With the October 2015 EMV liability shift quickly approaching, three of the nation’s biggest retailers, Walmart, Kroger and Target, are busily pushing ahead with their own EMV upgrades.
Walmart started updating its payment terminals in U.S. stores eight years ago. Currently, 4,200 of Walmart’s 4,800 terminals are activated and taking credit EMV transactions. The retailer can accept both chip-and-signature and chip-and-PIN cards at point-of-sale (POS) terminals, where consumers with a chip-equipped card will be prompted to use the chip reader instead of the mag stripe reader. By the end of 2014, the discount superstore plans to have new payment terminals running in all U.S. locations. In addition, before year-end, it will replace Walmart-branded cards with chip versions. Currently, the retailer is processing more than 50,000 EMV transactions per day.
Likewise, Target announced early this year it would switch its Redcard credit and debit cards to MasterCard’s chip-and-PIN technology and install a chip-enabled POS system.
With the nation’s largest retailers wholeheartedly on board with EMV, the question is: Will other merchants be prompted to follow suit? A recent Digital Transactions News survey says yes.
The survey asked retailers if Walmart’s chip-card implementation would encourage other merchants to speed up their own EMV acceptance plans. Sixty-five percent said it would, 23 percent said it wouldn’t and 13 percent were undecided.
“As the number one in the Fortune 500, with almost a half a trillion in sales, Walmart is a heavyweight among the heavyweights,” said Mary Monahan, EVP and mobile research director at Javelin Strategy & Research. She added, “Walmart will now begin to push other retailers to move to EMV cards by touting the higher level of security that they offer their customers.”
Undoubtedly, Walmart and Target’s moves toward EMV acceptance will spur some retailers to do the same. Additionally, the significant consumer reach each of these retailers has will certainly beef up consumer awareness and understanding of EMV, both of which are currently lacking.
Tags: chip cards, payment terminals, payments, retailers, strategy
In a recently released white paper, “The Mobile Payments Ignition Point,” I detailed the dramatic impact Host Card Emulation (HCE) technology is expected to have on the mobile payments marketplace. When paired with the right technology, HCE is poised to make it not only possible, but beneficial, for community financial institutions (FIs) to deploy consumer-centric mobile payments solutions.
FIs, telcos, device manufacturers, retailers and Internet giants will ultimately drive consumer adoption of next-generation payments. They just have to figure out how to play together first. A lack of agreement on one core technology to power mobile payments has also complicated issuer, merchant and consumer adoption. Simply put, a plethora of choices for both providers and consumers exists today.
In the excerpt below, the pros and cons of two leading technologies, barcode + cloud and Bluetooth low-energy (BLE), are explored.
Barcode + Cloud
Cloud technology for mobile payments is best demonstrated by Starbucks. A customer scans a barcode displayed on his or her device at the point-of-sale (POS); credentials are held in the cloud…the Merchant Customer Exchange (MCX), in partnership with Paydiant, has recently announced its plan to roll out a barcode + cloud mobile payments app similar to Starbucks. The MCX solution is reported to offer a different consumer experience than the Starbucks app because the consumer will scan a barcode produced on the POS device or on a receipt instead of displaying a barcode on his or her phone.
…Of course, serious attention to security and encryption are critical with any cloud-based technology…What’s more, barcode acceptance often requires merchants to perform terminal hardware and software upgrades. With the present need to reterminalize for EMV-capable machines, most retailers are not likely to pump even more investment into their terminals – especially if you consider the possibility of a set of standards someday requiring universal changes to payment barcodes. No standards exist for barcodes today so different providers are including different information in the bar codes.
Bluetooth low energy (BLE)
…PayPal is showing some interest in using BLE for payments. Its Beacon tool, for example, automatically detects shoppers who have enabled Bluetooth on their devices when they are in a participating store. It then allows those users to make payments at the POS hands-free with voice recognition.
Aside from payments, the marketing strategies that BLE enables are becoming very attractive to retailers…With BLE, merchants can pinpoint very precise locations of their customers and prospects. A department store, for example, can use BLE to identify users in a specific department and use that information to push out a highly targeted and relevant discount offer to those customers. Macy’s, Best Buy, Sports Authority and others have tested this idea via an app called Shopkick.
