Monthly Archives: March 2013

How Not to Fight Showrooming

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As traditional brick-and-mortar retailers continue devise ways to combat “showrooming” (the practice where customers browse store shelves to check out items that they ultimately intend to buy online), it seems that one retailer has come up with a new plan — charge customers for “just looking.”

According to the above photo posted this week on Reddit, a specialty food store in Brisbane, Australia has decided to charge customers a $5 fee for browsing, which they will refund from the purchase price of whatever they buy. Somehow they think that charging what amounts to an admission fee to enter their store will be good for business, but treating prospective customers like the enemy sounds like the worst marketing strategy ever.

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It’s almost as if they’re encouraging people to go online.

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It seems to me that if their prices were truly “almost the same as other stores” as they claim, they wouldn’t have this problem. And if their products are unavailable anywhere else, how is showrooming even an option?

Logical issues aside, showrooming is certainly a problem for retailers. But wouldn’t a price matching policy, like the one Target chose to put in place, be a more effective way to fight it? Or how about making your store a more inviting place to shop by welcoming your customers with a personal touch they can’t get online? As I understand it, usually the goal for retailers is to get more people into your store, but what do I know?

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I guess policies like this are yet another reason why not every business can be a success.

TRIA Extension Faces Tough Fight

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On December 31, 2014 the Terrorism Risk Insurance Act, or TRIA, is set to expire. The program, originally enacted in 2002, provides a financial backstop by the federal government in the case of a large-scale terrorist attack. TRIA has been extended twice, in 2005 and 2007, but there is uncertainty as to whether the program will be extended again.

Legislation that would simply extend the program to 2019 has been introduced by Rep. Michael Grimm (R-NY) and Rep. Carolyn Maloney (D-NY). However, Rep. Jeb Hensarling (R-TX), chairman of the House Financial Services Committee, has voiced opposition to extending the program in its present form. The House Financial Services Committee has stated its plans to examine the private sector’s capacity to assess and price for terrorism risk and to consider proposals that would phase out TRIA over time.

Others have expressed arguments against the program’s extension as well. David C. John, senior research fellow in retirement security and financial institutions at The Heritage Foundation, testified before the House Financial Services Subcommittee on Insurance, Housing and Community Opportunity in September 2012 that “we have now reached a point where the private sector is increasingly capable of providing [terrorism] coverage at appropriate prices without government support.”

Maurice R. Greenberg, chairman and CEO of C.V. Starr & Co. and former CEO of American International Group Inc., stated at a press conference at the National Press Club in Washington that the “private market is capable of doing a heck of a lot more” in regards to terrorism coverage than it could at the time of the program’s original authorization. While he did stop short of calling for ending the program, Mr. Greenberg’s statement added to the argument that the private sector is capable of insuring terrorism risks without a federal backstop.

Proponents of the program, including RIMS, argue that a completely private solution is not feasible as terrorism acts are exceedingly difficult, if not impossible, to predict. Without a federal backstop in place, coverage capacity will be significantly reduced, driving prices much higher. This holds especially true in high-risk metropolitan areas such as New York City, Chicago, Los Angeles, etc. Without adequate capacity, many organizations will be forced to self-insure, leaving themselves exposed to an event that could possibly end in bankruptcy.

Supporters of the bill would like to see an extension passed by the end of 2013 so as not to negatively impact policies issued in 2014, but with Congress focused on other priorities, this debate could continue well into 2014 and potentially right up to the deadline of December 31, 2014. Supporters of the program, including RIMS members, are strongly encouraged to reach out to their member of Congress to express their support and need for the program.

Hank Greenberg on Executives, Culture and What to Do With Negative Personnel Directors

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In the video above, Maurice “Hank” Greenberg — the 87-year-old architect of AIG and current chairman and CEO of C.V. Starr & Co. — speaks his mind in an interview with Carrier Management

He talks about:

  • his time in the Korean War
  • his “purely by chance” start in insurance after returning stateside
  • how he fired the first personnel director he met in the industry (a “jerk” whose “attitude was very, very negative”)
  • the mark of a good executive (one who “tries to be himself” rather than just following in someone else’s footsteps “to be like them” — “if you don’t think independently, what are you: You’re just a copycat”)
  • How corporate culture evolves over time (“you’ve got to be sensitive to change”)

He has never been a bashful man.

