Category Archives: operations

Study: Mobile pay adoption remains low, but incentives motivate

fintechWhile just 25 percent of U.S. consumers with an eligible smartphone are using mobile payments, according to a new survey conducted by Auriemma Consulting Group, incentives provided by merchants and financial institutions can help drive growth in this channel. Customers offered incentives were about 50 percent more likely to use mobile payments at the retail point of sale. Of consumers using mobile payments, nearly one-third say they were offered an incentive to do so, and 86 percent of those offered an incentive claimed it by paying at the point of sale or in their app. Banks are offering incentives less often, according to the study, and merchant-funded offers now account for the largest share of incentives offered. Click here to read more.

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Updated Cyber Insurance Purchaser’s Guide

CyberSecurityAs cybersecurity continues to rank among top concerns of CEOs and board members across the industry, ABA, in partnership with the Financial Services Sector Coordinating Council, has released a newly updated Cyber Insurance Buying Guide to help organizations weigh their insurance options.

The guide provides an overview of various types of cyber insurance and the current cyber insurance market, along with tips for determining how to get started, what types of insurance to purchase, how to identify existing cyber coverage exposure gaps and what the key exclusions and sublimits are. Download the guide.

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It’s Time to Adapt to the Digital Payments Landscape

by Matt Herren, CSI

achFrom Apple Pay to Walmart Pay, the financial industry has been inundated with alternative payment options. While some are more popular than others, digital payment offerings present both growth opportunities and new challenges for community banks.

And ready or not, it’s time to take notice. According to an eMarketer forecast report on mobile proximity—or digital—payments, while 2015 closed with about $9 billion in digital payment transactions, that number is expected to rise to $27.05 billion in 2016—and $210.45 billion by 2019.

Although there are a few exceptions, the major mobile payments players can be broken into two distinct factions—one that will propel financial institutions forward, and one that stands to take a chunk out of your interchange income.

Mobile Wallets from the Card Space

The first group comprises the mobile wallets that preserve the existing interchange model by utilizing the credit card network rails (Visa, MasterCard, American Express and Discover). These include:

  • Apple Pay
  • Android Pay
  • Samsung Pay

From a consumer standpoint, these mobile wallets conduct payments using Near Field Communication (NFC) at a growing list of supported terminals. The user simply “taps to pay” at an enabled terminal to complete an instant, secure transaction.

According to the Aite report, Mobile Proximity Payments: A Disruption in the Force, “NFC has the greatest potential to become the standard transmission method for mobile proximity payments. NFC’s nearly ubiquitous presence in smartphones, the rapid increase of NFC-capable terminals driven by EMV reterminalization in the United States, and the launch of Apple Pay will accelerate implementation and usage of NFC payments.”

The Merchant-centric Crowd

Conversely, the second set of digital payments players is largely composed of retailers. This relatively new and growing group uses the ACH rails to facilitate payments. Why the push for this breakaway faction? Very simply, money. Going the ACH route essentially costs these merchants little to no money, whereas with the existing card rails, they pay a percentage of each transaction to both the card network and the issuing bank—the interchange fee. By eliminating the interchange model—they boost their profit margins. This merchant group includes:

  • CurrentC/Chase Pay
  • Walmart Pay
  • Target REDcard

Most of these digital payment alternatives work by having the consumer download an app and scan a QR code on their phone to facilitate the payment. The barcode changes after a few transactions—their form of security. The drawback is, taking a picture of a QR code on a screen doesn’t seem particularly secure or technologically advanced.

Without a Doubt—the Card Space Wallets Are Your Bank’s Ally

Ultimately, it’s the digital wallets from the card space that will continue to drive community banks forward and preserve their interchange income. By riding the existing card rails, they’re sustaining a process that is far from broken.

The biggest difference these mobile wallets have brought forth is an added layer of fraud security through tokenization. Indeed, fraud prevention is a major impetus driving change in the payments space.

The industry has made great strides with EMV chip cards, which surround static card numbers with dynamic data to encrypt the transaction. And that’s a big boon to fraud prevention. But tokenization takes security yet another step: not only does dynamic data surround the credential, but also the actual core credential itself—the card number—changes. Essentially, merchants receive one-time credentials that can only be used for a single transaction—making it virtually impossible for cybercriminals to predict what the next dynamic credentials will be.

Risks of Ignoring Mobile Wallets

Banks choosing to not engage with alternative payments like Apple Pay, et al. risk losing consumer mindshare. If your card can’t be added to a digital wallet, consumers are going to use someone else’s card. Think of it this way: more than 80 percent of Americans have a smartphone of some type. So will phones be a larger or smaller part of everyday life in five years? The answer is pretty clear.

