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Take On Payments, a blog sponsored by the Retail Payments Risk Forum of the Federal Reserve Bank of Atlanta, is intended to foster dialogue on emerging risks in retail payment systems and enhance collaborative efforts to improve risk detection and mitigation. We encourage your active participation in Take on Payments and look forward to collaborating with you.

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January 4, 2016


The Year In Review

2015 marked the end of the era for my favorite late-night talk show host. In his 33 years of bringing laughter to late-night audiences, David Letterman is perhaps best known for his nightly Top 10 list. During the last several years, the Risk Forum's last blog for the year has included our own list of top 10 payments events. Our efforts clearly didn't match Letterman's entertaining Top 10s, and we have decided to retire our Top 10 blog in favor of a year-end review blog.

2015 can easily be characterized as "The Year of Deals." We witnessed two established payment processors, Worldpay and First Data, become publicly traded entities, with IPOs during the year. Following these IPOs, Square became the first "Unicorn"—a tech start-up with a valuation in excess of $1 billion—to test the public markets with its IPO. Beyond the IPOs, there were ample other noteworthy deals in 2015, including Ebay spinning off PayPal as its own entity; Visa acquiring its former subsidiary, Visa Europe; Global Payments' acquisition of Heartland; and a host of mergers such as the one between Early Warning and ClearXchange. On the venture capital and private equity side, indications suggest that 2015 will top 2014's nearly $10 billion investment in financial technology in the United States with payments-related investments leading the way.

Near and dear to the Risk Forum, notable risk-related stories will also make 2015 memorable. The long-anticipated initial EMV liability shift took place on October 1 with mixed reviews from different participants in the payments ecosystem. Data breaches that included the compromise of payment credentials and personally identifiable information seemed to be an almost-weekly event during the year. In response to the increasing incidence of data breaches and anticipated increase in card-not-present fraud, the buzz surrounding tokenization, which began in earnest with the launch of Apple Pay in 2014, intensified within the payments industry.

Mobile proximity payments might be the most frequent payment topic over the past five years, and 2015 was no different. While many have labeled each year over the last five as the "Year of Mobile Payments," mobile still has a way to go before the Risk Forum is willing to give this title to any year, including 2015. However, momentum for mobile proximity payments remained positive with the launch of Apple Pay rivals Samsung Pay and Android Pay. We witnessed a well-known and early established mobile wallet, SoftCard (originally branded as Isis), exit the playing field after being acquired by Google. The Merchant Customer Exchange (MCX), a consortium of retailers, launched a pilot of its mobile wallet—CurrentC—and has also partnered with Chase and its Chase Pay service with entrée to 94 million cards; and two large Financial Institutions, Chase and Capital One, both announced new mobile wallet initiatives. In December, Walmart and Target announced their own mobile payment applications. While mobile proximity payment usage remains minimal, it is becoming increasingly clear that consumers are using their mobile phones to shop online. According to holiday shopping figures from Black Friday through Cyber Monday 2015, mobile shopping accounted for approximately one-third of total e-commerce sales.

Finally, in 2015, the payment industry witnessed the launch of a comprehensive, collaborative effort to improve the speed and security of payments in the United States. In January, the Federal Reserve issued its long-anticipated Strategies for Improving the U.S. Payment System followed by the formation of two task forces, Faster Payments and Secure Payments, seeking to turn these strategies into actionable payment improvements. Related to improving the speed of payments, NACHA membership approved a same-day ACH service after a similar measure failed to gain approval in 2012.

As those in the payments industry have come to expect excitement and innovation, 2015 did not disappoint. And while it's certainly fun to look back, we must always keep looking ahead. Perhaps the most famous late-night talk show host, Johnny Carson, understood this best with his beloved great seer, soothsayer, and sage Carnac the Magnificent persona. Be on the lookout for our upcoming blog where the Risk Forum will channel our inner Carnac with some predictions and expectations for payments in 2016.

By the Retail Payments Risk Forum at the Atlanta Fed

January 4, 2016 in cybercrime , data security , mobile payments , payments study | Permalink

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