Online, Yet Card Present

Universal Air Travel Plan Inc. (UATP) last month announced it has partnered with Burbank, a United Kingdom-based fintech, to deploy an app that enables mobile devices to act as a POS terminal to process card-present transactions over the Internet.

The app is embedded in the merchant’s mobile app, which eliminates the need for consumers to download a separate app to their device, UATP says. The app makes the mobile device an EMV-compliant terminal, a necessary component of a card-present transaction. Burbank launched the technology, called CPoI, earlier this year.

To initiate a transaction through a UATP merchant, online shoppers tap their card to their mobile device and enter their PIN to complete payment, just as they would for an in-store transaction. PIN requirements vary by market and card issuer, and merchants have the option not to require a PIN for transactions initiated in the United States, a UATP spokesperson says by email.

Converting an online transaction to a card-present one benefits merchants in two ways. First, online merchants receive a lower interchange rate for card-present payments. Second, it reduces the need for card-not-present fraud-detection solutions, such as anti-fraud AI systems, 3DS, and fraud models typically used with card-not-present payments, according to UATP.

Fraud and chargebacks are a $40-billion problem annually for merchants, according to Burbank. Payment fraud is growing 69% per year, and chargebacks 52%, the fintech adds. In addition, the PCI Security Standards Council projects fraud losses for online transactions will be $364 billion between 2023 and 2028. “Merchants don’t have to pay for these losses with this technology,” says the UATP spokesperson.

Another benefit for merchants is that CPoI can increase authorization rates by 5% to 10% over card-not-present rates, its backers say. It is not uncommon for online merchants to experience high false-positive rates for card-not-present transactions, UATP adds.

Converting a mobile device into an EMV-compliant terminal that enables card-present transactions is a potential “game changer,” says Cliff Gray, principal at Gray Consulting. “This is a fascinating concept, because it enables mobile phones to become EMV POS devices, and most people have a phone,” Gray says. “For merchants, the technology is not just helping them save money on acceptance cost, but reduces the risk of chargebacks, which lowers their liability.”

One potential drawback is that the technology does not support wallets where consumers can store and access cards for future purchases, according to Gray. UATP says the intent of CPoI is to enable card-present processing with each customer tap.

“The technology can’t create friction to existing processes and consumers used to paying with a wallet aren’t necessarily going to want to pull out their card for each new transaction,” Gray says.

UATP, which processes for airline, travel agencies, and Amtrak, will market CPoI through media, events, and direct outreach. “We are taking it to market ASAP with a growing list of interested merchants,” the UATP spokesperson adds.