About


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

November 13, 2018


In Payments, What I Say May Not Match What I Do

How do you like to pay your bills? Perhaps you schedule bills to pay automatically by bank account number so you don't miss a due date. Or maybe you would rather review a paper statement and then mail a check.

By number, U.S. consumers report paying 4 in 10 bills by electronic means—for example, by using their online banking bill pay function or providing a bank account number at a biller's website. By dollar value, the practice of using electronic transactions to pay bills is also prevalent: about half of bill payments by dollar value are made using online banking bill pay or bank account number payment. These are among findings from the Diary of Consumer Payment Choice, a survey of U.S. consumers released in September of this year.

Chart-one

Source: 2017 Diary of Consumer Payment Choice

The diary also asks respondents how they prefer to pay bills, so we can look at how consumers' stated preferences compare to what they actually do in specific situations. It turns out that 36 percent of consumers prefer online banking bill pay or bank account number payment, and about the same percentage prefer either a debit card or credit card.

Keep in mind that 38 percent of bill payments and 36 percent of consumers are not comparable. Actual behavior is measured in percentage shares of transactions. Preferences are measured in percentage shares of consumers (about 2,900 U.S. adults responded to this nationally representative survey).

We can see, however, the transactions for which consumers deviate from their stated preferences for bill payments. Of the bill payments recorded in the 2017 DCPC, about half were made using the consumers' preferred payment instrument.

Why do we consumers deviate from what we say we prefer? Think of your own payment choices. You might be constrained by what is feasible. For example, you might prefer to pay most bills with a paper check but for bills you pay online, it's impossible to use paper payment instruments. Your choice could be limited by what the payee prefers to accept. For example, your plumber might prefer payment by cash or check. Or you might deviate from your preferred method to save money. For example, your local municipality might put a surcharge on card payments, so paying with your bank account number is less costly. Or, for larger bills, you might use a credit card to earn points.

To see more about how consumers adjust our payment choices given the situation, take a look at the interactive charts detailing payment choice by dollar value, payment type, and remote or in-person payments, as reported in the 2017 Diary of Consumer Payment Choice.

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

 

November 13, 2018 in cards, payments study | Permalink

Comments

Post a comment

Comments are moderated and will not appear until the moderator has approved them.

If you have a TypeKey or TypePad account, please Sign in

October 29, 2018


Remote Card Fraud: A Growing Concern

Where's the money in card payments? Despite all we hear about e-commerce and other kinds of remote payments, in-person payments remain strong. The total dollar value of in-person card payments exceeded the total dollar value of remote payments in both 2015 and 2016. In-person payments were 56 percent of all card payments by value in 2016, and 58 percent in 2015. By number, the race is not even close: 78 percent of card payments were in person in 2016.

Graph-one

Looking at change from 2015 to 2016, however, another story could be emerging. When we consider the growth in the value of card payments, remote payments grew by 11 percent from 2015 to 2016, compared to about 3 percent growth by value for in-person card payments. By number, in-person card payments increased 5 percent and remote by 17 percent.

It wasn't only remote payments that grew from 2015 to 2016—so did remote fraud. In fact, it grew faster than remote payments did overall. Remote fraud by value grew more than three times faster than the value of remote payments—35 percent compared to 11 percent. By number, remote fraud grew about twice as fast—32 percent compared to 17 percent.

In contrast to the mix of remote and in-person card payments overall, where in-person payments still are the majority, fraudulent remote card payments were more than half of all fraudulent card payments by both value and number in 2016.

Graph-two

These data suggest that remote card payments fraud is likely to be of increasing concern for the U.S. payments system going forward. Additional data are included in the report at www.federalreserve.gov/paymentsystems/fr-payments-study.htm.

To learn more about payments fraud, you can sign up for the Talk About Payments webinar on November 1 at 11 a.m. (ET). This webinar is open to the public but you must register in advance to participate.

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

 

 

October 29, 2018 in cards, consumer fraud, debit cards, fraud, identity theft, mobile payments, online retail, payments study | Permalink

Comments

Post a comment

Comments are moderated and will not appear until the moderator has approved them.

