A Time For Action
A few months ago, it seemed like conference discussions about next-generation payment options (EMV, NFC, mobile wallet, etc.) were mainly hypothetical—people were wondering if a certain solution was going to happen, nevermind when. Now, FIs see these changes actually happening and, as a result, they've started formulating real operational strategies for putting new technology into action.
The emerging mentality regarding payments seems to be a need to commit to something—even if that initial trial is a failure—and build on it, as oppose to doing nothing and risk losing relevance.
As one panelists said “The winners in this space will be the ones who try the most stuff, without spending the most money." On the flip side, if FIs do decide to go all in on a specific payment option, it should cover as many different use cases as possible to help increase the chances of adoption, and eventually, ROI.
Fraud has dropped 50% in EMV-chip countries while increasing 300% stateside, so no one can argue the technology's effectiveness. But now that EMV is here, there’s a ton of risks and benefits that need to be anticipated and managed.
Some merchants are afraid EMV might slow down checkout (even though evidence suggests otherwise), and there’s the risk they’ll sometimes fall back to using mag stripe even when EMV is available. Increasing card holder verification limits can be one way to help incentivize and increase the value of EMV for merchants and help discourage this behavior.
Even if fraud losses go down with EMV, fraud attempts will keep going up and some activity may be displaced to more vulnerable areas of the portfolio. This means institutions may not see the cost savings they had initially anticipated. On the plus side, the technology will allow them to focus the resources they do have on non-EMV transactions, where they’ll be needed the most.
Many FI's have decided not to authorize their EMV cards for offline pin to increase their cost savings. Pin is also more easily comprised than signature options.
The Great Divide
In terms of next generation mobile payments, there’s a huge disconnect between consumer segments groups. The mass affluent (who can be any age) and the the younger, lower income segments are the most open to new options, while all other segments tend to be much more conservative. Small business owners (under $1 million) are in line with general consumer payment adoption rates, but larger business customers lag behind in adopting new payment technology.
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