5 Ways Businesses Can Avoid Credit Card Fraud

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According to a March 2013 report from the Commerce Department, retail sales increased 1.1% in February to $421.4 billion, marking the biggest surge in the retail space since last September. Elevated sales numbers mean additional credit card transactions and, as a result, an increased risk for fraud.

A recent report from Javelin Strategy & Research found that credit card fraud has increased an alarming 87% since 2010 and accounted for a total loss of approximately $6 billion. Despite mounting evidence of this growing epidemic, loss as a result of credit card fraud has remained the proverbial elephant in the room for many businesses.

Organizations need to increase their awareness of this growing threat and the rather simple steps they can take to prepare themselves. The following are five tips for businesses leaders as they navigate through the economic climate in 2013 and beyond:

  1. Immediately deal with any breach. It’s critical to understand that even if all cautious, conservative steps are taken and the best payment processing security is installed, a breach can still occur. If it does, you must have detailed credit card sales records to refer back to as a means of retracing your steps. This will help in determining when and where the breach took place and therefore mitigate the potential for additional losses. A proper assessment of the initial attack may ultimately provide a trail back to the source of the breach.
  2. Maintain PCI Compliance. Not only is it against card brand regulations if you’re not Payment Card Industry (PCI)-compliant when accepting credit or debit cards, but it’s also an absolute must in today’s economic climate. Make certain your payment processing software security is current and is PA-DSS (Payment Application Data Security Standard)-certified, and that your business receives their PCI-DSS (Payment Card Industry Data Security Standard) certification. PCI certification provides a level of confidence and assurance that a processor has followed and passed a robust set of best practices for securing the information being processed when credit card payments are made. There’s no silver bullet here. You have a responsibility to protect your customer’s credit card information, just like you should be protecting all of your customer data.The depth of the audit required will depend on your business volume and systems but a full PCI audit will offer a scorecard across your business’ payments environment, including all connected back-office applications, allowing you to make critical changes before security holes are exposed by thieves.
  3. Use end-to-end encryption for all sensitive data. End-to-end encryption (E2EE) essentially boils down to scrambling the data sent from one device to another. It starts with your payment capture devices, and goes all the way to the transaction being authorized. E2EE technology prevents the card account data from being stolen electronically and lessens the cost and impact for your business to become PCI-certified. A company’s mobile payment devices, credit card terminals, software applications, and online payment portals need built-in encryption functionality when transmitting customer information. Your company should select a payments provider that is technically savvy. Look for a partner that supports E2EE technology. You’ll need to balance cost versus product and service here. Using the low-cost provider could come at the expense of limited product functionality, potential security holes, and lower levels of customer service.
  4. Prevent tampering. Make certain all employees tasked with the responsibility of accepting credit and debit cards from customers have a working understanding of the looks and functionality of the payment processing equipment they’re using. Scammers often try to tamper with a business’ payment processing equipment in an effort to steal credit card information. Altered equipment usually consists of a small piece of hardware physically attached to the terminal itself. An attentive employee who knows what to look for should be able to easily identify an extra attachment to the device or oddly functioning software.
  5. Refrain from storing credit card numbers. To avoid one of the biggest PCI compliance risks, you should do everything in your power to not store credit cards numbers. Look for a payments provider whose platform is designed so credit card information is never stored at your business site or on your business software. Your provider should be able to process the transaction and then store your customers’ card information in a secure “vault” in the cloud. They should provide you with an encrypted ID, so when you want to do another transaction for that same customer, your software can pass the payments provider the encrypted ID so your company never comes in contact with the stored credit card data.

It’s reasonable to have a healthy level of economic optimism, but critical to take the necessary precautions to protect your company’s assets and security. Apply these tips to help ensure credit card scammers aren’t given the opportunity to steal the fruits of your labor.