If you have a TypeKey or TypePad account, please Sign in

October 22, 2018


Three Views of Noncash Payments Fraud

Despite what we might gather from the headlines, payments fraud is a small fraction of the value of all payments.In 2015, by value, it was only about 1/200 of 1 percent of noncash payment transactions. The pie chart shows what a tiny slice of the pie that payments fraud is.

Image-one-sm

This view of the value of payments fraud in 2015 is one of three views that today's post will offer, using data from a recently released payments fraud report.

The report, based on data from the Federal Reserve Payments Study, quantifies noncash payments fraud by value and number in 2012 and 2015 and provides information that can help inform efforts to prevent and detect payments fraud. Data include detail on different payment instruments and transaction types.

Fraud value is defined in the report to be the value of unauthorized third-party payments that were cleared and settled, before any chargebacks, returns, or recoveries. It does not include the costs of any prevention, detection, or remediation methods. The report covers noncash payments used for everyday consumer and business transactions, including automated clearinghouse (ACH), check, and card payments. (Wires are excluded.)

Here's the next view of payments fraud by value: most payments fraud is by card. Slightly more than three-quarters of noncash payments fraud by value are credit card, debit card (prepaid and non-prepaid), and ATM withdrawal fraud; almost half is credit card fraud. The second chart shows that by value, ACH fraud is 14 percent of noncash payments fraud and check fraud is 8.6 percent.

Image-two-sm

Finally, fraud rates by value for cards increased from 2012 to 2015 while fraud rates for check payments decreased and fraud rates for ACH stayed flat. That rate increase for cards means that the value of fraudulent card payments grew faster than the dollar-value growth overall, which is concerning. Indeed, card fraud by value grew more than three times faster than the growth in card payments and ATM withdrawals by value—64 percent compared to 21 percent. ACH fraud grew more in line with the growth rate in ACH payments, with fraud by value increasing 11 percent compared to a 13 percent increase in the value of total ACH payments.

Image-three-sm
You can find additional data in the report at https://www.federalreserve.gov/paymentsystems/fr-payments-study.htm.

To learn more about the payments fraud report, join our next Talk About Payments webinar on November 1 at 11 a.m. (ET). The webinar is open to the public but you must register in advance to participate. (Registration is free.) Once registered, you will receive a confirmation email with login and call-in information. Also, be sure to check back next Monday for another Take On Payments post about the report.

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

 

October 22, 2018 in cards, consumer fraud, cybercrime, cybersecurity, debit cards, payments study | Permalink

Comments

Post a comment

Comments are moderated and will not appear until the moderator has approved them.

If you have a TypeKey or TypePad account, please Sign in

July 12, 2018


Behind the Growth in Debit Card Payments

U.S. consumers make more payments with nonprepaid debit cards than with other types of cards (credit and prepaid) combined. The 2016 Federal Reserve Payments Study found that consumers made 57.5 billion payments in 2015 using nonprepaid debit cards.

That's a 26 percent increase over 2012, when consumers made 45.7 billion nonprepaid debit card payments.

No doubt, effects of more favorable economic conditions—including declining unemployment, increasing wages, and greater consumer confidence—were important factors in increased consumer spending from 2012 to 2015. But from a payment choice perspective, such as which method or card to use, what might be driving this increase of almost 12 billion? Two factors related to those choices could be at play:

  • Maybe people started using the cards more intensively. That is, people who owned nonprepaid debit cards started using them more often, making more payments per card per month.
  • Maybe people started using the cards more extensively. That is, more people owned and actively used a nonprepaid debit card or more people owned and actively used multiple cards.

For this discussion, an "active" card is defined to be one that is not expired and had purchase activity or bill pay associated with the card during at least one month of the year 2015 or, for the 2012 estimate, at least one transaction during the month of March 2013. Note that the difference between the 2012 and 2015 estimates could, in part, be related to the different definitions of the measurement periods. (The Federal Reserve Payments Study also measures nonprepaid debit, credit, and prepaid cards that are in circulation but not used.)