How to Get Started

To ensure you’re serving as many customers as possible, your best path is enrolling in Apple Pay, Android Pay and Samsung Pay. It makes sense, since the card networks have waved their costs for processing and facilitating the payments.

And when you’re ready to jump into the mobile wallet pool, you should first reach out to your debit card processor. Your processor should act as your partner in completing your agreements with MasterCard and Visa and your addendum with the digital wallet providers, as well as ensuring your bank’s card art and logo are populated in the wallets and, finally, informing you of your “go live” date.

Digital Truly is the Future of Payments

As for securing customer buy-in, it comes down to making them aware that digital payments are available, and encouraging their use. Right now, about one-third of mobile devices are capable of making proximity payments, but from now on, all new models will feature this capability. Since people naturally upgrade their phones every couple of years, digital payments will rise exponentially. Will your bank adapt?

As product manager for Payment Analytics, Matt Herren has expanded CSI’s ability to address fraud through early identification of merchant breaches and fraudulent testing techniques. His work helps to increase bank profitability through fraud mitigation and card portfolio analysis, allowing customers to realize industry-leading results and maximize program performance.

Savings Bond Guide Updated

savingsbondThe Treasury’s Bureau of Financial Services has updated “The Guide to Cashing Savings Bonds” with the release of a more interactive PDF version. It provides official guidance for financial institutions on cashing savings bonds. The Guide describes procedures for verifying and documenting the identity of a customer, redeeming savings bonds and lists acceptable forms of identification. The new version replaces all previous versions. Find the updated guide here.

Deposit Insurance Coverage Webinars

FDICThe FDIC will conduct six identical live webianrs on FDIC deposit insurance coverage for bank employees and bank officers between February 23, 2016, and December 5, 2016. In addition, the FDIC has developed three separate Deposit Insurance Coverage OnDemand webinars for bank officers and employees, which are now available on the FDIC’s YouTube channel. Both the live and the YouTube deposit insurance coverage seminars provide bank employees with an understanding of how to calculate deposit insurance coverage. The live webinars provide a comprehensive overview of FDIC deposit insurance. The three YouTube webinars cover: Fundamentals of Deposit Insurance Coverage; Deposit Insurance Coverage for Revocable Trust Accounts; and Advanced Topics in Deposit Insurance Coverage.

The live events are free, but registration is free. For dates and registration click here. For links to the YouTube sessions, click here.

ATM Software Security Best Practices Guide

atmThe ATM Industry Association has released a new best practices guide for ATM software security developed to assist the industry in combating security threats, such as malware attacks. The guide includes a survey of the current global ATM software environment, a description of the PCI framework for ATM software, and sections that address threats to ATM networks, physical and logical fraud, payments security, the role of encryption, and more.

It also includes chapters on insider fraud, service interface protection for the ATM, relevant emerging technologies and detecting and mitigating malware and black box attacks. A checklist of recommendations for security ATM operating software and an essay on the “Ten Immutable Laws of ATM Security” are also provided. Read the guide here.

Many New Rules and Regs at Two-Day Deposit Account Administration Workshop

The IBA’s Two-day Deposit Account Administration Workshop will cover many new developments. Offered in in two locations – Cedar Rapids (October 27 and 28) and Johnston (October 29 and 30), the program is a MUST for operations managers and supervisors, compliance officers, trainers, and auditors. Experienced new account representative will also also benefit.

New Developments:

  • Iowa has adopted the NEW Durable Power of Attorney Act. Its provisions are effective July 1, 2014. The Act answers a lot of questions. It also includes a model form, and Agent Certification. Learn what you should be looking for when reading the new statutory POA form, and how to protect the bank when accepting the new POA. This is big!
  • On July 30, 2014 the Financial Crimes Enforcement Network (FinCEN) issued proposed Customer Due Diligence regulations to be codified as a part of the existing BSA regulations. This proposal creates a duty to gather information on beneficial owners when opening new accounts for legal entities. Learn what the proposal entails, and how it make affect account opening procedures.
  • The CFPB released four publications for various fiduciaries. These can be very helpful to you and your customers. Find out how to get them and use them to help your fiduciary customers understand their duties, and their relationship with the bank.
  • The IRS has made many changes in the two years.  There is a new Form W-8 BEN, a new Form W-9, and Name Control rules for matching the customer’s name to the TIN. Understand how to apply the new forms and name control rules at account opening, and learn how the FREE IRS TIN Matching program can save your bank money and time.

This is only the tip of the iceberg! Bring your forms and disclosures for reference during the workshop. This is the program you’ve been waiting for! Register today.