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Portals and Rails, a blog sponsored by the Retail Payments Risk Forum of the Federal Reserve Bank of Atlanta, is intended to foster dialogue on emerging risks in retail payment systems and enhance collaborative efforts to improve risk detection and mitigation. We encourage your active participation in Portals and Rails and look forward to collaborating with you.

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July 02, 2012


Are portable POS devices coming to a table near you?

Can you remember the last time you handed over your mobile phone to a friend, let alone a stranger? Writing from my own experience, I am guessing that it is not something people do very often. Back when our mobile phone's primary functionality was as a phone, we were generally open to letting someone borrow it to make a call. However, as phones become "smarter," we have become less inclined to give someone else access to a device that holds a wealth of information about us.

This behavior is in stark contrast to our behavior with our payment cards. While I can count on my hands the number of people whom I have let use my mobile phone, I have given my payment cards to hundreds of strangers at dine-in restaurants and allowed them to take my cards out of my sight. While an overwhelming majority of these card transactions are safe, this procedure does easily allow for bad characters to capture valuable card information that can lead to card fraud. One highly publicized skimming case that broke last November highlights the fraud risks inherent in a restaurant card transaction. This crime certainly would have been more difficult to perpetrate had the victims' cards been swiped tableside in front of them.

According to a recent Wall Street Journal article, the payment experience at restaurants might be changing. Several large restaurant chains are in the process of testing different portable tablet-type devices at the table. These devices allow restaurant patrons to perform traditional restaurant functions such as viewing menus, placing orders, and ultimately settling the bill. Some of these devices include advertising and, perhaps most intriguing, even allow patrons to play games, watch videos, and peruse news headlines.

While these portable devices have the "cool" factor, they also offer great benefits from a fraud-reduction perspective. Paying your restaurant tab without ever having your card leave your sight is a great first step in preventing the type of fraud described in the New York City incident highlighted above. Restaurants, in general, have shunned portable POS devices in the past due in large part to their expense in an industry that operates on thin margins. What's exciting with these new devices is that the new technology offers both top- and bottom-line benefits to restaurants that traditional portable POS devices don't. These devices can actually help drive an increase in existing revenues (higher average tickets) or even be a source of new revenue (advertising and fees from videogames) while also lowering a restaurant's fraud loss exposure.

I am hopeful that this new technology catches on and restaurants do adopt a safer payment card transaction. For the parent in me, the thought of the device entertaining my small children when our conversation fails to do so or the chips and salsa run out is promising. From my payments risk perspective, I am ready to keep full control of my cards and hopefully avoid that dreaded call, text, or e-mail from my bank that says my card has been compromised.

Douglas A. KingBy Douglas A. King, payments risk expert in the Retail Payments Risk Forum at the Atlanta Fed

July 2, 2012 in cards, consumer fraud, innovation | Permalink

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