Let's look at the numbers:

  • In 2012, there were 173.9 million active consumer nonprepaid debit cards in circulation. These cards are linked to a transaction account at a financial institution and can be used to make purchases at the point of sale.
  • In 2015, there were 209.6 million active consumer nonprepaid debit cards. That's an increase of 21 percent over the three years.
  • In 2012, U.S. consumers made 21.9 purchases per month per active nonprepaid debit card. In 2015, on average, across the months, they made 22.8 per card. That's almost flat—an increase of just four percent in the number of payments per card per month over three years.

These numbers overall tell us that increases in payments per card is not the main driver of this phenomenal increase in the number of nonprepaid debit card payments (see the chart). Note that payments per card is an average of various behaviors. Some people could be using their cards more—for example, new debit card owners may be moving from using cash or prepaid cards. Others could be using their cards less—for example, new owners of credit cards may be moving away from debit cards.

Number-of-non-prepaid-debit-cards-increases-chart

Rather, the increased number of active cards seems to be the source of the jump in the number of nonprepaid debit card payments. Here are some factors that could relate to the greater numbers of cards:

  • The U.S. population ages 18 and older grew from 240 million to 247 million during this time, a three percent increase (American FactFinder search).
  • The percentage share of consumers with a bank account (and thus able to own a nonprepaid debit card) increased from 91.8 percent in 2011 to 93 percent in 2015 (FDIC Survey of Banked and Unbanked Consumers [2012 estimate not available]).
  • By birth year, the share of people more likely to own a debit card increased. Young people born between 1995 and 1997 turned 18 between 2012 and 2015—about 14 million of them (American FactFinder search). At the same time, the population of people born before 1940 declined by about 4 million between 2012 and 2015.

Whatever the source of the increase in the number of cards, we see here that typical behavior for an active nonprepaid debt card is around 23 purchases per month. How many times per month do you use your card or cards?

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

July 12, 2018 in cards, debit cards, payments study, prepaid | Permalink

Comments

Post a comment

Comments are moderated and will not appear until the moderator has approved them.

If you have a TypeKey or TypePad account, please Sign in

January 8, 2018


Consolidated Mobile Banking and Payments Survey Results Published

In earlier posts, we published highlights of the 2016 Mobile Banking and Payments Survey of Financial Institutions in the Sixth District results as well as a supplement showing the results by financial institution (FI) asset size. The survey was designed to determine the level and type of mobile financial services that FIs offered and to find out what plans FIs had to offer new services.

Six other Federal Reserve Banks also conducted the survey in their districts, and we've combined all the data into a single report. Marianne Crowe and Elisa Tavilla of the Boston Fed's Payment Strategies group led the team that consolidated the data. The report—now available on the Boston Fed's website—addresses mobile banking and payment services from the perspective of the FI. The report offers additional value with its inclusion of a large number of small banks and credit unions (under $500 million in assets), a group from which data are often difficult to obtain.

Consolidated-survey-respondents-by-asset-size

The seven districts participating were Atlanta, Boston, Cleveland, Dallas, Kansas City, Minneapolis, and Richmond. A total of 706 FIs responded.

Here are some of the key learnings from survey responses regarding mobile banking:

  • Retail mobile banking offerings are approaching ubiquity across financial institutions in the United States. Eighty-nine percent of respondents currently offer mobile banking services to consumers, and 97 percent plan to offer these services by 2018.
  • By the end of 2018, 77 percent of bank and 47 percent of credit union respondents will be providing mobile banking services to nonconsumers including commercial and small businesses, government agencies, educational entities, and nonprofits. Commercial and small businesses will be the most prevalent.
  • Among FIs offering and tracking business mobile banking adoption, more than half still have adoption rates of less than 5 percent.
  • The most important mobile banking security concern that respondents cited is the consumer's lack of protective behavior. In response, FIs have implemented a range of mitigating controls. To enhance security and help change consumer behavior, more than 80 percent of respondents support inactivity timeouts and multi-factor authentication (MFA) as well as mobile alerts.

