6 hot ideas from Card Forum 2017

Don't blame EMV

The U.S. shift to EMV technology has dramatically reduced levels of counterfeit card fraud, but merchants and the card networks are divided on whether it caused the expected shift of fraud to digital channels.

The EMV-chip card standard is a counterfeit deterrent that only protects transactions at the point of sale. As a result, many observers expected fraudsters to simply move their attention to card-not-present transactions such as e-commerce, where EMV makes no difference. This shift appeared to take hold even before the EMV shift gained steam, but as any statistician will tell you, correlation is not the same as causation.

“It’s true that fraud dollars from CNP are growing, but it’s not increasing as a percent of total sales,” said Stephanie Ericksen, vice president of risk products at Visa, in a panel discussion at SourceMedia's Card Form.

Melanie Gluck, Mastercard’s vice president of mobile and e-commerce, agreed with Visa's conclusion. “We’re watching trends closely but we haven’t seen many spikes in CNP fraud," she said.

But Mark Horwedel, CEO of the Merchant Advisory Group (MAG), was unconvinced that there was no connection between EMV and online fraud.

“CNP fraud is rising, partly because the (e-commerce) channel has grown but it’s also because CNP fraud is the low-hanging fruit for fraudsters,” he said. “We’ve been through a period with a lot of data breaches, and we’ll emerge from all this with a less-than-adequate response."

Value of diversity

Promoting diversity in the workforce has been gaining momentum for several years, but increasingly it’s clear that the practice also makes organizations more competitive and resilient, according to women in leadership roles in the payments industry.

“Having different perspectives within a company expands the overall vision, which can offset vulnerabilities,” said Archana Puri, Braintree’s head of product management at Braintree, Monday, during a panel discussion at SourceMedia's annual Card Forum.

Puri, one of PaymentsSource’s 2017 Most Influential Women of Payments, joined several other honorees on a panel to discuss career development, mentorship and the effect of diversity on work environments.

U.S. Bank’s strong record of promoting diversity may even have helped the bank withstand shocks from the economic downturn that began nearly a decade ago, suggested Margaret Weichert, a principal with EY’s banking practice, who led the panel discussion.

“Promoting diversity can protect against risks,” Weichert said.

Racy Morgan, head of payment strategy and execution at U.S. Bank, sees the theory play out routinely at her organization where teams of employees with diverse backgrounds and points of view come together to design products.

“Because of unconscious bias, everyone has a tendency to design things that are familiar to themselves, but the way to offset that is to bring people together of different ages, genders and experience. That way you can make sure you’re designing products for everyone and differentiating your product from your competitors, at the same time,” Morgan said.

The allure of virtual reality

Virtual reality can often seem like a technology in search of a reason to exist, especially in the world of banking and payments. But RBC sees a lot of potential in developing for VR headsets, even if it does not expect people to do the bulk of their shopping in VR.

The consumer technologies available today are still just stepping stones, and developing for them puts banks and other companies in a strong position to detect and respond to the demands of the tech-savvy consumer, according to Sarah Wilkinson, RBC's senior manager of innovation strategy and communication.

"Virtual reality is only a sandbox platform at the moment," she said at SourceMedia's annual Card Forum. "It's admittedly clunky [to conduct] commerce on virtual reality. You have to put on a big headset, stick things in your ears to hear things, you have to have a dedicated space so you don't trip over a wire; this isn't the frictionless experience that we all want."

But it is enough to tell where the technology is going. Google Cardboard, while primitive, is cheap enough to turn any smartphone into a VR device. More robust platforms like Facebook's Oculus Rift or the HTC Vive were developed for high-end gaming and are convincing enough to have viable uses in retail stores today.

When consumers "put on a virtual reality headset and get to experience a product ... [they] are much more willing to make that purchase," Wilkinson said. "They are much more engaged with it, they can see it, they can feel it."

A digital identity crisis

Card issuers are caught between two competing business demands: the need to keep pace with digital payments, and the threat of becoming the brandless plumbing of another company's wallet app.

The reality is banks and credit unions will be stuck in the middle of these forces for some time, and success can be found by conceding some long-held advantages in the interest of reducing friction for the consumer.

This mindset is producing some weird business decisions, such as pretending that checks don't come with a checking account.

"We don't tell members about checks anymore," said Charlotte Norton, senior vice president of central operations at Randolph-Brooks Federal Credit Union.
"We found that when we stopped saying anything about the checks, only 20% of those [new members] ever came back and asked for the check order."

The challenge, of course, is that the credit union can't ignore the 20% who still use checks, even if most customers never want them. The same scenario is unfolding with plastic cards, although much more slowly, as digital wallets and tokenization gather momentum.

One school of thought is that banks should compete with the third-party wallets. But it's a fight that provides very little value to consumers and merchants.

"Why does it matter that I know what card I'm using?" said Reetika Grewal, head of payments strategy and solutions at Silicon Valley Bank, during the Most Influential Women in Payments sessions at Card Forum. "I don't have a strong affinity to my brand associated with my credit card" while making a payment at a store, she said. "Issuers really need to think about what their brand means."

Fear of complexity

Card issuers face a conundrum in supporting payments innovations that promise to improve user convenience and security, as more consumers express frustration with the rising complexity around making everyday purchases.

“Consumers in a very short time went from decades of simple, consistent payments to a very fragmented payments experience, and many are becoming confused,” said Jon Pendergrast, senior vice president and head of U.S. payments strategy for TD Bank at a Tuesday panel exploring the effects of recent payments technology at SourceMedia's Card Forum.

Consumers approaching the checkout in stores don’t know whether they must swipe, tap or insert their card, there’s little consistency in online checkout processes and the steps to using mobile wallets and apps vary widely, Pendergrast said.

The bumpy rollout of chip cards in the U.S. added another layer to consumer frustration, according to Andrew Davidson, senior vice president and chief insights officer with Mintel Comperemedia, which tracks consumer attitudes about payments with regular national surveys.

“Since chip cards came along (following the October 2015 EMV liability shift), the average card-processing time at the point of sale has gone from 3 seconds to 10 seconds for many consumers, and when paying online people are likely to find that a merchant’s desktop checkout experience is completely different and possibly more confusing than the same company’s mobile app,” Davidson said.

In a recent Mintel survey, 30% of U.S. adults ages 18 to 34 said “I don’t ever want to use my phones to pay for merchandise,” with that negative sentiment rising to 47% for consumers over 35 and 56% for consumers over age 55.

Overcoming reputation risk

In banking, as in any other industry, a company's brand is a precious commodity. But as the digital economy matures, card issuers are finding a greater need to hand the reins over to their partners.

It's not an easy thing to trust another company with your reputation. No doubt, JPMorgan Chase was less than thrilled after its co-brand partner United Airlines suffered a PR disaster in April by having a passenger violently removed from a plane to make room for an airline employee.

"What happened to United could just as easily happen to Delta or American," and to the banks that issue their co-brand cards, said Gary Leff, travel expert and author of View from the Wing, at SourceMedia's annual Card Forum.

"This could happen to anyone here," Leff said. In a co-brand partnership, "both reputations are on the line."

But that doesn't mean banks should back off. Crises blow over, and bankers agree that there are valuable benefits to yielding more control of the customer relationship to the co-brand partner, particularly in digital channels.

"The issuers have to get comfortable sharing data a little bit more and trusting third parties … we're going to have to get better at working together," said Chris Guido, vice president of co-brand and private label business development for TD Bank, in a panel discussion.

"We don't need to create our own app for the card program," he said. "It needs to be integrated into [the partner's] app."