Payments Sublimation Meets Merchant Tokenization

How to inject the credit union message into a seamless payments process, and how the merchant response to the EMV liability shift might be emerging were two hot topics at CSCU’s annual conference.

Sublimation as a psychological concept means to repress and transform negative into positive when it comes to social behavior. In the world of payments, it’s taken on a new meaning: to make the process as invisible as possible as it moves from the consumer to the biller or merchant and on to the bank or credit union account paying for it.

While that seamlessness sounds nice, it also leaves little room for branding and a lot of risk of disintermediation, of being cut out of the process completely. Once a card is loaded into that first-place spot, it’s very hard to dislodge,Bob Legters, chief product officer for the FIS Global Payments Retail Group, said Wednesday at the annual Card Services for Credit Unions (CSCU) conference in Orlando, FL.

Consumers don’t care who’s doing it. They just don’t want anything to stop the payments process and neither do the merchants, he said.

Examples of the new sublimation include the Uber rider who already has prepaid, and the Amazon Go grocery store concept now being tested in Seattle that allows shoppers to simply scan their phone on the way in and walk out looking for all the world likea pre-approved shoplifter.

So, what can credit unions do about it? Take every opportunity to show that you are their financial advocate every moment you can, including while they’re in the store, said Tom Davis, CSCU’s senior vice president of financeand technology.

With new avenues of purchasing and paying coming out all the time, that’s going to take innovation and imagination, Legters and Davis said. Plus, some old-fashioned cyber shoe leather, perhaps, like updating reminders to members on the website andmobile apps that their credit union card is the safest and best option for loading into any ecommerce app they encounter.

Another example? The Sam’s Clubs that now allow shoppers to scan their own items with their phone and pay with their Wal-Mart app as they leave. That kind of merchant functionality could allow a credit union to intervene in the running total, withmessages reflective of the credit union’s role as a personal financial management adviser.

Let’s find a way to do that and brand the crap out of that. The bank won’t, and neither will Sam’s, Davis said. And never really was about the brand. You’re in the business of being their financial servicesprovider and adviser, not in the business of just handing them 2-inch by 3-inch cards.

Tokenization And The New Liability Shift

Of course, it’s the account number that counts, and it doesn’t have to be on plastic. The fraudsters sure know that as they’ve largely abandoned card-present for card-not-present (CNP) cyber theft as EMV chip cards became ubiquitousin America following the liability shift deadline of Oct. 1, 2015.

CNP fraud feasts on breaches that expose the card-on-file numbers and there’s now talk of merchants and the major card brands adding that same kind of tokenization to their side of the equation. Tokenization substitutes identifying data with symbolsand numbers typically unique to each transaction.

Chips do that, shifting the liability of being the weakest link in the transaction to the merchant. E-commerce giants like Netflix, AutoNation, and hundreds of others may soon be asking card issuers to tokenize their BIN numbers ? those first four tosix numbers on a card ? and if they require it, that will put to a grinding halt any transaction from a credit union that hasn’t done that.

That’s what’s evolving now, Connie Davis, FIS senior vice president of enterprise product strategy, said at a breakout session Wednesday afternoon. She noted that payments giant PayPal may really push that process along if itfollows through on plans to migrate off ACH payments in favor of debit cards because of the liability and the desire to tokenize.

An added benefit of that, Davis noted, would that it would restore interchange income to the non-credit card flow of electronic cash through that massive payment channel.

April 5, 2017

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