And here are some important findings regarding mobile payments:

  • Implementation of mobile payment services is growing as FIs respond to competitive pressure and industry momentum. In addition to the 24 percent already offering mobile payments, 40 percent plan to do so within two years. However, the current offering level fell substantially short of the expected 57 percent predicted by the responses to the 2014 survey.
  • Mobile wallet implementations are increasing steadily, with Apple Pay as the current leader.
  • Enrollment and usage remain low. Eighty-one percent of the respondents had fewer than 5 percent of their customers enrolled and actively using their mobile payment services.
  • Asset size makes a difference in many areas: larger FIs have greater resources to expend on new services, implementations, and security technologies and controls.
  • Banks and credit unions often differ in approaches and strategies for mobile payments.

We will conduct the survey again this year and are eager to see how the mobile banking and payments landscape has changed. If you have any questions about the survey results, please let us know.

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

 

January 8, 2018 in banks and banking, mobile banking, mobile payments, payments study | Permalink

Comments

Post a comment

Comments are moderated and will not appear until the moderator has approved them.

If you have a TypeKey or TypePad account, please Sign in

October 30, 2017


Why the Explosion in Household Payments?

In a post last August, I analyzed some of the data from the inaugural release of the entire aggregated data set of estimated noncash payments from the latest Federal Reserve payments study. In this go-round, I will discuss the household payment figures in the report that accompanied the data set. These figures reflect core noncash payment types—including ACH transfers, check, nonprepaid and prepaid debit cards, and credit cards— that consumers in the United States use today.

The two pie charts show the distribution of household noncash payments for 2000, when the payments study began, and for 2015. Over this period, the number of consumer payments increased to 117.5 billion in 2015 from 50.7 billion in 2000. The area of each pie chart reflects the proportional difference in the average monthly household noncash payments for the two periods. In 2000, households made on average 40.3 noncash payments per month, compared to 78.6 monthly payments in 2015, a 95 percent increase.

Graph-image

Besides the near doubling of monthly payments per household, the other striking difference is the distribution of payments by type over time. Most dramatically, checks written decreased 6.4 percent per year over this time while debit cards, with an annual increase of 13.7 percent, were on a tear.

As the report notes, and according to my own speculations, increases in the number of monthly household noncash payments could be attributed to the following factors:

  • Some payments that historically would have been made with cash are now made with mostly noncash forms of payment. Debit cards snagged the greatest share, given their high growth rate and relatively low average ticket amount, which aligns with payments typically made with cash.
  • Storefront merchants and consumers have expanded their acceptance of card payments as a substitute for cash and check.
  • The growth of remote payments such as ecommerce have reduced check and cash usage.
  • Many people have migrated from using cash and check to using payment cards so they can gain points and other benefits from card rewards programs.
  • Online purchases of digital content such as games and music have brought about increases in micropayments.

We might surmise that increases in the number of payments in 2015 are also due to increases in household expenditures since 2000, though this is hard to quantify by number of payments. World Bank data show aggregated U.S. household consumption expenditures of $12.284 trillion and $6.792 trillion (in current dollars) in 2015 and 2000, respectively. Unlike the payments study data, these figures include both cash and noncash payments, and some of the expenditures are derived from imputed income related to high-ticket items such as purchases of homes and automobiles. With these caveats in mind, dividing these figures by the number of households during each of these years shows that the per-household expenditures in current dollars is about 52 percent higher in 2015 than it was in 2000. Not all of this gain came about from more payments—some payments may be higher ticket amounts than in previous periods due to luxury purchases.

What are your views on other factors contributing to the near doubling of monthly household noncash payments since 2000?

Photo of Steven Cordray  By Steven Cordray, payments risk expert in the Retail Payments Risk  Forum at the Atlanta Fed

October 30, 2017 in payments study | Permalink

Comments

Not only have more storefront retailers expanded card acceptance but even "mobile merchants" have as well. Think food trucks, farmers market vendors, state parks, pop-up shops and the like. We practically don't need cash any longer. Now, some enterprising payments provider just needs to figure out how we can tip the valet with a card.

Posted by: Brenda Gilpatrick | October 31, 2017 at 09:35 AM

Post a comment

Comments are moderated and will not appear until the moderator has approved them.

If you have a TypeKey or TypePad account, please Sign in

October 23, 2017


ACH and Consumer-Only Payments: Will the Twain Ever Meet?

