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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.

Take On Payments

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November 27, 2017


How Intelligent Is Artificial Intelligence?

At the recent Money20/20 conference, sessions on artificial intelligence (AI) joined those on friction in regulatory and technological innovation in dominating the agenda. A number of panels highlighted the competitive advantages AI tools offer companies. It didn't matter if the topic was consumer marketing, fraud prevention, or product development—AI was the buzzword. One speaker noted the social good that could come from such technology, pointing to the work of a Stanford research team trying to identify individuals with a strong likelihood of developing diabetes by running an automated review of photographic images of their eyes. Another panel discussed the privacy and ethical issues around the use of artificial intelligence.

But do any of these applications marketed as AI pass Alan Turing's 1950s now-famous Turing test defining true artificial intelligence? Turing was regarded as the father of computer science. It was his efforts during World War II that led a cryptographic team to break the Enigma code used by the Germans, as featured in the 2014 movie The Imitation Game. Turing once said, "A computer would deserve to be called intelligent if it could deceive a human into believing that it was human." An annual competition held since 1991, aims to award a solid 18-karat gold medal and a monetary prize of $100,000 for the first computer whose responses are indistinguishable from a real human's. To date, no one has received the gold medal, but every year, a bronze medal and smaller cash prize are given to the "most humanlike."

Incidentally, many vendors seem to use artificial intelligence as a synonym for the terms deep learning and machine learning. Is this usage of AI mostly marketing hype for the neural network technology developed in the mid-1960s, now greatly improved thanks to the substantial increase in computing power? A 2016 Forbes article by Bernard Marr provides a good overview of the different terms and their applications.

My opinion is that none of the tools in the market today meet the threshold of true artificial intelligence based on Turing's criteria. That isn't to say the lack of this achievement should diminish the benefits that have already emerged and will continue to be generated in the future. Computing technology certainly has advanced to be able to handle complex mathematical and programmed instructions at a much faster rate than a human.

What are your thoughts?

Photo of David Lott By David Lott, a payments risk expert in the Retail Payments Risk Forum at the Atlanta Fed

 

 

November 27, 2017 in emerging payments, innovation, payments | Permalink

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November 20, 2017


Webinar: Key Payment Events in 2017

This year has been an exciting one for the payments industry. Topics such as block chain and distributed ledger, card-not-present fraud, and chip-card migration continued to be in the news, and new subjects such as behavioral biometrics and machine learning/artificial intelligence made their way into the spotlight.

In the past, the Retail Payments Risk Forum team has coauthored a year-end post identifying what they believed to have been the major payment events of the year. This year, we are doing something a little bit different and hope you will like the change. Taking advantage of our new webinar series, Talk About Payments, the RPRF team will be sharing our perspectives through a round table discussion in a live webinar. We encourage financial institutions, retailers, payments processors, law enforcement, academia, and other payments system stakeholders to participate in this webinar. Participants will be able to submit questions during the webinar.

The webinar will be held on Thursday, December 14, from 1 to 2 p.m. (ET). Participation in the webinar is complimentary, but you must register in advance. To register, click on the TAP webinar link. After you complete your registration, you will receive a confirmation email with all the log-in and toll-free call-in information. A recording of the webinar will be available to all registered participants in various formats within a couple of weeks.

We look forward to you joining us on December 14 and sharing your perspectives on the major payment events that took place in 2017.

Photo of David Lott By David Lott, a payments risk expert in the Retail Payments Risk Forum at the Atlanta Fed

November 20, 2017 in banks and banking, biometrics, emerging payments, EMV, innovation | Permalink

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November 13, 2017


The Future of Wearables

My wife and I took our children to a Florida theme park for their recent fall break. While I would love to spend the next few paragraphs opining on why I think our school calendar is crazy or giving a review of the most phenomenal ride that I have ever experienced, it doesn't really fit the mission or purpose of Take On Payments. Fortunately, the trip did provide some fodder and thought for a blog post, thanks to a much-discussed and written-about wearable NFC—or near-field-communication—device that the theme park offers.

These bands were introduced in 2013 to create an awesome customer experience. This experience is much bigger than a payment platform and has absolutely nothing to do with a rewards program around which so many mobile wallet and payment applications are being developed. The band's functionality certainly includes payments, but the device also replaces room keys, park entry cards, and ride-specific tickets known as fast passes. As an additional feature, it is waterproof, which proves handy for a trip to the water park. I was able to spend the week without ever having anything in my pockets (yes, I even left my phone in the room). My wife commented how fantastic it would be to take the NFC band experience outside of the park because it was just so easy and convenient.

