Payments Insights Podcast

Declined card transactions can impact consumer confidence. In our latest Payments Insights podcast, two payments experts discuss the sharp increase in card-not-present transactions, the leading causes of card declines and ways to increase approval rates.

Erica Denham, SVP, Strategy and Commercialization Executive, Bank of America

Sara Walsh, SVP, Enterprise Payments Executive, Bank of America

Gregg Kambour, SVP, Merchant Integration Executive, Bank of America

Payment Insights

Episode 4: The Surprising Reason for Card Declines

Host: Erica Denham, Bank of America

Guest: Gregg Kambour, Bank of America; Sara Walsh, Bank of America

[Erica]

Hi and welcome everyone. I'm Erica Denham, Strategy and Commercialization Executive at Bank of America, and today on Payment Insights, we're going to discuss authorization rates. We've seen a lot of interest throughout the industry in optimizing this very important step in the acquiring process. So, we're going to sort through the market realities that are driving the interest in authorization and talk through some of the tools merchants have at their disposal. To help us dive into this conversation, we have two experts on deck. First, Sara Walsh is an Enterprise Payments Executive with 30 years of experience at Bank of America. She's joining us from our issuing side of the house and will help us understand the payment ecosystem today. Welcome Sarah.

[Sara]

Thank you, Erica. Nice to be here. Nice to talk with you all.

[Erica]

And we also have Gregg Kambour, Merchant Integration Executive, who is our resident expert on merchant technology with over 25 years of experience. Nice to have you here with us today, Gregg.

[Gregg]

Thank you, Erica. I appreciate you having me and I look forward to the conversation.

[Erica]

All right, well, let's dive right in and start talking about market changes that are driving the increased interest in authorization today. So Gregg, I'm going to start with you. Would you talk to us about how consumer payment behavior has changed over the pandemic?

[Gregg]

Certainly. There's been a massive shift in the way consumers are shopping today. The majority of consumers opting for safety and their health first have changed their behavioral pattern and have shifted their shopping to online versus in-store, so we've seen a massive increase in card-not-present transaction activity. If you think about the conditions and what merchants have adopted over the years, there's been a lot of buy online, pick up in store via the locker system that surfaced over the last year or two. Pick up curbside where merchant cashiers or associates would actually load product into somebody's vehicle, delivery to home and shopping again online and having goods delivered to a store where they would drive and pick them up as well. Again, behavior has changed incredibly with consumers, as they've really had time to look at themselves and how they shop.

[Erica]

Right. Yeah. And Gregg, so with that dramatic shift that we've seen in card-not-present transactions, how does that affect merchant revenue?

[Gregg]

It has the ability to increase merchant revenue. Card-not-present activity handles more volume on a per shopping basis. There's usually target shopping that occurs and they make their selections and based on approval they're buying, right? So, more buying power, and that gives merchants more revenue coming into their pocketbook.

[Erica]

Yeah, that makes sense, Gregg, thank you. Sara, I'm gonna go over to you. Why is authorization so important to the payment acceptance process as a whole?

[Sara]

Sure. It's a great question and super important in our industry. Really three things I would say - having the card approved maintains the customer's confidence in being able to utilize their card. You know, you don't want to be at the point of sale or shopping online and have your card declined. It also ensures in consumers that have access to their funds either via their deposit account, if it's a debit card or available credit with their credit products. And lastly card payments has introduced so much efficiency for customers from doing person to person transfers, the ability to tap and go, paying from our phones. We don't want to interrupt that flow and that ease of buying for customers; really those three things are why it's so important for payment authorization rates to be as maximized as possible.

[Erica]

Yeah, and so, you started going there, let's go a little bit more tactical. Could you just walk us through, what are the steps of authorization?

[Sara]

Sure, absolutely. So, the client initiates the authorization request at the point of sale, or in the case of a subscription type merchant, the merchant would initiate the authorization request. That merchant's acquiring bank sends the authorization to the payment network, either Visa, MasterCard, Discover, American Express, Star, AFEN all of the payment networks. And then that network sends the authorization to the issuer, in our case, Bank of America, and then the issuer either will approve or decline the authorization really based on a few factors - number one, being the availability to buy the client status. Also, if the transaction type is one that the issuer supports and will approve, and then also the risk of the transaction being sent and how that looks to us, you know, as an issuer, as they're coming in. Then Bank of America or the issuer sends a message back to Visa and MasterCard stating that the transaction was either approved or declined. Visa and MasterCard would then send that message back to the merchant's acquiring bank, and then the merchant's acquiring bank displays that decision back to the client, so they know if the authorization was approved or declined. And of course this happens in a very short time period, a matter of portions of a second, but that's really the flow of how the authorization works.

