Finovate Dispenses Inspiring Innovation (Part 2)

From security to payments, incorporate best practices from today’s bleeding edge providers. recently highlighted some of the best ideas in PFM and mobile marketing from the Finovate Fall conference in New York City last month. This week, we continue that coverage with two of the biggest concerns on credit unions’ radars right now: next generation security/authorization and new developments in the payments space.

Not every credit union will be in the position to adopt the emerging services and solutions featured at the Finovate conference right now. But knowing where industry innovators are focusing their efforts can help institutions address gaps in their current offerings and guide future investments.

Shared Security

Collaboration is a key strategy for hackers and other nefarious characters trying to defeat a financial institution’s security, so why not even the odds with your own collaboration? Consider letting your best minds loose in an online community specifically designed for financial security tasks.

FraudXChange, a product from California-based Guardian Analytics, provides the medium for outside experts, research labs, and financial institutions to share information directly or anonymously about current and possible threats in a secure environment. When an institution finds a possible case of malicious activity, it can discover its own vulnerabilities in other areas, match that attack criteria against other submitted cases, see who else might be at risk and warn them. Think of it as a Facebook for fraud busters.

Next Generation Authorization

In the member-facing channel, Georgia-based IDology is offering the chance to move away from using public data, which can be compromised and used for account takeovers, for members’ shared secret authorization. Instead, credit unions can harness proprietary data kept behind the institution’s own firewall.

This information most often takes the form of questions like “Where did you do your last ATM withdrawal?” or “How much was your last direct deposit?” But credit unions that really want to stand out will go the extra mile to streamline these questions for those with multiple accounts or complex financial relationships. If you’re a business member with five different accounts, chances are you won’t remember your exact actions for every one.

Biometrics are also continuing to evolve, as demonstrated by a solution from Nevada-based Internet Biometric Security Systems. After a one-time legal verification and biometric data collection, credit union members can use either facial recognition or vocal matching to authenticate their logon, eliminating historical problems with a single source option like biorhythm, which is the unique pattern with which you type. The system also creates an audit log for every session to help weed out fraud and settle transaction disputes.

Power In Payments

Are you tired of guessing which technology will win out in the war of the wallet? You’re not alone. Even in established EMV markets like Europe, only 83% of magstripe readers are EMV compliant, says Jeff Mullen, CEO of Dynamics Inc.

The Pittsburg-based company aims to hedge all bets in the emerging payment space by forgoing the mobile wallet in favor of an all inclusive magstripe, contactless (NFC), and contact (EMV) compatible physical card option.

This solution will no doubt prove impressive for a certain category of members, specifically those who travel overseas or are looking for enhanced security, and it will likely become important in all card relationships. While credit unions may likely face a higher issuance cost as each card has around 70 electrical components, the option is waterproof, reduces wear and tear from physical contact like swipes, and can yield additional savings by reducing fraud cases.

When it comes to the mobile wallet, some solutions like MShift can work entirely outside of existing payment rails. This California-based company is offering a branded option they say can increase interchange for financial institutions and cut merchant fees in half by circumventing the card companies.

“Other solutions marginalize banks or push them out of the equation,” says CEO Scott Moeller. But with this system the wallet is owned, branded, and issued by financial institutions.

MShift’s solution relies on a single-use dynamic token in the form of a bar code for ACH transfers, and can offer capabilities for merchant specific rewards. For the technology to really take off, “mobile rewards have to exceed the very best of plastic cards,” Moeller says.

Others companies like California’s Blackhawk Networks or Texas-based PayTap are focusing on bringing outside payment products into mainstream mobile wallets, with platforms that incorporate open- and closed-loop gift cards, or bringing the option to split P2P payments for large ticket items among multiple parties.

There is also plenty of room to improve on existing payment options. While credit unions may question whether they really have a horse in the mobile and online commerce race, remember that value added services here can increase product utilization, create business ties to retailers, and yield improvements to a credit union’s online/mobile processes (loan applications, etc).

New York-based Dashlane auto fills the checkout and purchase information for any website and captures all the details of that purchase including screenshots. By reducing the transaction time for online and mobile commerce, registered financial institution cards can become more convenient and ultimately more top-of-wallet than other payment options that must be entered manually, says Emmanuel Schalit, the company’s CEO. 

And when children transact online, they can get into “all kinds of issues with fraud and chargebacks,” says Jo Weber, CEO of California-based Virtual Piggy, adding that COPPA and CPI regulation typically limits what information kids under a certain age can enter during checkout.

To address these issues, Virtual Piggy provides children a platform to make limited online purchases at age-appropriate merchants, without risk and without exposing potentially dangerous information online.