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Letter from the CEO: Collaborating for a Better Outcome (MAG Quarterly- Volume Eight, Issue Two)

By John Drechny, CEO, Merchant Advisory Group

July 1, 2020

When I spoke at the MAG’s mid-year conference regarding the need for the industry to collaborate to bring about a better outcome for our mutual customers, I could have never imagined how true this would become. Since our conference in February, the world has become a much different place as we battle the Covid-19 pandemic. 

You, our members, have been impressive in your response to the changing business environment by implementing solutions in record speed to protect both employees and customers, ensuring America has the resources it needs to survive during the multitude of stay in place orders, and reacting instantly to the call of help in the testing for the disease by setting up drive-thru testing areas in your parking lots. You have also reduced the number of touch points required for customers and employees to complete transactions and stood up new business models to turn your businesses in viable solution as seating areas have been closed.  Thank you and your retail heroes for once again stepping up in a disaster situation to provide critical services even though it requires facing increased risk. 

While the fight to lower the impact of the pandemic continues, the need to collaborate has increased. Most networks have agreed to delay the liability shift on EMV implementation at Automated Fuel Dispensers until April 2021. All of the networks delayed the implementation of the April Business release, with Visa recently agreeing to delay all interchange and fee changes until April 2021 (with the exception of a decrease in interchange for in-store grocery transactions scheduled for July 2020). Excessive chargeback programs have been adapted for businesses experiencing high levels of cancellations. Visa also announced they will refund fees for chargebacks and refunds which are related to Covid-19. American Express has increased their threshold in which a PIN is required on contactless transactions and increased the number of days merchants have to reply to chargebacks. Through the working groups within the MAG, we identified many of these challenges and then collaborated with the networks to find solutions which helped relieve some of the pressure on merchants.

Contactless has also become more top of mind with consumers and merchants, but it only solves for not having to insert a card. Meanwhile, solutions like order online and pick up in store or activating a pump by scanning QR code with a phone completely remove the need to interact with a terminal and, in many cases, associates. Restaurants have been innovative in implementing carryout systems, which allow for the payment to take place before the customer arrives to pick-up their order in addition to contact-free delivery. Grocers have implemented many new models, and some completely remove the need to stop at a traditional checkout.

As society makes progress with testing of and treatment for the virus, some things will return back to normal but other shifts will be more permanent. Customers want to have a seamless transaction in which they have less touchpoints, and that may not change. Merchants’ ingenuity to alter online transactions processes meet new customer demands; however, their systems were not designed for these purposes. Both the processes and rules surrounding them need to be updated to allow for the seamless transactions to take place. Approval rates need to be at par with in-store transactions. We also need to collaborate on removing fraud from the system and reducing the cost of these types of transactions, so they are consistent with the in-store transactions they are replacing.

These changes can only be accomplished by all parties within the ecosystem working together. Only the merchants understand how the customer uses a payment to purchase merchandise just like only the issuers see how the account is used across several different merchants. We should strive to build a system which creates greater efficiencies and securities. All parties should also participate in the new economics to incent adoption. When only one party develops a system and asks the rest of the industry to adopt the new processes, we see slow uptake. By allowing everyone to participate, all parties will have buy-in; and adoption will come naturally.

We have an opportunity to collaborate in a manner which provides a significant improvement to our mutual customers. Let’s find ways we can work together and solve the complex issues which produce a better outcome for all parties. The MAG is the perfect place for this collaboration to take place, as we have proven it to be effective and for the betterment of the payments system. Through working together, we removed signature as a requirement. We have also worked together to provide instant recognition of refunds so customers feel confident the money is on its way when they leave the retailer where the refund occurred.

When faced with a challenge, MAG and its member merchants have proven to rise to the occasion. Let’s not waste this opportunity to innovate and create a more touchless experience during this unique time in our nation’s history.