The following is the third in a series of three EMV-themed blog posts. The original article appeared in Credit Union Management magazine.
In my last post, we talked about building an EMV team within your organization. One of the first tasks for this core EMV team is to become educated on the many different types of EMV card configurations. After learning as much as they can, the team must make a series of decisions to guide implementation. They should consider the answers to each of the following questions:
1. Will we migrate credit and debit at once or stagger implementation?
The best course of action is credit now, debit later. Not only are there several outstanding issues on the debit side of things, but debit cards are typically higher profile among consumers. Any bumps in the road that may come from a first-ever EMV conversion will be much easier to weather with credit cardholders than with debit cardholders who may use their cards several times each day.
2. Will we configure our EMV cards to be contact-only or dual-interface?
Many payment-industry analysts believe that when it comes to credit card transactions, tap is the new swipe. Dual-interface EMV cards allow cardholders to take advantage of tap-and-go terminals, which are more prevalent overseas and in some major metropolitan areas of the U.S. (think train stations, bike-rental kiosks or vending machines). This configuration is considered the Cadillac among EMV cards and will demonstrate a financial institution is ahead of the market. However, it may require as much as double the budget to issue dual-interface EMV cards.
3. Which authentication method will we pursue?
Each issuer will feel pressures to choose different authentication methods, largely based on their payment network relationships. Whereas some networks consider chip-and-PIN to be the most secure, others view chip-and-signature as best. Each of the major card networks has devised incentives for issuers to elect their chosen method.
If we put our consumer hat on, however, we have to consider that most credit card users are not used to entering a PIN. If they are issued an EMV credit card that has only chip-and-PIN authentication, they may need significant education to understand that the PIN will not be optional on their EMV card. And, if they neglect to memorize it, the credit card will not work.
4. Will we allow both online and offline transactions?
During an offline transaction, the EMV card must be smart enough to “make decisions” about whether the cardholder is who he says he is, and whether there are enough funds available to allow the transaction. During an online transaction, an EMV card and the host network can talk to each other about those two issues. In addition, during an online transaction, the host can update the information on the card’s chip, such as limits for offline transactions like, “This card may be used three times offline before it must be used online (and receive any new updates).”
Because many of Europe’s unmanned terminals (such as a ticket vending machine in the train station) are not connected to telephone or Internet service, offline-capable cards are important there. In contrast, in the United States, an abundance of connectivity and a healthy telecommunications infrastructure prevail, creating an environment where maybe only five percent of all card transactions are offline-only.
For a U.S. financial institution without a significant number of international travelers, online-only EMV cards will likely be a sufficient offering, as cardholders will rarely need an offline transaction. In contrast, credit unions or banks with large numbers of overseas cardholders may wish to take on the additional costs and maintenance involved with offering cards able to do both online and offline transactions, so that customers abroad will have a more seamless experience.
5. Will we take a segmented approach or do a portfolio-wide conversion?
Most financial institutions are taking a tiered approach to converting existing accounts to EMV, beginning with cardholders who live or travel overseas. As the October 2015 deadline gets closer, these financial institutions will begin to convert the remainder of their portfolios. This provides for a soft launch, allowing card teams to learn from the challenges presented and to make phase two rollouts as smooth as possible.
To learn more about the ways in which TMG clients are rolling out EMV cards, listen to the free podcast, “How Your Colleagues are Preparing for EMV.”
Tags: cardholders, conversion, credit cards, decisions, demand, EMV, financial institution, portfolio, questions, team, transactions, U.S.
The following is the second in a series of three EMV-themed blog posts. The original article appeared in Credit Union Management magazine.
The reason many financial institutions are implementing their EMV plans today is to limit their exposure to fraud tomorrow. By enabling credit cards with EMV chip technology, credit unions and banks can reduce their exposure to fraud. However, because today’s EMV cards must also carry a magnetic stripe to remain compatible with the millions of traditional point-of-sale terminals still in existence, the fraud ROI of EMV is still several years away.
Even though the October 2015 liability shift seems like a long time from now, TMG recommends issuers begin implementing their plans to be EMV-ready by the deadline. At a minimum, card managers should have a calendared plan in place within the next 12 months.
The most important recommendation we can make is for credit unions and banks to communicate their EMV plan to their vendor partners sooner than later. This will provide ample opportunity to get themselves into the necessary conversion queues. TMG has made it easy for our clients to do this by offering informational webinars and surveying them to find out their EMV plans.
With your partners, have conversations about:
• Specs and to-dos with core processors
• Data processors
• Plastic card fulfillment vendors
• Financial institution customer support partners
• PIN networks
Feeling a bit overwhelmed? Often the best way to go about this is to develop a core EMV team within your organization. It becomes this team’s job to champion EMV conversion across the financial institution and to be sure all information gathering and collaboration happens on the prescribed timeline.