For many years, person-to-person (P2P) payment providers have touted the emergence of compelling P2P mobile-based products that exploit some combination of financial institutions (FIs) and fintech providers. Several players have made notable inroads into P2P with certain demographics and use cases, but the overall results in terms of absolute numbers are far from ubiquitous. This post uses hard numbers to explore what progress ACH has made with P2P payments.

During a payments conference earlier this year that showcased findings from the Fed's triennial payments study (here and here), the table below was presented showing the number and value shares of domestic network ACH payments in 2015. The table is complicated because it shows both debit pull and credit push payments by consumer and business counterparties. Despite the complexity, the table distills ACH to its essence by removing details associated with the 14 transaction payment types (known as Standard Entry Class codes) that carry value for domestic payments. Many of these individual codes reflect similar types of payments (for example, three codes are used for converting first presentment checks to ACH). As expected, virtually all payments involve at least one business party to each payment. Consumer-only payments are negligible.

Chart-one

In a typical use case for consumer-only ACH, a consumer transfers funds from one account to another account across financial institutions. As shown in the solid red oval, 0.04 percent of all domestic payments were consumer-to-consumer payments, where the payee initiated a debit to the payer's bank account. For consumer credit push payments, the figure is 0.3 percent. The combined figure rounds to 0.3 percent. On the value side for consumer-only payments (in the dashed red oval), debit pulls, credit pushes, and the combined figure were 0.02 percent, 0.2 percent, and 0.2 percent, respectively. These types of payments typically reflect P2P payments1, when one consumer pushes funds to another consumer.

The next table shows the figures that prevailed in 2012. Given the modest share by both number and value across both years, it is apparent—and interesting—that ACH has made little progress in garnering consumer-only payments. Although ACH is ubiquitous on the receipt side across all financial institutions, it is not so for consumers, given the lack of widely promoted and compelling service offerings from FIs and no standardized form factor like there is for card payments. Additionally, many small FIs do not offer ACH origination services.

Chart-two


This lack of adoption is not unique to ACH. Although some of the electronic P2P entrants are experiencing significant growth, it will be some time before they supplant the billions of P2P cash and check payments. P2P players on the FI-centric side include Zelle, which a large consortium of banks owns. Non-FI providers include PayPal and its associated Venmo service. Given the lack of ubiquity with the new offerings, the fallback option for consumer-only payments is cash and checks. As the payments study reports, check use is still declining, though the most recent trend shows that this decline has slowed. ACH or other electronic options still seem a good bet to continue to erode paper options, but perhaps the market is signaling that paper options have ongoing utility and are still preferred if not optimal for some users in some instances.

So what would it take for ACH to gain some traction in the consumer payments space? Perhaps the presence of same-day ACH, in which credits were mandated in September of 2016 and debits followed in September 2017, offers some opportunity for compelling service offerings coupled with a user-friendly way to send an emergency payment to your ne'er-do-well son.

What are your views on the viability of ACH garnering more P2P payments?

Photo of Steven Cordray  By Steven Cordray, payments risk expert in the Retail Payments Risk  Forum at the Atlanta Fed

 

_______________________________________

1 Sometimes account-to-account (A2A) transfers are lumped in with P2P payments.

 

October 23, 2017 in banks and banking, financial services, mobile banking, mobile payments, P2P, payments study | Permalink

Comments

Post a comment

Comments are moderated and will not appear until the moderator has approved them.

If you have a TypeKey or TypePad account, please Sign in

August 14, 2017


Extra! Extra! Triennial Payments Data Available in Excel!

In countless old black-and-white movies, street newspaper vendors would shout out the latest sensational news from hot-off-the-press special editions. The Fed is no different in that we want to shout out that it is no longer necessary to mine the PDF-based Federal Reserve Payments Study report to extract the study's data. For the first time, we are offering our entire aggregated data set of estimated noncash payments in an Excel file. The report accompanying the data is here.