…There is a question of how much BLE-powered interaction consumers will tolerate, however. Similar to the way Tom Cruise’s character is inundated with unsolicited marketing messages in the film “Minority Report,” a world full of BLE could become irritating. This may cause consumers to opt-out, making mass-market solutions unviable.
Watch for my next blog in which we’ll talk through a third leading technology, near-field communication (NFC), and how NFC, when paired with HCE, is the best solution.
In the meantime, you can download the complete white paper at themembersgroup.com/mobile_ignition.
Tags: bluetooth, Cloud, mobile, mobile technologies, point of sale, white paper
There’s been a lot of talk about omnichannel banking lately. The term refers to the fusion of delivery and/or communication channels to create a unified customer experience. Essentially, it’s the convergence of physical and virtual channels, allowing for the experience initiated in one channel to be seamlessly transferred to another.
Modern consumers want omnichannel banking. In fact, a recent Cisco research report found that, although branches will not entirely disappear, consumers want access to financial services and advice across a variety of digital channels. These include mobile devices, online, video conference and social media networks.
The survey of 5,300 consumers in seven countries also concluded global consumers still value branches for personal attention and favor expanded services that include different kinds of financial advice.
Specifically, 78 percent of consumers in developed markets and 72 percent in emerging markets prefer to use financial institution (FI) web applications for paying bills, managing accounts, checking balances and managing other basic transactions. Additionally, 13 percent of consumers in developed markets and 18 percent in emerging markets prefer to use mobile banking applications for real-time expense tracking, personal finance management and payments.
Forty-two percent of consumers consider FIs to be the most trusted stewards of their digital information, ahead of the government (19 percent), telecom companies (6 percent) and social media sites (4 percent).
A word of caution: Consumers must see the value in omnichannel beyond its potential to increase profits. One recent consumer survey, “Omnichannel Customer Service Gap,” found 73 percent of consumers believe brands are using multiple channels to boost sales rather than to improve customer service.
According to the global survey, a company’s reputation for good customer service matters to 78 percent of consumers. In fact, 75 percent of consumers say good customer service will bring them, their money and their referrals back to the company. Interestingly, 69 percent of consumers say their expectations are increasing.
These statistics show that while the omnichannel banking experience is attractive to the majority of consumers, many remain skeptical about the way the channels are used. The data also reiterates a positive customer service experience can translate to loyalty, which has immeasurable value.
Tags: consumers, omni-channel, service
A recent Credit Union Times infographic highlights some of the ways credit unions can decipher and use Big Data. Specifically, a number of credit unions are looking to integrate uncomplicated predictive analytics and data management tools into their data mining programs.
Three of TMG’s credit union clients recently signed on to use our data analytics and portfolio consulting solution, Catalyst. Catalyst allows financial institutions (FIs) to better monitor, learn from and adjust to the changing behaviors of consumers. Built in conjunction with TMG’s strategic partner IQR Consulting, Catalyst leverages an FI’s own credit card portfolio data to help leaders understand cardholders on an individual level.
With Catalyst’s easy-to-decipher “snapshot” and “trending” reports, credit union executives don’t have to dig through the data to understand how portfolios are performing. Rather, the reports allow management teams to quickly assess the health of the portfolio and take corrective action where needed.
The Credit Union Times infographic breaks down some interesting statistics and facts from the CUNA Technology Council’s white paper, “The Data Craze: Perspectives on Big Data, Predictive Analytics and Business Intelligence.” It also takes a look at some of the main benefits of data analytics and the ways credit unions are utilizing Big Data.
Current statistics show just how “big” data mining has become. Consider these three examples:
The infographic points out five key advantages credit unions receive by collecting and analyzing data:
- Promotes clarity to cut down on time spent researching and processing information
- Permits the use of testing models to accurately measure performance statistics
- Separates populations into sectors, allowing for customized product and service offerings
- Streamlines processes by aiding and sometimes eliminating human decision-making through automated algorithms
- Encourages the creation of fresh business models, as well as products and services
Credit unions and other community FIs are applying data analytics to daily operations in a number of ways. These include improving customer service, creating accrued interest reports, developing certificate offerings, running daily teller reports, managing internal auditing and deciphering ATM settlements.
