I recently blogged about the increasing number of EMV payment cards in circulation. With EMVCo reporting there were in excess of 2 billion EMV cards in circulation worldwide at the end of 2013, it’s clear EMV is gaining traction globally.
In a recent PaymentsSource article, Oberthur Executive Martin Ferenczi predicted an EMV card will be in every American household by the end of 2014. Ferenczi said he is basing his estimation on the increased issuance of cards in recent months, as well as growing consumer awareness of EMV.
“Deployment of EMV cards is accelerating, and the largest issuers are either issuing or are close to issuing EMV cards,” says Ferenczi. He added, “There was a lot of publicity of EMV that followed the Target breach and the subsequent breaches.”
While getting cards into the hands of consumers is one thing, ensuring their comfort using them is quite another. There’s no doubt consumer awareness and education are critical to the success of any EMV rollout. Helping cardholders understand the benefits of EMV, as well as the differences between paying with EMV as opposed to mag-stripe cards, are essential components of EMV implementation.
Despite the press EMV received (and continues to receive) following high-profile data breaches, consumer awareness is lacking. “What’s been most glaringly omitted so far is consumer education. EMV is a big change in payment habits,” Javelin Senior Analyst Nick Holland said in a press release. “If consumers aren’t trained to use cards, you will have significant lag times in checkouts.”
Making the transition to EMV easier for consumers is one reason TMG is advising issuers to implement signature EMV cards, as this means less change to established habits. As opposed to PIN-based EMV cards, signature cards are what we consider a “best practice” for community financial institution (FI) credit card issuers. This is due mainly to credit cardholder familiarity with signature authentication. Consumers are not used to entering a PIN when swiping their credit cards.
PIN also adds an additional layer of complexity for the issuer. When it comes to EMV issuance, TMG advises clients to start simple and add complexity in the future, if necessary. The availability of PIN as an authenticator for EMV credit can always be added at a later date.
People learn by doing. When more cardholders have EMV cards in their wallets, education will become easier.
Ferenczi’s forecast is important, because if it’s true, community FIs need to consider the competitive ramifications of an EMV card in every U.S. household by year-end.
Tags: EMV, financial instituion, issuers
Iowa State University (ISU) students recently beat out 98 other universities from 28 countries to win first place during the 15th Annual Data Mining Cup (DMC) competition in Berlin. ISU’s victory marks the first time a U.S. team took home first place in the international competition.
As Big Data continues to get bigger, so will the impact of data analytics across all industries, including retail and financial services.
This year’s DMC task had teams calculating the probability of an online return. On average, online customers return half of all clothing orders, representing a significant cost factor for merchants. Reducing the rate of returns by implementing preventative measures (restricting methods of payment, adjusting shipping costs, providing size charts) on the basis of return probabilities is a key discussion in eCommerce.
Teams were given six weeks to use an online shop’s historical purchase data to develop a model for new orders that would calculate the probability of a purchase leading to a return. Teams were given information, including age and location of buyers, purchase history and quantity of items to determine a pattern of behavior. Participants then apply these patterns to a group of 50,000 purchasers to predict behavior.
ISU’s team leader and statistics Ph.D. candidate Cory Lanker explained the core of ISU’s solution was “to fully characterize customer behavior, which we did using advanced statistical learning concepts on the provided history of purchases. Once we successfully characterized customer behavior, we could then best predict whether a new purchase would be returned.” He added, “We could advance our ideas to create an application that helps online retailers reduce returned shipments and increase profit margins.”
The top 10 teams were invited to Berlin to present their solution methods at the Prudsys User Days conference. The winning ISU team, consisting of students from the statistics department, bioinformatics and computational biology department, and computer science department, was awarded 2000 Euros.
With the explosion of data analytics solutions happening around the world, it was exciting to see one of our great Iowa universities realize such an accomplishment. Financial institutions in the Midwest, you may want to look a little closer at recruiting from within this award-winning group of budding data specialists!