[Erica]

Thank you, Sara. It's a great explanation. You don't realize when you're at the point of sale or you're shopping online, all that goes into that behind the scenes in such a quick time period, so thank you for that great explanation. So, I'm going to stick with you, Sara. Now let's get a little bit more into authorization rates. So, from an issuing perspective, what reasons do you see that have the most impact on approval rates?

[Sara]

Sure and especially since we're talking here about the card-not-present space or e-com transactions, like Gregg explained earlier. In this space by far, the main reason for a client decline is due to the card number that is being sent through is on a closed or maybe a reissued account number. And I think that this can be a little bit surprising to people because a lot of times in the industry, we assume that its fraud that is actually the reason for the decline and that is really not the case. A very small percent of transactions are actually declined due to fraud. Let's say that you have a card on file with a merchant and you're trying to process, you know, a new transaction, if that merchant is utilizing an old account number, then that transaction is likely to be declined, and that's really where we see the majority of those. The last reason for declines is due to insufficient funds, and that is especially true when we're talking about debit products. I think on the credit card side of the house, you have a little bit more flexibility as an issuer to approve transactions over the credit limit that's established, but with the debit products, there are more insufficient funds that you'll see, and that just leads to a few more declines.

[Erica]

Yeah. Sara, did you have any advice on what our merchants can do to improve approval rates?

[Sara]

Yes, absolutely. So, talking about that first reason for the declines, a closed or reissued card, there are tools that are available out there to keep the card on file current. The networks offer a great service called Account Updaters, and they can be done either in batch. If you know you're going to be billing a customer, the merchant can go out and proactively check to make sure that account number is the most recent account on file, or if you get a decline and you want to check to make sure that the decline isn't due to the account number, then you can go back and check the account number against the networks Account Updaters, and that will allow you to get the new account number to rebuild the customer appropriately. And there's also real-time Account Updaters, which allows the transaction to be sent in, and then the network will actually replace, in the authorization message, that old account number with a new account number, and that will come through successfully to the issuer to be able to be approved. So, really a combination of those things help, and also we really see a nice improvement on approval rates when the cards have been tokenized. And that's because the whole job of a token is really to maintain that underlying account number with a digital token. So, it's much quicker for an issuer to be able to update a token account number and to notify the merchant when that has changed, so they can either re-tokenize or map older token to the new issued financial pan. And then for fraud declines, I do think that there's some things that we can do together as an ecosystem, and that really is making sure that when the transactions are being sent in, they're identified appropriately, which allows the issuer insight into the transaction. For example, make sure that we're using the correct MCC, Merchant Category Code, or if it's a recurring transaction to utilize the recurring indicator or card-on-file indicator. All of these are really valuable indicators to us as an issuer that can be used when we authorize the transaction. The other thing that we can do together as an ecosystem is really when key pieces of the processing change, communicate these changes to the issuing community. A great example of this is if your typical average transaction amount maybe is $50, but you're running a promotion or maybe onboarding a new product or a new service that's closer to a $100, then communicate that to the issuers and make sure that we know, and that way we can adjust our strategies to say, "hey, you know, this is expected behavior, this is not fraud. This is not some kind of risk that's being introduced, but something that's expected." And the other thing along those same lines is merchant IDs. Everybody's assigned a merchant ID and those are utilized at the issuer level to make transaction decisions and authorization decisions. So, if you are expecting either maybe your volumes to change on your ID, or if you're changing your merchant ID, for some reason, also it would be real important to notify the issuing community, so we can, again, adjust our strategies to look at those. And then lastly and probably the most important is to really look at the details of the transactions. Invest the time to look at authorization requests, look at decline transactions, look at approved transactions, and really understand what could have been done, if anything, to avoid that decline?

