented and assume no obligation to update or otherwise revise these materials.

About Bank of America Merchant ServicesBank of America Merchant Services connects businesses and their customers by doing payments better. The company delivers payments, eCommerce and security solutions, as well as consultation services, to businesses throughout the United States, Canada and Europe. It processed more than 17.3 billion transactions at approximately 700,000 merchant locations.15 The company is a joint venture that combines the technology and innovative products of First Data with the relationship strength and prominent global brand of Bank of America. To learn more, please visit merch.bankofamerica.com.

EMV is a registered trademark in the U.S. and other countries, and an unregistered trademark elsewhere. EMV® is a registered trademark owned by EMVCo LLC.1 U.S. Department of Commerce, March 2019. https://www.census.gov/retail/mrts/www/data/pdf/ec_current.pdf2 Baymard, “Cart Abandonment Rate,” 2018. 3 National Retail Federation, “Consumer View,” winter 2018.4 NetDiligence, 2018 Cyber Claims Study. https://rsmus.com/content/dam/mcgladrey/pdf_download/wp_0119-netdiligence-cyber-claims-study.pdf5 Salesforce Research, “State of the Connected Customer: Second Edition,” 2018. https://www.salesforce.com/blog/2018/06/digital-customers-research.html6 Ponemon Institute, 2018 Cost of a Data Breach Study7 451 Research, “Global Unified Commerce Forecast,” 2018.8 LexisNexis, “2018 True Cost of Fraud Study for the Retail Section,” 2018.9 Omar Oakes, Campaign, “IAB accuses advertisers of being ‘clickheads’ over use of click-through rates,” 2019. https://www.campaignlive.co.uk/article/iab-

accuses-advertisers-clickheads-use-click-through-rates/1525373 10 IAB UK, “Measuring Digital Advertising in a Multi-Media Context,” 2019. https://www.iabuk.com/sites/default/files/public_files/IAB_Measurement_Toolkit_

Online%20%284%29.pdf11 PYMNTs.com, “NACHA Approves Expansion of Same Day ACH,” 2018. https://www.pymnts.com/news/payment-methods/2018/nacha-expansion-same-day-ach/12 Andriotis, Annamaria, The Wall Street Journal, “Walmart and Target urge the Fed to speed debit-card payments,” 2018. https://www.marketwatch.com/

story/walmart-and-target-urge-the-fed-to-speed-debit-card-payments-2018-12-0613 The Association of Banks in Singapore, “FAST – Fast and Secure Transfers,” 2018. https://abs.org.sg/consumer-banking/fast 14 Mastercard, “Vocalink Powers Real-Time Payments Service in the U.S.” 2017. https://newsroom.mastercard.com/press-releases/vocalink-powers-real-time-

payments-service-in-the-u-s/15 Per the Nilson report, March 2019, Issue #1149 and Bank of America Merchant Services data, March 2019

Learn more

https://merch.bankofamerica.com/enterprise-merchant-services/solutions/

merch.bankofamerica.com

© 2019 Banc of America Merchant Services, LLC. All rights reserved. All trademarks, service marks and trade names referenced in this material are the property of and licensed by their respective owners. Merchant Services are provided by Bank of America, N.A. and its representative Banc of America Merchant Services, LLC. Banc of America Merchant Services, LLC is not a bank, does not offer bank deposits, and its services are not guaranteed or insured by the FDIC or any other governmental agency.

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