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Skip the chip and PIN? Plenty of ways for consumers to pay in 2019

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Michael Bartlett, 31 December 2018, Credit Union Journal Online

2019 could wind up being the year of the contactless card.

That’s the prediction from the CEOs of two major credit union payments groups, who noted that while big moves toward contactless payments were predicted as long as a decade ago, their time has finally come.

“Visa is estimating 100 million new contactless cards in the U.S in 2019,” said Chuck Fagan, CEO of PSCU, a credit union service organization working in the payments space. “The move from EMV insert to contactless will take the transaction time from 8 to 10 seconds down to 1 second.”

It’s crucial for CUs to be early adopters of contactless EMV, Fagan added, pointing to a Mastercard study that found more than 800,000 merchant locations across the country had already enabled contactless payments by the end of 2017.

“Fast forward to today, more and more terminals are providing contactless payment activity through mobile wallets such as Apple Pay and Samsung Pay. 2019 will likely be a turning point when it comes to the adoption of contactless.”

The transition to contactless, however, will require financial institutions to once again reissue cards – unwelcome news for many credit unions that already spent several years reissuing again and again as the result of conversion to EMV, data breaches and more.

Todd Clark, president and CEO of CO-OP Financial Services, noted that he has begun to see many traditional EMV cards replaced by contactless counterparts – a trend likely to pick up in the coming months.

Fagan, however, noted that most institutions won’t do a mass reissuance.

“What is more likely is top users will be reissued contactless cards, but others will cycle through the reissue process,” he said. “We have a couple credit unions making big changes, so in their case it makes sense to get rid of the logo on the card and accelerate reissue.”

And while the rise of Samsung Pay, Apple Pay and others has led to talk of a mobile payments revolution, Fagan predicted contactless cards will actually see speedier adoption.

“Mobile wallet adoption will not be as fast as contactless cards because people are so trained to use plastic,” Fagan said.

Fraud threats persist

Fraud continues to be a concern both for consumers and financial institutions, though credit union members are likely to have more account management tools at their fingertips in 2019, including features such as card locks, limits based on location and transaction size, and a greater focus on authentication.

Widespread conversion to EMV resulted in a “slight decline” in fraud – particularly at brick and mortar locations – to the point where now “most people are at least able to accept the current level of fraud,” said Clark, whose firm is investing heavily in machine learning to help the institutions it partners with stay one step ahead of fraudsters.

“We fully anticipate fraud will shift to online and account takeover. It is already happening, but those will become almost synonymous with fraud.”

PSCU’s recent “Eye on Payments” study revealed 13 percent of credit union members fell victim to card fraud within the last year, while 4 percent had their identity stolen. The stats on identity theft are the same for non-members, but two points lower for card fraud.

As a result of that, said Fagan, security is the No. 1 concern for consumers when choosing a card product, and with the migration from traditional card fraud to account takeover, “authentication is of the utmost importance.”

With artificial intelligence also becoming more important in thwarting fraud attempts, identity management tools will be crucial for consumers in the year ahead.

“We are going to have to give consumers control of their identity,” said Clark. “Static IDs are probably going to go by the wayside. When doing a movement of money, it will take more than static ID and a regular password. We will need a dynamic multi-factor authentication. This means sending a text to a phone or a code to an e-mail. The user has to type in the one-time code, and at the same time the system is geolocating the phone to ensure that person is in the city in which he or she claims to be.”

Data demands

The importance of data analytics is also expected to continue to rise, not just or increasing card penetration and utilization, but for automated loan decisioning (including credit cards), predicting member behaviors and more.

“There is no correlation between the size of the credit union and the size of investment in data analytics,” said Lou Grilli, AVP product development and thought leadership at Trellance, a Tampa-based CUSO offering card portfolio growth solutions, analytics and more. He added that CUs of all sizes will need to adjust in 2019 in order to make better use of data from their core, debit and credit processors, loan origination systems and external data sources.

“Credit unions added 5 million new members in the first half of 2018, and they will be using data analytics to reach out to those new members,” he predicted. “There are always members not being reached out to, especially someone who took out an indirect auto loan and may not even realize they are part of a credit union, and data analytics can help. It is too much for a person to grasp all the data, so an analytics solution will help.”

This article was licensed through Dow Jones Direct.