[Erica]

That's great, Sara, that's a lot of good information and not only helpful to our merchants, but really in the end benefits our customer to not experience the declines at such a high rate, so that's fantastic! Thank you for that. Gregg, let’s shift over to the merchant acquiring side, what are additional tools and products that are available to help merchants manage declines?

[Gregg]

Yeah, great question. From a tools perspective, it's important for merchants to stay current with their specs that they're using for authorization. Specs change on occasion, based on association compliance updates, and if a merchant isn't current with their authorization records coming into the system and out to the issuing side, as Sara described earlier, they increase the decline rates, so that's first and foremost, right, ensure that they're up to spec with their authorization records that they're submitting. Second, we offer a program called Authorization Optimization. It's a program that takes a lot of what Sara described and bakes it into an automated process that our system is responsible for. So, as an example, if the consumer is shopping on a merchant's website and they go to buy product or services, and they submit that authorization for decisioning, if that card number that is in use was changed by the issuer, and the consumer was unaware of this, and the card account on file was never updated, as we go out for authorization, Bank of America is going to decline the transaction because of the card number presented. And our system will receive that decline message and understand what it needs to do in order to repair and retry the authorization, so we get the updated pan information in using real-time account updater, and then we'll retry that authorization message with the new information and under normal conditions, we'll get an approval back from Bank of America and that approval will go back out to the client, and the client's consumer will successfully shop, and it's a positive experience for the consumer. Behind the scenes, that information on the merchant website or card on file, I should say, will have to be updated with the current pan. And on the settlement side, we'll handle the settlement record and the authorization record match all the information that's required by the associations and submit that for a successful settlement process as well. So, the merchant will get funded. So, approval rates will increase with the program and revenue as well will increase for the merchant.

[Erica]

Thanks, Gregg, with all of the suggestions that both you and Sara gave and the information on optimization, is there a specific set of industries that you would say would benefit most from these suggestions?

[Gregg]

Absolutely! Any industry that handles card on file subscription; you've got newspapers, magazines, music streaming, membership, verticals, gyms, theme parks, things like that, products and supplies, health supplements, office supplies, personal care, restaurants QRS are even moving into loyalty programs, where consumers that are loyal to a specific restaurant, as an example, will apply cards on file from an online perspective. Service industries, pest control, landscape, home security, think of like ADP, as an example, and then, you know, one industry that really relies in this type of environment would be billing, utilities, phone services, Internet, anywhere that you're paying on a month to month basis, per se, again, recurring subscription, all verticals.

[Erica]

So, Gregg, for those merchants that participate in optimization initiative or take any of the suggestions we've talked about today, what kind of results can merchants expect from these efforts?

[Gregg]

Yeah, certainly they would see growth in satisfied consumers, right, that will return to their website or digital site and continue shopping with them. Positive experiences create repeat customers. Second, you'll see a lot more card-not-present volume, so merchants will certainly enjoy that. More inventory moved for them and if you're moving more inventory that equates more revenue, so again, multiple positive reasons for doing some of the things that Sara and I discussed. And again, it's just a matter of enhancing what you're doing today from a web and digital experience and seeing an uptick in approval rates.

[Erica]

Thanks, Gregg. You both have given us great advice today that merchants can use to drive increase in authorizations and ultimately better the customer experience. And I think that does it for us today. Thank you, Sara and Gregg, and thank you to our listeners. We hope everyone had a great time and gained some relevant insights and advice. Until next time!

[Sara]

Thank you, Erica. Nice to talk with you all.

[Gregg]

Thank you.

“Bank of America” and “BofA Securities” are the marketing names used by the Global Banking and Global Markets divisions of Bank of America Corporation. Lending, other commercial banking activities, and trading in certain financial instruments are performed globally by banking affiliates of Bank of America Corporation, including Bank of America, N.A., Member FDIC. Trading in securities and financial instruments, and strategic advisory, and other investment banking activities, are performed globally by investment banking affiliates of Bank of America Corporation ("Investment Banking Affiliates"), including, in the United States, BofA Securities, Inc. and Merrill Lynch Professional Clearing Corp., both of which are registered broker-dealers and Members of SIPC, and, in other jurisdictions, by locally registered entities. BofA Securities, Inc. and Merrill Lynch Professional Clearing Corp. are registered as futures commission merchants with the CFTC and are members of the NFA. Investment products offered by investment banking affiliates are not FDIC insured, may lose value and are not bank guaranteed.

