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Security And Redefining The U.S. Payments System

How EMV, smartphones, and tokenization are changing the customer experience.

They say cash is still king. If you’re analyzing a company’s spreadsheets, that might be true. But in the consumer marketplace, cash is rapidly going the way of the cassette tape. Cards credit, debit, prepaid, private label are everywhere and smartphone payments are becoming more common. Soon, most of us won’t even remember the last time we actually used cash to pay for something.

With changing payment preferences there comes a change in expectations. Where and how customers can access and control their funds is important. And, security is top of mind for everyone. But, what will truly drive customer behavior is the experience you offer them and your ability to customize it and make it personal and secure.

3 Keys To Making Payments More Secure

The EMV Promise

Most of the world converted to EMV years ago because chip cards, particularly when used with a PIN, reduce card-present fraud and increase cardholder security. Microprocessor technology embedded in the cards makes them harder to replicate when numbers are stolen particularly poignant in the wake of recent and continued breaches.

Though security is the driving force behind chip technology, the most promising opportunity may be the ability to help credit union issuers personalize card use for their members. In conjunction with data analytics and loyalty programs, issuers have far more information about member behavior, which can help them personalize experiences, drive loyalty and boost spending.

Mobile: A Nonstop Portal To Customers

Mobile devices are redefining financial services faster than ever. Your members may already deposit money through a picture from their phone, pay bills, transfer money, and possibly even access an ATM with their mobile device.

Sales and use of mobile continue to grow, and most users carry their phones everywhere they go. In order to stay competitive, credit unions must enable personal, anytime, anywhere forms of commerce. The good news is that, since consumers always have their phone, you have a nonstop portal to your members. You can see what they’re doing in real time, respond to them instantly and provide feedback that reinforces your value to them.

Security also can be a benefit of mobile commerce. Many mobile payment applications carry data in the cloud, meaning no card or payment information is stored on the device. That way, if the device is lost or stolen, it can’t be used to steal such information. Secondly, most people will notice a missing phone much faster than they’ll notice a missing payment card.

Tokenization Filling The Gap

To increase the security of mobile and online payments, cybersecurity and payments experts advocate tokenization. Such a system creates a secure link between an actual payment card account and a unique identifier a pseudo number which transmits in place of a card number in order to keep the true PAN (Primary Account Number) secure.

The goal of tokenization is to fill in the gap from other security methods. For instance, EMV decreases the risk of card-present fraud but has limited to no effect on online transactions. Tokenization used for an online transaction would prevent the card information from being openly transmitted over the Internet, where the data could be stolen or compromised.

The best mobile wallets and apps carry consumer data in the cloud, but not all do. Tokenization could be used to transmit information for apps that are less secure, so consumer data doesn’t fall into the hands of criminals.

A Secure Future Is Now

Ultimately, consumers want everything they have now and more more speed, more security and a more personalized experience. Chip cards, smartphones, and tokenization all can be expected to play a role in making that happen. But it’s up to you to keep up. Credit unions that don’t keep up won’t last.

Bruce Lowthers is executive vice president of FIS North American Card Solutions and can be reached at 1-800-822-6758 or bruce.lowthers@fisglobal.com.

This article is sponsored by a recognized solutions provider in the credit union industry. Callahan & Associates does not endorse vendors or the solutions they offer, and the views and opinions offered here might not reflect those of Callahan. If you are interested in contributing an article on CreditUnions.com, please contact the Callahan team at ads@creditunions.com or 1-800-446-7453.
September 8, 2014

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