Tags: big data, consumers, ecommerce, retail
As consumer awareness about the prevalence of payment fraud increases, more cardholders are becoming interested in protecting themselves. They are looking for convenient, simple ways to protect their accounts and identities. Consumer attitude about fraud is a crucial component for financial institutions to monitor because it provides an opportunity to help people understand what it really takes to maintain the security of their information.
It’s an opportunity the majority of credit unions and banks are not seizing – at least according to a Q1 2014 ACI Worldwide study of 6,159 consumers in 20 countries. In that study, 44 percent of U.S. consumers said they can’t recall receiving any anti-fraud information from their financial institution.
The report goes on to conclude nearly half of global consumers are demonstrating risky behaviors when it comes to their identities. Examples of this risky behavior includes carrying their PIN with their card, using public computers to shop online, throwing documents that contain personal information in the trash and leaving smartphones with personal information unlocked. Generally, these consumers do not take risks intentionally; they simply lack the proper education on the consequences of these behaviors in today’s world.
Financial institutions must get their cardholders involved in their own financial safety. Keeping individuals updated on fraud trends and scams will prevent misconceptions. Here’s one of those misconception brewing today: Consumers believe shopping online is safer than shopping in-store.
Here’s another: Cardholders also appear to lack confidence in the new cards they are issued after a breach. Based on a recent Aite Group Impact Report, consumers with reissued cards say they used them, on average, 43 percent less as compared to their previous plastic.
Because those of us in the financial industry work around these topics every day, the facts become engrained. It can be easy to make assumptions about the knowledge or know-how of everyday consumers who rightly depend on us to help protect their money, their data and their identities. It’s so important, especially today, to keep the communication flowing and to share new tips on protecting funds as often as we can. After all, your customer can be your strongest ally in the battle against fraud.
Tags: behaviors, consumers, Fraud, security
Prepaid options are playing a key role in the development of mobile wallets. Because prepaid is essentially the model behind a number of mobile payment solutions, it’s no doubt prepaid will continue to play a significant role in the future of mobile wallets.
Evidence of the prepaid model’s popularity among consumers can be seen in its growth, which is accelerating at a rate faster than even credit and debit cards.
Recent announcements suggest mobile wallet providers understand the merit in marrying their high-tech solutions with the convenience of prepaid. Swedish mobile payments company Seamless has teamed up with InComm, a prepaid product and transaction services company, to allow users to store digital reloadable prepaid cards into Seamless’ SEQR wallet. SEQR is a mobile wallet available in 30 countries currently processing 3 billion transactions per year. The U.S. market will be the first launch location for the combined SEQR/InComm offering.
SEQR isn’t the only mobile wallet with a prepaid component. Softcard (formerly Isis) mobile wallets feature a Softcard and Amex co-branded prepaid card, which has made Softcard more appealing to the nearly 70 million U.S. unbanked or underbanked consumers.
As innovative mobile payment developers are demonstrating, prepaid service models and mobile wallet solutions can be mutually supportive. When merged, each will power and encourage innovation in the other. This may establish a strong facilitator in driving both industries forward.
Tags: mobile banking, mobile wallet, Prepaid
Our teams have been preparing for the day payments would be made using near field communication (NFC) and tokenization. With this week’s introduction of Apple Pay, that day appears to have arrived.
What some may see as a disruptor to the payments industry, we see as validation of the path our experts have been traveling.
At this summer’s TMG Executive Summit, our financial institution clients learned of TMG’s vision for a consumer-centric digital wallet – a smart combination of mobile banking and mobile payments into one tool powered by NFC and host card emulation (HCE) technologies. At the same time, we unveiled our initial wearables product, See2Pay, which allows consumers to make payments via Google Glass. At TMG, we are always open to exploring and embracing other emerging payment technologies if they are likely to gain momentum in marketplace. Agility is the key to remaining relevant in a fast-paced changing payments landscape, and we view it as a critical factor in our ability to serve financial institutions and consumers in the future.
Although Apple’s news has created quite a bit of buzz about the new future of payments, EMV, NFC, tokenization and wearable devices used for payments have been part of TMG’s strategic product roadmap for the past 18 months. Our vision for the future of payments remains intact, as we look to develop solutions for both iPhone and Android users.