Ease and convenience–isn't that what a lot of us are after? If you have to give me something to get me to open an application and tap my phone in place of a payment card, is that really providing ease and convenience? I am now 100 percent convinced that rewards programs aren't going to drive mobile commerce to any significant degree. Experiences that provide ease and convenience will drive mobile commerce. Hello, mobile order-ahead. Hello, grocery delivery. And hello, wearable of the future.

It isn't hard to imagine a wearable device, like an open-loop band, transforming our lives. After my theme park experience, I long for the day when a wearable will be the key to my vehicle—which I won't have to drive, either—and to my house, my communication device, and my payment device (or wallet). Of course, we'll have to consider the security issues. Even the bands incorporate PINs and fingerprint biometrics in some cases to ensure that the legitimate customer is the one wearing the band.

Is this day really so far-fetched? I can already order a pizza through a connected speaker, initiate a call from the driver's seat of my car without touching my phone, or tap my phone to pay for a hamburger. The more I think about these possibilities, I have to ask myself, is it crazy to question whether or not using mobile phones for payments just might become obsolete before long? Or maybe mobile phones will provide that band functionality?

Photo of Douglas King By Douglas A. King, payments risk expert in the Retail Payments Risk Forum at the Atlanta Fed

 

 

November 13, 2017 in banks and banking, innovation | Permalink

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November 6, 2017


My Fingertips, My Data

I am not a user of old-style financial services. While I remember learning how to balance a checkbook, I never had to do it, since I never had checks. Recently, my financial adviser suggested several mobile applications that could help me manage my finances in a way that made sense to me. I researched them, evaluated a few, and decided which one I thought would be the best. I'm always excited to try new apps, hopeful that this one will be the one that will simplify my life.

As I clicked through the process of opening an account with my new financial management app, I entered the name of my financial institution (FI), where I have several accounts: checking, savings, money market, and line of credit. The app identified my credit union (which has over $5 billion in assets and ranks among the top 25) and entered my online banking credentials—and then I was brought up short. The app was asking for my routing and account number. As I said, I don't own any checks and I don't know how to find this information on my credit union's mobile app. (I do know where to find it using an internet browser.) I stopped creating my account at this point and have yet to finish it up.

I later discovered that if I banked with one of the larger banks, for which custom APIs have been negotiated, I would not have been asked for a routing and account number. I would have simply entered my online login details, and I'd be managing my finances with my fingertips already. I started digging into why my credit union doesn't have full interoperability.

In the United States, banking is a closed system. APIs are built as custom integrations, with each financial institution having to consent for third parties to access customer data. However, many FIs haven't been approached, or integration is bottlenecked at the core processor level. It is bottlenecked because if they deny access to customer data (which some do), the FI has no choice in the matter.

New Consumer Financial Protection Bureau (CFPB) guidance on data sharing and aggregation addresses the accessibility and ownership issue. The upshot of the CFPB's guidance is that consumers own their financial data and FIs should allow sharing of the data with third-party companies. But should doesn't equal will or can.

The CFPB guidance, though not a rule, is in the same vein as the European Union's PSD2 (or Directive on Payments Services II) regulation, whereby FIs must provide access to account information with the consumer's permission. This platform, which represents an open banking approach, standardizes APIs that banks can proactively make available to third parties for plug-and-play development.

While open banking is a regulatory requirement in Europe, market competition is driving North American banks to be very interested in implementing open banking here. An Accenture survey recently found that 60 percent of North American banks already have an open banking strategy, compared to 74 percent of European banks.

It is no surprise that bankers are becoming more comfortable with the shift-in-ownership concept. FIs have been increasingly sharing their customers' data with third parties. Consumer data are what fuel organizations like credit agencies, payment fraud databases, identity and authentication solutions, and anomaly detection services, to name a few. As these ownership theories change, we will also need to see new approaches to security. What are your thoughts about open banking?

Photo of Jessica Washington  By Jessica Washington, AAP, payments risk expert in the Retail Payments Risk Forum at the Atlanta Fed

 

 

November 6, 2017 in banks and banking, data security, emerging payments, innovation, mobile banking | Permalink

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