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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November 22, 2021
We Are Thankful For…
Two years ago, prior to Thanksgiving, I asked each Risk Forum member to provide me the one thing they were thankful for in payments. This year, I posed a bit of a different question to my colleagues and asked them what payment innovation they are most thankful for. Without further ado, the Risk Forum presents our 2021 Thanksgiving week "What payment innovation are you thankful for?" list.
- Nancy Donahue, project manager: I'm thankful for innovation in voices contributing to payments because it's through these different and diverse viewpoints that the industry develops solutions that are inclusive of all consumers!
- Claire Greene, payments risk expert: I am thankful for the electronic receipt of bills and automatic bill pay. As a payments expert who doesn't want to think about her personal payments, I remember the monthly stack of envelopes on my dining room table.
- Scarlett Heinbuch, payments risk expert: I am thankful for the innovation of dongles and payments apps that make it easy for small businesses and individual sellers to accept credit card payments.
- Douglas King, payments risk expert: I am thankful for innovation in payroll that makes my payday afternoons more flexible through the ability to receive my paycheck via direct deposit. Prior to direct deposit, I distinctly remember receiving a check at my job and then heading to a bank only to wait in a long teller line on Friday afternoons with others to deposit our paychecks.
- Dave Lott, payments risk expert: I am thankful for the ability to make contactless payments with my debit card at stores and gas pumps as it is much faster.
- Sally Martin, senior business analyst: I am also very thankful to be able to schedule payments electronically, either once or as many times as I want out to infinity. Keeps me honest and doesn't allow me to rob Peter to pay Paul as easily. Also, I don't have to think about doing it every month when the due date comes along.
- Catherine Thaliath, project management expert: I am thankful for digital wallets that make it convenient to store my credit cards, boarding passes, concert tickets, loyalty cards, etc., all in one place!
- Jessica Washington, payments risk expert: I am thankful for mobile deposit capture. When I do get lucky enough for someone to give me money (outside employer) and it is a check (whah, whah) I love that I can pop that moolah into my account right after I open the mail or birthday card.
And we are thankful for YOU, our readers of Take On Payments and supporters of the Risk Forum. We sincerely appreciate your comments, kudos, and criticism, and hope that you all find value in the information we provide and share. As we enter into these crazy last weeks of 2021, we wish you and yours a wonderful holiday season.
September 27, 2021
Payments Inclusion and Broccoli: Lessons from Parental Incentive
A recent television commercial opens to a scene familiar to most families across America: it's dinner time, broccoli is served, and a child pushes the plate away while an anxious parent coaxes the child to eat it. The child is unhappily resistant for reasons many of us can relate to today, and dinnertime is stressful and frustrating for all.
The ad provides a simple solution: "Potato pay!" exclaims Dad, saying the child will get three potato fries as a reward. The child's face lights up, broccoli is swallowed, chased down by the yummy potatoes, and meal-time tranquility now reigns.
The ad caught my eye as we continue to research payments inclusion efforts for greater financial health. While this simple approach might work on a small scale, such as getting your kids to eat their broccoli, payments choices and behaviors are far more complex.
How do you get people to change their behavior when it comes to trying different or newer payment options? What would help people expand their choices to include these options?
Maybe we need to better identify what the "broccoli” is for those people who could benefit from a well-balanced menu of payment choices. We know that issues such as trust, access, privacy, fees, location, lack of transparency, minimum balance requirements, and other barriers are often cited as reasons why people might stick to cash, a perfectly valid choice. Or they may lead them to use other forms of payments that may be more expensive, such as prepaid cards that come with fees, check cashers, or money transfer facilities.
Rewards, peer and social inclusion, and other positive reinforcements can be useful motivators for behavior change, among other approaches. In general, the reward's promised delight needs to outweigh the refusal to try something, whether it's broccoli to encourage healthy choices, or a payments option that might provide greater financial freedom and health by moving money around more easily and perhaps less expensively.
As we move forward with our payments inclusion research, I will continue to look for incentives that might be helpful for people considering options they might initially not like but could be helpful to their financial health. Meanwhile, I plan to check out the freezer aisle for those magic potatoes.