As the business of collecting data continues to grow, it’s important for FIs to understand the scope, uses, advantages and best practices of data mining. These insights can help leaders create and implement effective data analytics programs and better decipher the information they glean.
Tags: big data, catalyst, community banks, credit unions
Seventy percent of U.S. credit cards and 41 percent of debit cards will be EMV-enabled by the end of 2015. That’s according to a new report, which also predicts the majority of the EMV transition will occur by the end of 2014 and into the beginning of 2015.
The Aite Group report, “EMV: Lessons Learned and the U.S. Outlook,” is based on card issuer interviews. Eight of the 18 issuers interviewed said they plan to start issuing EMV debit and credit cards to the general public by the end of the first quarter 2015. Aite concludes three things in particular are motivating issuers to speed up issuance:
- Increasing fraud threat
- Interest in hastening terminal upgrades to accept near field communication (NFC) mobile payments
- Obstacles involved with using magnetic stripe cards overseas
The research indicates credit card providers will primarily issue contact chip-and-signature credit cards to cardholders rather than dual-interface (contact and contactless) cards. Issuers listed three main reasons for this:
- Card deployment simplicity
- Retailer infrastructure (many of those interviewed believe the technology to accept contactless payments may not be widespread by the deadline)
In contrast to the above research, TMG has seen its issuers overwhelmingly choose dual-interface cards. When asked about why many were making this choice, the common responses were “preparing for mobile payments” and “getting cardholders familiar with the process of tapping to pay.”
Conversely to credit cards, according to the Aite Group report, debit cards will use the chip-and-PIN technology that is popular both stateside and in countries outside the U.S. The report also points out American consumers are already familiar with using a PIN for their debit cards. However, the report claims card issuers believe cardholders should get accustomed to the chips on credit cards before learning to incorporate the PIN technology.
The report details the past EMV migration experiences of five countries: the U.K., Australia, Mexico, Brazil and Canada. It also provides insight for financial institutions (FIs) on how to best prepare for EMV implementation.
“Issuers, based on lessons learned from other countries, should consider issues like fraud migration paths and how to counter them, as well as how to educate the consumer and merchant alike on chip cards,” said Julie Conroy, Aite’s research director for retail banking.
Conroy also advises FIs to take into account third-party expertise gleaned through the EMV migration process of other countries to simplify the deployment process.
Tags: credit, debit, EMV, mobile payments, PIN
I recently had the privilege of attending the World Credit Union Conference (WCUC) in Gold Coast, Australia. I joined IQR Consulting President Rahul Nawab as a presenter during the “Consumer Expectations in Payment Trends” session.
In my presentation, “Consumer Mindsets Driving Payments Innovation,” I highlighted some of the ways consumers themselves are disrupting the payments industry. Specifically, consumers are looking for omni-channel interactions that meet their standards of service across all platforms, seamlessly and on demand.
The ability to bank and pay seamlessly on-the-go and easy access to sharable, interactive rewards, discounts and other types of loyalty perks is the future of consumer-driven payments solutions. As consumer demand continues to influence an anytime, anywhere payments technology movement, our industry must work to stay one step ahead of this desire.
That’s where data analytics emerges as the key to delivering consumer-focused payments solutions. With so many consumers connected through a variety of devices, not only are organizations able to collect personal data, they can obtain behavioral data, as well. Transaction data, third-party data, social media and demographics all come together to allow companies to understand consumer patterns and predict future behaviors.
Additionally, the multi-dimensional nature of today’s transactions (Search > Shop > Redeem > Pay > Share) calls for the use of analytics. Sure, we can collect information on shopping patterns and make predictions, but can we actually use that information to glean insight? The answer, fortunately, is yes.
Analytics capabilities enable financial institutions to accurately forecast consumer demand and respond by providing precisely what their target market wants, even before consumers within that market know they want it. In short, data analytics is allowing organizations to better meet the needs of their customers.