“Bank of America” is the marketing name used by certain Global Banking and Global Markets businesses of Bank of America Corporation. Lending, other commercial banking activities, and trading in certain financial instruments are performed globally by banking affiliates of Bank of America Corporation, including Bank of America, N.A., Member FDIC.

Is your payment system ready for the holiday surge? Our latest Payment Insights podcast explains why reliable internet service, adequate bandwidth and a sound anti-fraud strategy are essential to a successful season.

Monica Kennedy, Merchant Services Portfolio Executive, Bank of America

Anand Ahuja, SVP, Head of Business Banking Sales, Bank of America

Jonathan Hallford, SVP Platform Manager, Bank of America

Payment Insights

Episode 3: How to Prep Payments for Peak Season

Host: Monica Kennedy, Bank of America

Guest: Anand Ahuja, Bank of America; Jonathan Hallford, Bank of America

[Monica]

Welcome everyone. Merchant Services at Bank of America is happy to host another Payment Insights episode. Today, we're going to dive into Peak Season Preparedness. With our focus on the retail, lodging and food and beverage industries, how can merchants prepare for the high transaction volumes that accompany the US holiday season? To help us outline some quick and easy steps to ensure merchants get the most out of peak season, we have two experts with us today. Anand Ahuja is our Merchant Services Sales Executive focusing on business banking clients. Welcome Anand.

[Anand]

Thanks Monica. I'm happy to be here.

[Monica]

And Jonathan Hallford is a Platform Manager at Bank of America with expertise in helping merchants limit their fraud exposure. Good to have you Jonathan.

[Jonathan]

Hi Monica. Happy to be here. Thank you.

[Monica]

Okay, so let's start with technology and point of sale devices. Anand, how can merchants ensure that their technology is ready to handle high payment volumes in their stores? Where should merchants start?

[Anand]

You know, one of the most important things, Monica is also the simplest: reliable Internet service with appropriate bandwidth. Those are essential. Verifying that your internet speed and bandwidth can accommodate your peak volumes is critical. Consult with your Internet providers and don't forget to connect with your merchant service providers beforehand. We found as an example, our best prepared merchants are those that have consulted and prepared with their service providers before the big holiday surge.

[Monica]

That's great. And what about their terminals or point of sale devices? Anything they should check there?

[Anand]

You know, this is just like your cell phone, Apple phone, Android phone you want to make sure your equipment is up to date and running the latest software. You want to check that all the approved payment methods are running smoothly. When we think about, especially with COVID, contactless is key, so make sure yours is working along with any other payment methods that your customers commonly use.

[Monica]

I think supplies is another good call out. What would you recommend merchants have on hand from a supply standpoint?

[Anand]

Make sure your supplies are in stock and you have enough of them, whether it's register tape, extra devices, handhelds, it's important to have that ordered ahead of time. You don't want to be ordering that at the last minute and hoping that you get it, order that stuff ahead of time and make sure you're prepared.

[Monica]

During the holidays, we also see an increase in gift card sales. How should merchants be prepared for that?

[Anand]

If you do have a gift card program in place as a merchant, similar to supplies, just make sure you have enough gift cards in stock and have your cushion. And if you don't have a gift card program in place, but want to have one for next season, it's great to sign up early. It may be too late for this holiday season, but after this holiday season, if you sign up for your gift card program, you'll have it ready to go for the next peak season.

[Monica]

What happens if a terminal goes down?

[Anand]

You know, Monica, if a terminal goes down, you want to have a backup plan. If a register goes down for whatever reason, make sure that you have a Plan B, especially during the holiday season. Mobile terminals, as an example, make excellent backup options because they're portable. They can facilitate indoor and outdoor sales.

[Monica]

Yeah. And I would also suggest having your Merchant Services provider's 800 number handy as well. They can help you troubleshoot in the event that you have any disruption in service. So, let's shift our focus now to fraud, many merchants experience an uptick and fraudulent transactions during the holidays. So Jonathan, what are some strategies for merchants to safely handle peak season from a fraud standpoint? Let's start with Card Present. How can merchants protect themselves at the point of sale?