Tags: cardholders, conversion, credit cards, demand, EMV, financial institution, implementing, overseas, plan, portfolio, transactions, U.S.
The following is the first in a series of three EMV-themed blog posts. The original article appeared in Credit Union Management magazine.
The United States has been one of the few holdouts in the universal adoption of the Europay Mastercard Visa standard, making the acronym “EMV” far from a household word among U.S. consumers. Regardless, most credit union and bank leaders know the term represents a significant shift in the way card transactions will be made and processed in the U.S.
Here are some of the more immediate benefits driving today’s EMV conversion projects:
- Enabling more credit card transactions in more places;
- Satisfying demand from cardholders who travel or live overseas;
- Solidifying a competitive advantage and top-of-wallet positioning for the credit card portfolio; and
- Demonstrating a first-mover stance to high-value cardholders.
The value gained by migrating cards to EMV has changed the discussion about EMV from “what if” to “when should we start?”
Right now, many card-issuing financial institutions are weighing the costs and benefits associated with migrating some or all of their cards to the EMV standard. After Oct. 1, 2015, issuers and merchants that do not offer EMV to their financial customers will be liable for fraudulent transactions. While some card managers are already feeling pressure to meet this deadline, others are willing to take on the additional liability risk, believing that many retailers will not be EMV-ready by October 2015.
Credit unions and banks choosing to wait may be in for a tough road, however. Vendor queues for EMV conversion become longer each day. What may be a two-month implementation timeline now could become as long as a year the closer we get to the deadline. Processors and others have recognized this, and are working on products that will allow for faster implementation of EMV solutions for their clients.
TMG, in fact, has developed a unique and streamlined processes that is today making it much easier for issuers to rollout EMV cards in time to meet their strategic objectives. If you’re curious how this process could help your credit union or community bank, certainly contact me.
Tags: cardholders, conversion, credit cards, demand, EMV, financial institution, first mover, overseas, portfolio, transactions, U.S.
TMG client FORUM Credit Union recently introduced a new program promoting youth entrepreneurialism. Indianapolis-based FORUM’s program, called Bright Start, encourages the development of entrepreneurial skills for children and teenagers.
According to FORUM’s website, Bright Start is designed to teach kids the basics of starting their own businesses, breaking it down step-by-step. The program teaches young entrepreneurs to first come up with an idea for a business by building on their interests, talents and skills.
Second, Bright Start instructs the budding business owners to develop a marketing plan. Whether it be through “word of mouth,” social media or papering the community with flyers, the youth are encouraged to find a creative way to get the word out about their new ventures.
The third step in the program is to explore business administration. For Bright Start participants, this can range anywhere from creating a business plan to drawing up a prospective client list.
The fourth step centers around the financial aspect; specifically, how young entrepreneurs should manage their earnings. FORUM strives to teach youth the “Three Money Principles of Save, Spend and Share.”
According to its website, FORUM aims to teach responsibility, promote financial independence, improve communication skills and inspire self-esteem. To that end, FORUM hosted a video contest this summer for participants ages 8-19 who already run their own businesses through the program. Contestants submitted a brief video describing their business, chronolicing their journey and sharing what the experience has taught them.
Kudos to FORUM for creating this program in an effort to encourage and instruct young entrepreneurs. Consider ways your financial institution could reach out to and provide financial education to the youth in your community.
Tags: business, contest, credit union, entrepreneur, Forum, skills, video, youth
One in four uninsured Americans eligible for federal insurance subsidies do not have a bank account, according to a Jackson Hewitt report released earlier this year.
The U.S. Department of Health and Human Services said insurers participating in new health insurance exchanges would be required to accept payment from consumers in several different forms. These include prepaid debit cards, cashier’s checks and money orders, as well as paper checks and bank account transfers. According to the ruling, the fact that many insurance providers already accept debit cards means adding prepaid cards should result in few “administration or operational issues.” The ruling does not require insurers to accept cash.
Allowing prepaid cards as a payment method is intended to help ensure 8.5 million unbanked, lower-income Americans can still sign up for coverage, even without a checking account.
This ruling is proof of the growth in widespread acknowledgement of prepaid cards as a payment option.
Tags: exhanges, health, insurance, Prepaid, unbanked
Attracting young consumers is important to the stability and longevity of banks and credit unions of all sizes. As such, most financial institutions (FIs) are looking to gain a better understanding of Generation X’s and Y’s expectations and preferences regarding financial products and services.