What Apple this week did was to shine an even brighter spotlight on NFC, tokenization – and to some extent even biometrics – to complete a payment. This is expected to spur more merchants to enable their terminals for NFC and more online retailers to adopt tokenization. Of course, it’s also expected to inspire more consumers to consider making payments from their connected devices.
Why is this so impactful? Because the combination of NFC and tokenization will lead to increased security that will benefit issuers, merchants and consumers. What EMV promises to do for card-present fraud, tokenization promises to do for card-not-present fraud.
Thanks to TMG’s partnership with First Data, we are excited to announce support for Apple Pay, as well as First Data’s Integrated Token Services. Servicing both issuers and merchants, First Data is poised to accelerate mainstream acceptance and use of tokenization. This in turn paves the path for TMG and our clients to offer these new payment technologies.
More than anything, we are proud to be an industry pacesetter alongside our future-focused clients. Whether it’s setting a course for EMV or blazing a trail with NFC and tokenization, it’s such an exciting time to be in the business of payments.
Tags: ApplePay, credit, EMV, GoogleGlass, mobile, payments, Wearables
Global marketing executives expect digital and mobile technology to significantly transform their marketing budgets over the next five years.
Specifically, more than one-third of chief marketing officers (CMOs) believe digital spending will account for 75 percent of their marketing budgets by 2019. Further, according to the recent Accenture study of nearly 600 executives in 11 countries, 41 percent believe their spending on digital marketing will increase by more than five percent next year alone.
The expected digital growth is the result of marketers’ increasing confidence in digital channels, up 10 percent over the past year. That comes as CMOs see an increase in the effectiveness of digital formats, including email, online display and search, compared to two years ago.
Another study found CMOs will spend more than $130 billion on innovative digital marketing efforts this year. The WebDAM study also concluded 55 percent of marketers worldwide increased digital marketing budgets in 2013.
The potential of data analytics is also on the minds of top marketing executives. Seventy-eight percent of those polled believe corporate marketing will undergo a fundamental transformation due to the use of analytics, digital and mobile technologies. Further, 42 percent believe data analytics in particular will become a “core competence” of marketing by 2019. Even so, 79 percent believe their company will not be a fully operationalized digital business by 2019.
With CMOs planning to embrace digital marketing and allocate the funds necessary to amp up their digital marketing efforts, there’s no question: Digital is the wave of the future. As digital grows and becomes increasingly sophisticated, marketers must adapt. Financial institution marketers will need an arsenal of tools and media channels at the ready to stand above the rest.
Tags: consumers, digital, digital marketing, Technology
U.S. consumers want EMV, and they want it soon. A recent MasterCard survey states 57 percent of Americans expect to receive an EMV card in the next six months. News of recent data breaches, it seems, has finally hit home.
Media coverage of system intrusions at businesses like Target, Neiman Marcus and P.F. Chang’s has brought merchant susceptibility to the forefront of consumers’ minds. They are not only paying attention; they are calling for change. Simply put, consumers don’t feel as safe as they once did.
According to an interview with MasterCard’s VP of Electronic Payments Oliver Manahan, the stateside EMV roll out began with a focus on providing a more reliable card for travelers. That focus was almost exclusively aimed at credit card portfolios. Now, Manahan says, “… it appears that both credit and debit will be going out in the coming months, at least for big issuers.”
While not new to the international payments industry, EMV is newly adapted to the U.S. The more U.S. financial institutions, large and small, that issue EMV, the less “new” it becomes. Most large U.S. merchants have already started to upgrade their checkouts for EMV capabilities (as you may have noticed in your local Target and Walmart stores, for example). As large issuers begin to mail out EMV chip cards, word of mouth spreads. Credit union and community banks, if they haven’t already, will soon be receiving more inquiries from cardholders curious about the status of their own EMV cards.
Tags: community bank, consumers, credit union, data breach, EMV
A growing ATM scam has turned into a multimillion-dollar problem for U.S. financial institutions. Called “card cracking,” the scam began in Chicago and has now spread to other cities across the country.