[Johnathan]

Very good question, Monica. So in a Card Present environment, fraudsters may leverage the heavier foot traffic within a place of business, as an easier means to perpetrate fraud. Most common type of fraud in card present is simply a stolen credit card being used to purchase the goods or services. There are a few examples, but the common theme to look for is any type of odd or irregular behavior from a customer that you wouldn't typically notice. As a best practice, if you encounter a customer that you feel may be attempting to use a stolen credit card, you can always say, you need to obtain a voice authorization by dialing the 800 number on the back of the customer's credit card. The odds are, if that card is in fact stolen, the customer will probably leave quickly without making the purchase.

[Monica]

What about Card Not Present? What are some best practices or tools for merchants in the e-commerce space?

[Johnathan]

So, in the e-commerce environment, your website shopping cart and your payment gateway provider are your first lines of defense. They offer tools such as velocity filters, address verification services, the employment of a CAPTCHA system, all of these help prevent bot attacks, which can be very costly to merchants.

[Anand]

Jonathan what's a bot attack exactly?

[Johnathan]

Good question, Anand. So a bot is essentially a piece of software that's designed to perform some type of automated or repetitive task. The bot attack is the method in which fraudsters test stolen credit cards by exploiting those e-commerce payment gateway vulnerabilities or weaker settings. The fraudster simply wants to understand which stolen cards received and approved authorization and which do not. The dollar amount is typically 1 cent, which does not sound like very much. However, the fraudsters may be using some type of emulation software that allows for a very high volume of cards to be attempted within a very short period of time. This can easily cost thousands of dollars in authorization fees for our merchants.

[Anand]

Got it, Jonathan and what's CAPTCHA?

[Jonathan]

So, CAPTCHA is a security feature that can be applied to a website shopping cart that proves that the users are human and not in fact computers. So, if you think about any time that you've gone and made a purchase online, you go through the checkout process, you enter in all your billing and shipping information. You get to the point where you're ready to finalize your purchase. And then sometimes you might have a box that will pop up where you have to click it and says, I'm not a robot. Or maybe there might be a set of tiles that appear, and you have to pick the tiles that have a street crosswalk or a traffic signal. It could even be as simply as being provided a string of numbers and letters in which you have to type those back in correctly. All of those things are proving that you are a human and it prevents bots from emulating transactions through your shopping cart.

[Monica]

Jonathan, are there any other security tools merchants can use?

[Jonathan]

There are Monica. So if we think about the address verification service, this is a system applied to a shopping cart that compares information entered by the individual to that of the credit card. If any of that information does not match, that will result in a decline. And of course, during peak season, we want to get as many sales as we can from the merchant's perspective. However, we also want to make sure that there are declined features in place to prevent bad transactions from risky credit cards. Lastly, we do have velocity filters that essentially identify a velocity of transactions coming from a single place. There are parameters that can be enhanced to prevent that from happening.

[Monica]

That was great conversation. And you provided some very practical advice, Jonathan and Anand. We appreciate your time, the tips and pointers, as well as your expertise on these topics. And thank you to our listeners. We sincerely hope this episode gave you some ideas for preparing your business for peak season. Thanks again.

[Jenny]

Is the pandemic-era rise in contactless cards and mobile wallets here to stay? Our latest Payment Insights podcast takes merchants inside this growing trend to help you adapt to shifting behavior at the point of sale.

Erica Denham, SVP, Strategy and Commercialization Executive, Bank of America

Juan Garrido, Product Management Executive, Bank of America

Nicolle Wilson, VP of Product Management, Bank of America

Payment Insights

Episode 2: Contactless Payments Take Center Stage

Host: Erica Denham, Bank of America

Guest: Nicolle Wilson, Bank of America

Guest: Juan Garrido, Bank of America

[Erica]

You're listening to Payment Insights from Merchant Services at Bank of America. With a continual emergence of new technology every year, you can easily argue that this is one of the most exciting times in payments - potentially ever! Today, we're going to take a close look at what is quickly becoming one of the most dominant payment methods in the industry: Contactless. Welcome everyone! I am your host, Erica Denham, Strategy & Initiative Executive at Bank of America, and with me today, I have two of Bank of America's very own experts in payment technology: Nicolle Wilson, Vice President of Product Management, and Juan Garrido, our Product Management Executive. Hello to both of you.