New research from consulting firms Simon Associates Management Consultants and C.F. Effron offers some insight into what young adults are looking for in (and expecting from) their FIs. The research also includes the preconceived ideas FI executives had on what Gen X/Y consumers want from an FI.
The study consisted of Gen X and Gen Y participants taking part in a “Build Your Own Dream Bank” game. Twelve individuals were instructed to invent a make-believe FI consisting of the products, services, technology and staff they felt would “best serve them” as their assets grew. Conversely, 17 FI executives were also asked to detail how they would originate an FI by the year 2020 that would effectively draw Gen X and Gen Y consumers.
Overall the results showed a disconnect between what young adults indicated they sought from their FI and what FI executives believed to be important to consumers in this demographic.
Gen X and Gen Y participants continually referred to their dream bank as a place where they “belonged.” They desired an institution with knowledgeable staff that could provide consumer education, assistance and direction regarding their current and future finances. Specifically, these young adults sought an FI that offered guidance on how to “protect their assets and use them wisely,” including budgeting and creating a realistic financial blueprint for their future. An FI they could trust, where they could “feel appreciated” and be known by name were also at the top of the Gen X/Y group’s list.
This data is supported by a recent Cisco Systems study that found more than 50 percent of consumers would not put their money in a completely “virtual” FI, opting instead for an FI with a physical location. Cisco also concluded that 69 percent of those surveyed would be willing to share more personal information with an FI that offers “more personalized service.” (This is a good sign for FI leaders looking to leverage consumer data for more intelligent decision making.)
In contrast, the FI executives taking part in the research rated technology, including mobile device integration and social media, ahead of personally tailored customer service for Gen X/Y. It’s true that technology is important to this demographic, as many in the group said their dream FI would have “all the sophistication of the big banks and their cool systems.” But just as importantly, they added: “with all the warmth and familiarity of the local credit union.”
Not surprisingly, it appears Gen X and Gen Y want the best of both worlds. They are looking for an FI that combines all the latest bells and whistles with good old-fashioned one-on-one customer service. Consider where your FI fits into the mix.
Tags: bank, belong, consumers, credit union, data, familiarity, financial institution, Gen X, Gen Y, personal information, share, warmth
Consumer Reports recently reviewed 26 different prepaid cards and evaluated them based on four different factors. The cards Consumer Reports considered to be the best scored well in each of these four factors:
- Value — How much they cost to use.
- Convenience — Availability of in-network ATMs, bill pay features and how widely the card network brand is accepted.
- Safety — Whether funds are protected with FDIC deposit insurance.
- Clarity of Fees — How well fees are disclosed.
Highest ranked cards are those like the ATIRA suite of prepaid cards TMG’s clients issue. They have fewer fees and make it easier for consumers to avoid them, carry FDIC insurance for each cardholder, offer features comparable to traditional checking accounts and do a better job of disclosing fees.
Not surprisingly, the worst prepaid cards reviewed scored poorly in at least one, and sometimes several, of the above categories. All of the lowest ranked cards have “high, unavoidable fees, including activation and monthly fees.” Additionally, the lower scoring cards fail to make their fees clear and easy for consumers to access and understand.
Specifically, the report found some prepaid cards fail to provide clear explanations of how to use features such as electronic payments, text alerts and mobile remote deposit capture, and the fees that may be charged for them. Further, while all of the cards reviewed claim to offer some form of protection for consumers, the report found these policies are often not clearly defined.
Consumer Reports also found it problematic that although issuers provide safeguards voluntarily, they can cancel them at any time. Additionally, according to the report, fee information is often hard to find and difficult to understand. The report states this problem is “compounded by the lack of consistency with fee names and descriptions” from card to card, making it challenging for consumers to compare fees and costs.
Consumer Reports also found that prepaid cards offered by some of the big banks are not necessarily less expensive than other prepaid cards. Also, these big bank offerings may be less attractive to consumers because they often don’t provide the option of making both electronic payments and payment by paper check.
This is the first time Consumer Reports has evaluated and ranked prepaid cards, revealing a shift in the market for prepaid. As prepaid cards continue to grow in popularity, consumers are going to become savvier about which prepaid cards they purchase. Consider taking a closer look at this Consumer Report to determine how your financial institution’s (FI’s) prepaid offering measures up.
Tags: Cards, clarity, consumer reports, convenience, fees, Prepaid, safety, value
What follows is an excerpt of an article originally appearing on CUinsight.
The Christmas shopping season is one of the best times of year for card promotions. As spending rates soar, so do card managers’ ambitions to get their debit, credit and prepaid cards to the top of their members’ wallets.