Next month, I’ll blog about another WCUC session, “Advancing Women in Leadership,” for which I was so honored to serve as moderator.
Tags: big data, consumer mindsets, consumers, financial institution, omni-channel, rewards, target market
Audience segmentation has always been part of a marketer’s job. Today, it’s becoming easier with the availability of advanced data and analytics solutions.
Life stages are just one way smart marketers are categorizing the target audiences of their financial services marketing campaigns. There are certain predictable events in nearly everyone’s life that generate specific financial needs.
Below are five life stages and the financial place in which individuals in these stages generally find themselves. As you read about each stage, consider how you might tailor your marketing messages accordingly.
- Pre-Adult — At this stage, parents play a key role the financial decisions individuals will make. In that regard, providing financial education to both parents and children can help establish the trust necessary for securing pre-adults’ loyalty later in life. Laying the groundwork for positive savings habits through youth savings programs can be a great place to start.
- Young Adult — These individuals are building a base for their financial futures. Positive saving and borrowing habits need to be reinforced at this stage, even though many in this age group are also experiencing major life events like starting their career, getting married and buying a home. Encouragingly, a recent CO-OP Financial Services survey found credit unions are doing a great job meeting the needs of this demographic. Eighty-one percent of Gen Y credit union members said their credit union provides an “outstanding customer experience.” Keep in mind, the young adult demographic is tech-savvy and will often respond better to emails, apps and online tools. In fact, the CO-OP survey found 39 percent would use mobile payment apps, and 38 percent would utilize person-to-person (P2P) payments.
- Middle Adult — This stage generally brings children, busy schedules, lots of expenses and insurance needs. Consumers in this age group are looking to protect and/or start their investments as they build their families. Insurance needs are also of great importance. CoOportunity Health — Iowa and Nebraska’s only nonprofit health insurance CO-OP — is designed to help credit union members understand what’s changed in health insurance as a result of the Affordable Care Act. Credit unions’ partnership with CoOportunity Health gives members access to experts who are ready to help sort through the complexity of healthcare reform. These experts understand the law, new options and how the new Health Insurance Marketplace works, so they can provide personalized help for individuals, families and businesses. Additionally, for middle adults, loan consolidation and refinancing products can be attractive offerings. Also, consider the value this age group might find in GAP coverage and other discount insurance products. Because people in this age group are busy, statement inserts, direct mail pieces and emails are often the best way to reach them. Yet, don’t overlook the power of word of mouth marketing. This age group is often very connected to community, family and friends.
- Late Adult — These individuals are preparing for the kids to leave home and are thinking seriously about retirement needs. Many are familiar with technology, but not as tech-savvy as younger adults. This group may be interested in taking retirement preparedness classes, meeting with an investment planner and even taking part in money management groups or courses.
- Retirees — Older adults often (but certainly not always) have secure financial knowledge and an established trusting relationship with their FI. Many are looking to lower long-term costs, begin planning their estates and make conservative investments. They generally respond best to face-to-face communication.
Understanding the ever-changing stages of life and the unique financial needs of each stage will help marketers more successfully reach — and get a better response from — the target audiences of their campaigns. Also, starting young, establishing trust, providing financial education and building loyalty throughout the consumer’s life can increase the number of life-long relationships your financial institution secures.
Tags: audience, consumers, data analytics, health insurance, Marketing
There’s no doubt data analytics can be helpful to financial institutions (FIs) in a number of ways. These include identifying the profitability of specific customer segments, isolating consumer behavior trends, developing targeted marketing efforts, determining cross-sell opportunities and more.
It’s also worthwhile to consider how Big Data, when analyzed properly, can be helpful in boosting “relationship banking” within your FI, by offering more personalized customer experiences and service. This benefits the consumer by offering products and services he or she really wants and needs; in turn, it helps the FI by bolstering customer satisfaction and loyalty.
While credit unions and community banks undoubtedly understand the importance of personalized service, it’s worth considering ways in which data mining can make this personalization easier.
A recent Forbes article talks about how some FIs are using data analytics to generate a “360-degree” view of consumers, all in the name of customer-centricity. By tracking and deciphering the specific ways each consumer utilizes different banking channels, these FIs are informing the ways in which they will build customized products and service offerings.
