Debit and Alternative Products Advisory Service Update
With the unavoidable scent of pumpkin spice in the air, we can be sure that fourth quarter has arrived. As the payments industry heads out for fourth quarter’s wave of conferences and finalizes plans and budgets for the coming year, there is a cornucopia of new product, issues, and changes to consider.
That includes the ongoing, never-ending fight against financial fraud in the wake of the massive Equifax data breach, which was quickly followed by breach announcements from Whole Foods and Sonic Drive-In. With those announcements, and the many that preceded, fraudulent activity weighs heavily on debit card cardholders’ minds. In Mercator Advisory Group’s report Operational Excellence: The Best Debit Marketing Strategy, we examine how managing debit card fraud and also managing the dispute process can be the most effective use of resources to retain debit card customers. With most now having personally experienced card fraud, consumers are aware firsthand how disruptive fraudulent transactions can be to their payment activity. It doesn’t help when the general press is conveying that consumers using debit cards have no rights or recourse in the event of fraud.
The figure below from the report cited above shows that important debit card demographic segments such as younger and wealthier debit card cardholders are seeing more fraud on their debit accounts than the population at large.
I will be attending Money 20/20 and would be happy to meet with any readers. If you have any comments on these debit trends or wish to discuss anything in the realm of pay now alternative products, I would enjoy hearing from you.
Topics I will be looking at next:
In the remaining months of 2017 I plan to publish a report regarding financial inclusion. I will examine how financial products including deposit accounts and connected payment tools are succeeding outside the U.S. and in particular in developing markets. The report will discuss whether the same level of success that has been achieved in those markets can be achieved in more developed economies, including in the U.S., where the unbanked represent a much smaller, although still significant part of the population.
An interesting phenomenon is occurring with faster payments. We are seeing new options for expedited transactions using push payment solutions such as Mastercard Send, Visa Direct, and First Data’s solution through Acculynk for a variety of disbursement solutions. NACHA rolled out Same Day ACH debits in September, and Zelle continues to add more and more integrated financial institutions. Although none of these money movement solutions actually settle in real time and they don’t check all the boxes for a real-time payment solution as defined by the Federal Reserve, they are making an impact on the payments industry and the eventual rollout of “real” real-time payments products.
Around the Industry
In this section I like to highlight interesting articles or reports that have been published in the industry.
Speaking of faster payments, CUNA and other industry organizations made it known that they were not happy with the way that the Fed’s Secure Payments Task Force initiative was progressing. If you will recall, the Fed’s initiative to bring true real-time payments to the U.S. is unfolding through the collaborative effort of the Faster Payments Task Force and the work conducted through another group, the Secure Payments Task Force. It is the latter group where a bit of unrest has occurred. In Mercator’s PaymentJournal, I have posted comments on the issues that have emerged that have caused some members of the Secure Payments Task Force to accuse some participants of “expanding scope, technical misstatements or misunderstandings, and procedural difficulties.” The full article can be found here .
Sticking with the theme of faster payments, I came across a paper from last year from the Federal Reserve Bank of Atlanta titled, “Risks in Faster Payments.” I found it to be a very good read that articulates well the high-level areas of risk that the industry will need to consider as real-time payments emerge. That paper can be found here.
Director, Debit and Alternative Products Advisory Service