[Nicolle]

Hi Erica. Thank you so much.

[Juan]

Thank you, Erica. It's a pleasure to be here.

[Erica]

Thank you both for being with us today. Okay, Juan, I'm going to kick it off with you, and I really want to lay a foundation for our conversation that we're going to have. So can you help me set a baseline about what we're talking about when we say contactless payments?

[Juan]

Absolutely. And that's a great question just to level set with, so the term contactless payments includes any type of debit, credit, smartcard or other payment device that has the ability to process a payment just by tapping it next to a card reader.

[Erica]

Thank you, Juan. Yeah, that's great. I think a lot of people think contactless payment and they only think of the credit card, but using your Apple Pay®, Samsung Pay® or any method is considered contactless payment when it comes to technology and integration. Okay. So let's move into more of the why Nicolle, I'm going to turn this over to you and I really want to help our merchants understand and look at in the market today. What are the current trends that you're seeing for contactless?

[Nicolle]

Absolutely. So I think it's important to understand the US was really the last major economic region to adopt contactless transactions. And what we saw with the introduction of EMV into our market, um, along with that came EMV contactless. Um, merchants really struggled with that here in the US to enable that. So we saw a huge industry efforts starting in about 2016, um, to increase the acceptance of contactless, uh, by helping merchants enable contactless at their terminals. And then we saw an increase in card issuance for contactless support. Bank of America alone has over 60 million contactless cards in the market today. The next step is what we're seeing now, which is a big effort for consumer education and merchant education as well. Uh, we're starting to see signage at point of sale devices. Um, I received flyers in my credit card statements telling me all about the wonderful benefits of contactless payments. Um, and it really came at a perfect time, um, for the industry, given that we then entered into a global pandemic in 2020, um, and there was a big focus between consumers, merchants, our frontline workers trying minimize physical contact with each other, but also common surfaces. And contactless payments lets you make it, a really clean transaction, uh, you know, really sanitary from a health perspective. And we saw contactless usage, which was really fairly minimal grow from about 4.7% in July of 2020 to 15.9%, almost 16% in February 2021. That's a 238% increase in six months. Um, you know, we also have a great story for the industry. Um, you know, Juan and I'd, I'd like to ask you to share your experience with the New York Metro transit going open loop with contactless support.

[Juan]

Yeah, absolutely. So, you know, we've definitely seen that there's been an uptick overall in contactless and really what's happening is, is that consumers are taking a hold of the fact that it's easy to use at the point of sale. Uh, they finally have an understanding that all you do is you tap a card or you tap a mobile device. And the payment goes through. Not to mention, of course, the fact that we've had the impacts of COVID and the current environment and because of the pandemic we're being told to limit contact with others, and consumers have taken note. So, you know, as Nicolle mentioned, you know, I consider myself a payments geek and I play, I pay very close attention to the payment experience when I'm out and about. I live in New York City, so, uh, I've been able to see a payment evolution when it comes to the New York City subway. So they recently installed a contactless payment system called ONMY, where you simply tap your contactless card or a contact device next to a card reader at a turnstile, and you walk right onto the platform. So let me compare that versus the experience before. Before I would have to carry around a MetroCard. Whenever my funds were low, I would have to go to a kiosk. I would have to enter my MetroCard. I would have to enter the amount that I want to fill on my MetroCard, and then also insert my credit card, not to mention the fact that I mentioned I live in New York City. So there's millions of people around me. So, uh, of course the lines are long in order for me to be able to refill my MetroCard. So, take into comparison the whole contactless experience, the fact that I can run down to the station, I can tap my phone, tap my credit card, and I'm on the platform, versus my experience before where I had to wait in line. It was my time. And, you know, it was just very difficult for me to be able to get in and refill my MetroCard that just shows how contactless was able to revolutionize the industry in terms of the New York City subway system.

[Erica]

Yeah, that's an amazing experience. And, and with the pandemic as a catalyst, as Nicolle mentioned, I mean the benefits to the consumer are obvious, right? The ease of use and being able to switch between payment methods very easily and getting rid of that contact where you don't necessarily need it for sanitary purposes. It's just huge. Um, so, but with that said, Nicolle, you mentioned, um, the benefits also to merchants, so we can see it with consumers, but could you talk a little bit more about what the benefits to merchants are, who are going to enable contactless at the point of sale?

