What's happening in payments? The year of Europay, MasterCard and Visa (EMV) has arrived, near field communication (NFC) has become a certainty, consumers value experience over materialism, and acquirers are doing a good job – at least when it comes to communicating with retailers.
That's the kind of fact and opinion that filled the air at the 27th annual Card Forum & Expo in Chicago. The conference is designed for card issuers, but acquirers could also benefit from the gathering's exchange of information.
And the rewards of cross-pollination don't end with issuers and acquirers, according to Phil Philliou, President and Chief Executive Officer of TruBeacon, who served as the event's chairman. "We could all learn a lot from the credit unions," he told attendees assembled Thursday, April 9, 2015, for the speakers program.
Credit union executives who met during the conference impressed Philliou with their collaboration and willingness to discuss best practices, he said. They also won his praise for their honesty and for not feeling threatened by competition. "Credit unions are great sharers," he maintained.
That cooperation is taking place against a backdrop of unprecedented change, other speakers suggested. "This is the most exciting time to be in payments," said Cheryl Guerin, MasterCard Executive Vice President and U.S. Product and Solutions Lead. "We're going to see more change in the next five years than in the last 50 years."
The digital and physical worlds are merging, and consumers will decide which of their connected devices will take precedence, Guerin said. Just the same, plastic credit and debit cards won't disappear anytime soon, she added.
A trend that began 20 years ago is continuing to gain momentum, Guerin said, and acquirers who want to become advisers to their merchants should take note. Experience is replacing material goods as the symbol of success, and retailers who use that information to connect with the public can prosper, she noted.
In an example of creating a consumer experience, Guerin cited Coca-Cola bottles bearing phrases like, "Share a Coke with Mom." The campaign created a sensation, she said, noting that, "those bottles flew off the shelves."
Loyalty rewards also enhance the consumer experience, Guerin said. MasterCard studies of social media show 94 percent of consumers are making upbeat comments on mobile payments, and reward points and offers play a big role in that, she noted.
MasterCard is creating consumer experiences that include expediting concessions at Yankee Stadium, facilitating point redemption at checkout, helping millennials find jobs and manage credit, and surprising cardholders with unexpected perks, Guerin said.
Another speaker, Garry Reeder, a partner at Fenway Summer LLC, CEO of FS Advisory LLC and former Chief of Staff at the Consumer Financial Protection Bureau, advised taking a principles-based approach to complying with federal regulation instead of a rules-based response.
That means offering products and services in the spirit of transparency, fairness and suitability, Reeder said. Transparency demands that consumers can describe a product and know the risks. Fairness calls for providing consumers a choice of financial products. Suitability suggests that a financial institution official would sell a product to a family member.
A panel on host card emulation (HCE) extolled the virtues of removing the need to operate through a secure element in a mobile phone. "It was a paradigm shift," said Doug Mosteller, CPI Card Group Director of Research and Development.
Panelists said HCE is making it easier to conduct pilot testing of systems, which in turn helps make a business case for the technology. Moreover, HCE is now in place and ready for card issuers to use, panel members emphasized.
But that's not the only technology that's proliferating. Wearable mobile devices are also on the rise, according to another speaker, Jeremy Bornstein, Royal Bank of Canada Head of Payments Innovation. "This time next year, we'll all be paying for each others' coffee by tapping our wrists," he said in a reference to smart watches. "We're very satisfied this is the future."
Besides putting computing power on wrists, the technology can wrap users in shirts made of smart fabrics or place sensors directly on the skin, Bornstein said. They can gather data like the electrical pulses of a person's heart, which are unique and more varied than fingerprints, for authentication. That goes beyond verifying that the card is present, he stated – it also proves the cardholder is present.
Consumers embrace wearables for their convenience; merchants appreciate their speed and the certainty that they're receiving payment; and issuers like the ability they afford to maneuver to the top of the wallet, Bornstein said. He also maintained that the debate has ended on NFC. "NFC will win," he said.
Meanwhile, the nature of the debate is changing on EMV, according to members of a panel on that subject. Last year, merchants were questioning whether they really had to begin accepting chip cards. Now, they're searching for the best ways to make the transition, panelists said.
Three elements come into play when making the business case for EMV: stopping counterfeit cards, dealing with lost or stolen cards, and finding ways to make money with the chip, said panelist Philip Andreae, Oberthur Technologies Vice President of Field Marketing. The French were the first to adopt EMV and had a good consumer experience, Andreae said. The UK came next, motivated by security concerns, he noted.
The transition is underway, with 185 million EMV cards produced in 2014, up from 30 million the previous year, Andreae said. Up to 45 percent of the cards in the United States could comply with EMV by the end of the year, he predicted.
EMV is finding a place in the United States because of increased awareness of security risks, Andreae stated. "Cyber security has gone from something we care about to something we worry about," he said. The next challenge will arise as having EMV at the POS drives fraud online, he added.
Consumers are ready for EMV and have begun asking for it, according to another panelist, Thom Rooney, Manager of Customer Insights, Analytics and Loyalty Measurement for BMO Harris Bank.
Much has been said of small retailers' failure to prepare for EMV, but Philliou, chairman of the event and moderator of the EMV panel, wasn't blaming ISOs. "Acquirers have been doing a great job of getting the word to merchants," he said. "I don't think that's a weak link."
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