The data set is very rich and covers the following categories:

Accounts and cards
Private-label credit processors
Checks Person-to-person and money transfer
ACH Online bill pay
Non-prepaid debit Walk-in bill pay
General-purpose prepaid Private-label ACH debit
Private-label prepaid issuers & processors Online payment authentication
General-purpose credit Mobile wallet
Private-label credit merchant issuers  

Here is another table that is just one extract from the non-prepaid debit card portion of the extensive payments data available.

To get a taste of what this data can teach us, let's look closer at the cumulative volume distribution by payment dollar value threshold for non-prepaid debit cards (the data are shown above) along with general-purpose credit cards. The number and value of both types of payments grew substantially from 2012 to 2015, the last two survey periods. The chart compares these distributions, showing more vividly how this growth affected the relative proportions of payments of different dollar values.

Chart-two

For example, debit card payments below $25 accounted for 59.1 percent of all payments in 2012 versus 61.8 percent in 2015—evidence that debit card purchases are migrating to lower ticket amounts. The trend is even more dramatic over the same time span for general-purpose credit cards.

Because this is a distribution, increases in the relative number of small-value payments must be offset by decreases in the relative number of large-value payments. Unfortunately, our previous survey capped the payment threshold at $50 in 2012. Otherwise, we would see the dashed 2012 lines crossing over the solid 2015 lines at some payment value threshold above $50. In brief, the results suggest cash payments are continuing to migrate to debit cards, while credit cards may be garnering some share at the expense of both cash and debit cards.

The challenge is on for you data analysts out there. Please share your findings.

Photo of Steven Cordray  By Steven Cordray, payments risk expert in the Retail Payments Risk  Forum at the Atlanta Fed

August 14, 2017 in ACH, cards, checks, debit cards, mobile payments, payments study | Permalink

Comments

Post a comment

Comments are moderated and will not appear until the moderator has approved them.

If you have a TypeKey or TypePad account, please Sign in

December 22, 2016


Why U.S. Card Fraud Is Now Present and Accounted For

Last year, I wrote a post called "Why Is the U.S. Card-Present Fraud Breakout Not Present?" in which I discussed the lack of publicly available information on the distribution of U.S. card fraud by type. I'm happy to report that more detailed data on card fraud in the United States is now present and accounted for in the Initial Data Release (IDR) of the 2016 Federal Reserve Payments Study.

As is common in other countries, card fraud can be categorized as follows across person-present and remote payment channels:

  • Counterfeit card: Fraud is perpetrated using an altered or cloned card.
  • Lost or stolen card: Fraud is undertaken using a lost or stolen card.
  • Card issued but not received: A newly issued card in transit to a card holder is intercepted and used to commit fraud.
  • Fraudulent application: A new card is issued based on a fake identity or on someone else's identity.
  • Other: "Other" fraud includes account takeover and other types of fraud not covered above.
  • Fraudulent use of account number: Fraud is perpetrated without using a physical card.

An extract from the fraud section of the IDR shows breakouts for card fraud by type across five countries.

Percentage-of-total-domestic-general-purpose-card-fraud

As reflected in the numbers, the United States continues to be by roughly an order of magnitude a continuing and persistent target for card counterfeiters using stolen card data compared to other countries that have adopted much earlier counterfeiting controls using EMV (chip) cards. Use of chips makes in-person card fraud more difficult, because of built-in technology to thwart the creation of counterfeit chip cards. As adoption of chips for cards and terminals improves in the United States, fraud using stolen card data is likely to shift from person-present to remote channels as has already occurred in other developed countries. My colleague, Doug King, discusses these issues in detail in an interview conducted last year.

Look for other Take On Payments posts that highlight additional key findings from the 2016 payments study.

Photo of Steven Cordray  By Steven Cordray, payments risk expert in the Retail Payments Risk  Forum at the Atlanta Fed

December 22, 2016 in cards, chip-and-pin, EMV, payments study | Permalink

Comments

Post a comment

Comments are moderated and will not appear until the moderator has approved them.

If you have a TypeKey or TypePad account, please Sign in

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

Comments

Post a comment

Comments are moderated and will not appear until the moderator has approved them.

If you have a TypeKey or TypePad account, please Sign in

Google Search



Recent Posts


Archives


Categories


Powered by TypePad