July 6, 2021
Think Like a Genius for Payments Innovation
Ron Klein filed the patent for the magnetic strip used on credit cards in 1966, and it was awarded in 1969. His invention revolutionized the payments industry, increased efficiency, and reduced fraud. I was fortunate to meet Ron, known as "The Grandfather of Possibilities", at an entrepreneur's conference several years ago. Being in the payments world, I wanted to know how he got the idea for the magnetic strip that is still on the back of credit and debit cards today.
Ron, an engineer by training, said department stores came to him with two problems. It took too long for customers to make charge purchases, and the burden of proof was on the merchant. For example, prior to the magnetic strip and online authorizations, the customer's name and account number were embossed on credit cards. Lost, stolen, canceled or past due accounts were listed in a monthly printed bulletin sent to merchants. Clerks at the point of sale waded through thousands of numbers to see if the card was not listed, and therefore acceptable. A merchant accepting a card listed in the bulletin was liable for the transaction.
Ron's first solution: He compiled the monthly records of negative accounts and stored the information on magnetic drums. The merchant then had a keypad that was connected to the stored data to look up numbers. While that expedited the POS process, it didn't go far enough to solve the problem. Keying in the card number was time-consuming.
Ron said he decided to "put some smarts in that piece of plastic" by applying reel-to-reel tape recorder technology. His idea? Record the account number on the tape, build a device that reads it like a tape recorder, connect it to the stored data, and voila! The credit card validity checking system is born!
At 85, Ron continues to mentor, coach, and inspire others to solve challenges. This requires, he said, a certain mindset: Be smart, daring, and different, and don't be afraid of making mistakes. If you want to solve a problem, you need to take some time to think about it in a certain way. Simply put, Ron said there is a gift behind every challenge that, if explored with an inquisitive mind, can bring forth innovations that can make things better for people.
I was thinking about Ron in the context of today's payments innovations, or the challenges we currently face, such as the chip shortage or fraud. What problems do you think need to be solved? By thinking like a humble genius, we see that every challenge brings an opportunity for advancing innovation.
May 24, 2021
Mindfulness Can Ease Payments Stressors
Making a $26 purchase recently, I was surprised when my debit card was declined. My account had money in it, so I couldn't understand what was wrong. Fortunately, I had cash and prepared to pay with it. Then, the clerk pointed to a notice taped to the terminal: "No cash accepted."
Behind me, people were growing impatient, sighing, and shuffling their feet. I tried a credit card I keep for emergencies, and it went through. Relieved to complete the purchase, I left and called the bank. My account was fine; the problem was with the merchant's terminal.
Back in my car, I breathed a sigh of relief but thought about how uncomfortable I felt standing in line, having two payment methods rejected, needing to scramble to find another way to pay, and sensing the impatience of others behind me. I also thought about the alarm I felt when my debit card was declined. Had my account been attacked and emptied by fraudsters? I realized this transaction had triggered a typical stress response: increased heart rate, anxious feelings, sweaty palms, disrupted breathing patterns, all physical and emotional reactions to a simple payment transaction that almost wasn't completed.
May is Mental Health Awareness Month, and it helps to be more aware of any stress we have while making our daily payment transactions. We are all affected by money and need it to function in our daily lives. We often take payments for granted but it's our primary method for getting what we need and want. Money, and conflicts over money, are significant stressors for people. One way to help with stress reduction is mindfulness, the practice of bringing your attention to the present moment, taking a deep breath, and relaxing. In this situation, I used mindfulness techniques to reduce the physical and emotional effects I was feeling. I was grateful I had learned these techniques for staying calm and reducing my stress response.
I think about people who are having payments rejected for whatever their circumstances, whether it's due to bank error, merchant error, a fraud alert, or the merchant not accepting a payment type such as cash or check. This can be particularly stressful if you need groceries, a prescription, gas, or emergency supplies and can't get them because either you or the merchant can't complete your transaction due to each one's payment choices or available options.
This in-person point of sale issue has the power to affect you in ways you may not even recognize, causing feelings of shame, embarrassment, anger, and anxiety. Payments inclusion initiatives can address some of these issues. In addition, by simply acknowledging that any of the monetary transactions we make in a day can cause stress, we can increase our awareness of how we respond to help us remain calm and reduce mistakes. When we take a deep breath and a minute to be mindful, we can reduce our body's automatic stress response, which benefits us in other areas of our lives.