CHICAGO – Payments processors that falsely inflate interchange fees are commiting fraud, and it's a big problem, according to Bob Carr, CEO for Heartland. Carr spoke Tuesday morning on the future of mobile wallets at the Mobile Payments Conference here at the Hyatt Regency McCormick Place.
"It's a hidden thing that is going on in our industry," he said.
The most common example of what Carr called deceptive trade practices are processors that attribute interchange fees to Visa and Mastercard in their statements to merchants, when in fact those fees are are being captured by processors.
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He presented an example of a car dealer who had selected what it thought was a low-cost processor that quoted 25 basis points plus 20 cents per transactions and about $50 in junk fees. Through deceptive interchange, the processor inflated costs by 250%, he said.
Carr also spoke about the fate of CurrentC, the app created by Merchant Customer Exchange large retailers. He said some of those retailers have jumped ship to Apple Pay. CurrentC falls short because it doesn't operate on Near Field Communication, opting instead to use QR codes. It also does not offer fingerprint authentication and stores data in the cloud, he said.
The appeal of CurrentC to merchants was what Carr called a defensive move to interchange, which would allow them to process more transactions for less interchange cost. However, Carr said, consumers have demanded easier pay methods, and merchants have responded by offering Apple Pay instead.
For mobile wallets to be successful, Carr said they must build consumer facing apps that would allow buyers to manage all loyalty program memberships in one place. Integrated mobile wallets would also allow for mobile rewards programs that would provide merchants with new incremental revenue streams, and open new partnerships and the ability to more effectively market to new customers.
Data connectivity is also key, he said. Apps must effectively communicate with a merchant's home office to ensure that pricing and inventory are up to date and rewards can be claimed by consumers.
"The idea of a mobile wallet is to tie all the parts of a transaction that are important to the consumer," he said.
Interestingly, Carr also said that digital drivers licenses are a key piece of the mobile wallet puzzle. Some states are currently testing virtual license prototypes and could launch them as early as next year.
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