[Nicolle]

Absolutely. So a contactless transaction is still an EMV transaction and has that EMV security that merchants are looking for. Um, it takes a fraction of the time that a contact transaction takes where you have to actually insert your card. And there's a little dialogue between the terminal and your card. With contactless you really do is, as Juan mentioned, you just tap it and your card goes back into your wallet or whatever form factor you're using. Um, so for the merchant, they get increased throughput through their checkout lane, which reduces consumer friction. Um, it's incredibly easy. A consumer never takes their hand off the card for the reducing consumer friction. And because transactions are so easy, a consumer might pick up an extra item while they're in line and make a separate transaction because it's so fast. So it's, it's really a great benefit to the merchant and they haven't sacrificed anything.

[Erica]

Thanks, Nicolle. Yeah, that's great. And Juan, I think that takes us to a very easy segue and why don't we get into the nitty-gritty and tell us a little bit more, really about the technology of contactless and how does it work?

[Juan]

Absolutely. So it sounds like it's complicated because you think to yourself, man, I'm only tapping a card, I'm tapping a mobile phone and the payment is being processed immediately, but you know, it really is quite simple technology. When a merchant system prompts a customer to pay, the customer is going to bring their credit card or mobile device in close proximity to that payment terminal. That information is being transmitted electronically, using information, information from the chip onto the card and by using radio frequencies. If you're using a mobile device, the same is true, except you're actually using NFC rather than those uh, radio frequencies - and NFC stands for Near Field Communication. That is the chip in your mobile phone that it's used in order to make that payment. Once the system accepts the tap, it signals the customer with a beep, a green light or a check mark. And that's it, 'wa-lah' your payment is processed.

[Erica]

Thank you, Juan. And now that we understand technically how it works, Nicolle, why don't we talk about how and what a merchant needs to do to actually enable contactless at the point of sale for their business?

[Nicolle]

Sure. So, as I mentioned, many terminals are already equipped with contactless. So if you're a merchant and you have a terminal, I think the first thing you should do is check to see if you can accept a contactless payments. Um, if you know, you can't, um, you know, a merchant either has that point of software development in-house, or they outsource it to a third party. For a merchant who has those capabilities in-house, they want to discuss with our merchant specialists, what it would take to set up an integration project. If there is a third party that's involved, they should check with that third party. Likely the third party has already enabled contactless in their software suite, and it's a matter of a download or an upgrade. Um, for any merchant using our Bank of America solutions with the terminals, it comes ready to accept all forms of contactless payments.

[Erica]

That's great. Ready to go out of the box. That's great.

[Nicolle]

That's right.

[Erica]

So after contactless is enabled, uh, we've, we've talked a little bit about how adoption has so dramatically increased with the pandemic, but Juan, is there anything that merchant should be aware of that they need to do after enabling contactless to ensure adoption?

[Juan]

One word, and that is communicate. You want to communicate, communicate, communicate. Make sure that your customers know that those terminals are enabled for contactless. As Nicolle mentioned earlier, you know, put some customer signage next to the payment terminal, so customers know that they can just tap to pay. I would also encourage education. You know, Nicolle mentioned that she gets statements in the mail on how contactless work. That is a great way to ensure that consumers know how to use contactless at the point of sale. Another best practice is train your cashiers. Make sure that they A. know exactly how contactless works and communicate that to their clients. If they see a card that is enabled for contactless, rather than having that consumer either insert the card and, or swipe the card, make sure that they tell the consumer that their card is contactless and that the terminal is as well and show them how easy it is to and effortless in order to make that work.

[Erica]

Absolutely everything comes back to communication and training and making sure that the customer has that best experience, so they'll be using it again in the future over and over again. Okay. Well, Nicolle and Juan, thank you so much for joining us. It's always a pleasure working with both of you and thank you to our listeners.

[Nicolle]

Thank you, Erica.

[Juan]

Thank you.

[Erica]

Contactless evolution and adoption is a hot topic in the payment industry, and I hope you've enjoyed the discussion today. Take care everybody!

[Erica]

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