For some issuers, due to limited resources, the holidays are the only time they run special deals for cardholders. With cardholder segmentation strategies, however, card teams can generate dramatically improved results from their promotions – perhaps even enough to fund more promotions throughout the year.
Take the success of Deere Employees Credit Union, for example. Hoping to better target cardholders with offers that would ensure cardholder retention during the holiday shopping months, the cooperative partnered with TMG’s data analytics partner IQR Consulting in advance of the 2012 season.
Following an in-depth portfolio analysis, the credit union was able to detect patterns in spending behaviors. This helped pinpoint cardholders best suited for the campaign, as well as helped identify which cardholders should be excluded from the promotion.
Once the target market group was identified, analysts categorized the accounts into Transactor, Revolver, Inactive and Paydown (or TRIP) segments and custom designed rewards offers for each segment. Offers were distributed to specific cardholders based on card product type, purchase behavior and TRIP segment.
Fifteen percent of the qualifying cardholder accounts were removed from the campaign to create a control group. This allowed the card team to effectively evaluate the impact of the custom offers.
Overall, the credit union realized a more than 60-percent increase in income and a 154-percent lift in profit. Average purchases increased by nearly 50 percent compared to the pre-campaign average, and among the highest-rewards group, the purchase increase was more than 120 percent.
This campaign and its results have provided the card team with valuable insights into its portfolio, which they can apply to the 2013 holiday campaign and others.
More issuers are realizing the competitive and strategic advantages of card segmentation programs. The holiday season provides an ideal backdrop for treating cardholders to the kind of customized offers they expect from their community bank or credit union.
Tags: competitive, credit card, credit union, customized, iqr consulting, offers, promotions, segmentation, segments, strategic
Consumers increased spending in August, responding well to back-to-school shopping offers, seasonal clearance sales, favorable weather and an earlier-than-usual Labor Day holiday.
According to a recent spending report, the year-over-year overall dollar volume growth of more than 7 percent was the largest increase since March 2012. Retail dollar volume growth was up more than 5 percent, as consumers took advantage of back-to-school sales. General merchandise stores saw a 4 percent growth, while clothing stores enjoyed a nearly 3 percent jump. The continued strengthening of the housing market helped lead to a 13 percent increase in sales at building material and supply stores.
Here is the August dollar volume growth broken down by payment type:
Credit — up 5.4 percent
Signature Debit — up 7.9 percent
PIN Debit — up 9.3 percent
Prepaid — up 2.9 percent
Check — down 3.2 percent
“Consumer spending growth continued its positive momentum into August largely due to strong back-to-school sales and the sales tax holidays,” said Krish Mantripragada, SVP of information and analytics solutions at TMG’s processing partner First Data. “Lower…gas prices helped drive an increase in discretionary spending, which contributed to continued credit card growth over debit card.”
These numbers are encouraging as we move into the holiday shopping season over the next few weeks.
Tags: august, back to school, credit, debit, first data, spending
By guest blogger and 2013 TMG Client Conference presenter Ken Segall
Talking to attendees at the TMG Client Conference this summer affirmed something I have long believed:
The basic drivers of human behavior remain the same, whether one is selling financial products, automobiles, smartphones or oatmeal. People are looking for relationships. More accurately, they’re looking for love.
One of the points I made in Vermont was that Apple’s stellar success has come largely from its ability to create products that people can love. In fact, Apple’s every effort is designed to build upon that love. The love-based relationship ensures that people not only stick with Apple for future purchases, it encourages them to share their experience with friends, families and colleagues. This generates even more business.
Though it isn’t “normal” for people to fall in love with inanimate objects, Apple has built the world’s most valuable company on that very concept. It is equally unlikely for people to fall in love with financial products or financial institutions — yet it is equally possible.
When I switched credit cards recently, I started feeling love the first time I logged into my personal account page. I noticed that things I had purchased only minutes before were already listed, which was something I’d never seen with my previous provider. The more I looked, the more features I discovered. Before long, I was telling friends how foolish I felt for having stuck with my previous credit card company for all those years. Though I didn’t use the term when sharing my experience, I was feeling the love.
Any company can offer up a list of products and services. And obviously the depth and quality of those things is critical. But it’s how they’re presented and how easily they are discovered that elicits this deeper emotional response. In one important way, customer relationships are like every human relationship: love is the key.
Apple earns love by fulfilling a desire that exists within all of us. It provides a simpler solution. It doesn’t take years of research to appreciate this basic driver of behavior. It’s intuitively obvious. Which makes it even more mysterious why so many companies don’t seem to focus on it.
After all, those that do are far more likely to win people’s hearts — along with their business.
Tags: apple, human behavior, ken segall, love, products, purchases, relationships, selling, TMG