Here’s how it works:
A card cracker approaches a legitimate cardholder with an offer: “Give me your debit card and your PIN. I’ll deposit my check into your account and only withdraw some of the money. You get to keep the rest.”
Sounds like easy money to many. And that’s why the scam is effective.
The criminal then uses an ATM to deposit a counterfeit check into the victim’s bank account. The card-cracker then withdraws the funds quickly, before the check is found to be fraudulent. To rub salt in the wound, the schemer usually doesn’t share any of that withdraw. He or she simply leaves the cardholder to deal with the financial institution (and potentially even the police) when the “deposit” inevitably fails to clear.
Victims are recruited through ads on social media networks, such as Facebook and YouTube. Card crackers have even been known to pitch the idea in person as college-age cardholders approach on-campus ATMs.
The scheme has grown in popularity (there are even reports of the crime popping up in rap songs). More than 1,000 reports of young adults becoming victims of the scam have surfaced over the past two years. The scam has also become more organized, widening across the country.
Scams like these, in which legitimate cardholders willingly share their account information, are among the most challenging to thwart. And for cardholders, it can be difficult to recoup the loss for the mistake. Financial institutions and the major card networks often have policies in place that deny reimbursement of fraud losses when a victim has voluntarily given out his or her information. Often these policies come as a surprise to victims, so financial institutions should do their best to provide frequent reminders of these policies. Importantly, educate your cardholders on ways to spot scams like card cracking, and remind them to never give out their PIN. Ever.
Tags: counterfeit, Fraud, scams
Financial institution employees have long had their guards up when it comes to their email. With phishing scams and the added complexity of social engineering, malicious communication has become a real problem.
Financial service professionals understand these scams are especially dangerous when they target the employees of a credit union or bank. Thanks to consistent and clear education, many of these employees have become near experts at spotting fake emails. As such, the fraudsters have been forced to find new ways to trick skeptical employees.
What are they up to now? The scam artists are no longer content to send phishing emails from well-known companies and organizations; now they are masquerading as your boss.
The fraudsters send emails that appear to come from senior executives (typically the CFO or CEO) inside targeted financial institutions. The note usually comes to a junior employee and requests an urgent – and confidential – financial transaction. The employee then initiates the top-secret transaction via ACH to a fake account and the scheme goes undetected until employees talk to one another or an internal system detects the mistake.
These masquerading crimes underscore the importance of layered security. Financial institutions must have policies in place to combat this type of incident and to give employees the confidence to verify strange requests – even if they appear to be coming from the very top.
Tags: account takeover, fraudsters, phishing
Earlier this summer, I posted about hackers going after more than just payment data with their intrusions. The recent news of StubHub’s run-in with cyber thieves is a perfect example of this desire for access to other types of accounts. The online ticket reseller announced customer accounts had been hacked, and the criminals were able to buy tickets to events through the site using the stolen account information.
According to the announcement, more than 1,000 accounts were accessed fraudulently. The company said the hackers did not break through Stubhub’s own security. Instead, they obtained Stubhub usernames and passwords from other sources. These include the websites of retailers involved in their own data breaches and malware installed on victims’ computers. Because consumers often use the same login credentials for several sites, the thieves were able to apply the stolen usernames and passwords at Stubhub.
Company spokesperson Glenn Lehrman said, “The company detected the unauthorized transactions last year, began working with authorities and gave the affected customers refunds and help changing their passwords.” Although StubHub is based in San Francisco, the case has apparent international reach. In fact, of the arrests made in the case, three were in London, and one was in Toronto.
This hack underscores the fact that attackers don’t have to breach your systems to gain access to your customers’ accounts. Vulnerabilities in your customers’ own systems and even poor personal security habits can open your online and mobile banking door just wide enough to let the criminals in.
Educate your consumers about this and encourage them to practice good password security. Remind them to never use the same username and password for multiple sites (at a minimum, their financial accounts should contain unique credentials). Advise online and mobile banking users to change their passwords every few months. And of course, you can’t remind consumers enough to monitor their banking, social and retailer accounts for any suspicious activity so they can report it immediately.
Tags: compromise, cyber_crime, cyber_fraud, data breach, Fraud, stolen