To tailor new product and service offerings to the right consumers, FIs must understand their habits. In so doing, FIs can predict which new products consumers will purchase from the FI (and when), customize offers to segmented consumers and create targeted marketing campaigns.
Gathering and analyzing this data also improves relationships with profitable customers, increases new product development and bundling, offers bundle and a la carte pricing options and cuts costs by providing an understanding of channel usage.
Defining the right use cases for your FI and building the right data mining infrastructure can enhance your innovation and greatly improve your business processes. Keep in mind, though, that data will only be as useful as the insights you are able to obtain from it.
Tags: big data, community banks, consumers, credit unions, data analytics, offerings
A recent spending report showed a dollar volume growth of 4.2 percent in May. Retail spending saw a 1.7-percent increase, a slight bump from 1.3 percent the previous month. Importantly for issuers, the data also indicated a significant jump in credit card spending, as well as a noticeable decline in purchases made by check in month-over-month analysis.
Overall retail spending in May experienced the greatest growth in more than six months. This was mostly due to a nearly 7-percent jump in spending at home improvement retailers and a 1.4-percent increase at furniture stores. Because both of these retail categories sell high-ticket items, their customers are more likely to pay with credit.
May’s mild temperatures also led to a spike in travel expenditures, with hotel spending seeing more than 9 percent growth, marking a 12-month high. The warm weather also drove up retail foot traffic in most regions, except the Northeast.
More travel also led to an increase in gas station dollar volume, which saw a 3.6-percent increase. This increase, along with higher year-over-year gas prices, played a significant role in overall spending growth.
May’s average ticket growth of 1.2 percent was higher than April’s 0.5 percent growth. Additionally, although retail average ticket growth was 0.0 percent in May, it was an increase from April’s -1.1 percent. Some of the growth can be attributed to retailers returning merchandise to full price after offering discounts during the extended cold-weather season.
This kind of spending data can be incredibly helpful to issuers. Understanding when your cardholders are most likely, seasonally speaking, to pay with credit can inform the types of promotions you should offer. If consumers are likely to use a credit card for home improvements or furniture shopping in the spring, perhaps double points at DIY or home stores would ensure it’s your credit card they choose.
Tags: consumers, credit card, retail, spending
The Federal Trade Commission (FTC) is asking Congress to provide new legislation calling for greater transparency and consumer control over information collected by data brokers.
The FTC recently issued a report, Data Brokers: A Call for Transparency and Accountability, which studied nine data brokers’ collection and sharing of consumer information. The report found the data brokers collect and store billions of data elements covering nearly every U.S. consumer.
The FTC is doing more than writing reports. It is urging Congress to consider legislation that would increase transparency and accountability of data brokers’ activities. In addition, the legislation the FTC is calling for would provide consumers with access to information about them held by data brokerage firms.
The report contends that consumers should have ways to find out about, and most importantly to correct, information compiled on them. The FTC contends consumers should also be allowed to opt out of having their information delivered to data brokerage clients.
Specifically, the report recommends legislation to require:
- A centralized Internet portal, where data brokers can identify themselves, describe their information collection and use practices and provide links to access tools and opt-outs
- Consumer access to data, including any sensitive data, in detail
- Opt-out tools and a way for consumers to suppress the use of their data
- Consumer education on inferences made from raw data
- Disclosure of names and categories of data sources
- Consumer notices when companies share information with data brokers, along with the ability to opt-out
- Express consent from consumers before information is collected and shared with data brokers
- Brokers that provide “risk mitigation” data to allow consumer access to information used and the ability to correct it
In May, The White House issued a report calling for a renewed push to pass a Consumer Privacy Bill of Rights. President Obama first proposed the bill in 2012. Several of the recommendations in the FTC report are in line with those in The White House privacy bill.
It remains to be seen how this new call for increased Big Data regulation will affect the financial industry specifically. It will be important for financial institutions to maintain a clear understanding of changes in regulatory requirements in the coming months. Watch for future blogs on the subject as legislation is debated and hashed out.
Tags: big data, consumers, data, data brokers, FTC