NASHVILLE, Tenn.—Credit unions were offered some insight here on what’s going on in debit cards, where issues remain with EMV, and even some thoughts related to what’s known as “capacity of the mind.”
The comments were offered during a panel discussion at the 2016 TMG Executive Summit, which was moderated by TMG Director of Digital Strategy Brian Day. Panelists included Philip Andreae, vice president of field marketing for Oberthur Technologies; Miriam De Dios, CEO of Coopera; Glenn Fodor, senior vice president of corporate strategy and intelligence for First Data; Pam Brodsack, chief technology officer for TMG, and Todd Link, senior vice president of risk management and remote delivery for Dupaco Community Credit Union.
Among the topics the group discussed were the rumored death of debit, the status of EMV in the U.S., the mobile wallet marketplace and blockchain technology.
Among some of the observations made by the panel:
- There was consensus among the panelists around the fact debit cards are far from dead. In fact, both TMG’s Brodsack and Coopera’s De Dios cited proprietary data indicating strong growth of debit accounts, particularly among 18- to 29-year-old consumers and several segments of the Hispanic consumer market. “There were some cuts after Durbin,” said First Data’s Fodor. “But the most important thing is the consumer has spoken, and the consumer loves debit.”
- On EMV chip credit cards, Oberthur’s Andreae said on the issuing side of EMV adoption, “We’re there.” On the merchant side, however, he said there is a lot of work to be done, largely around certification of EMV terminals. According to Andreae, this “issuer first” deployment is unique to the U.S., as most markets begin by preparing terminals and then working with financial institutions to roll out the cards. While he agreed terminal certification is causing much of the delay, he added,
“Merchants are not doing a lot of work to get their certification passed right the first time. EMV is hard. You have to do the work.” Andreae also called on more people to get involved in the EMV Migration Forum (EMF), which will soon become the Payments Forum to “keep the community conversation going with PCI, tokenization, mobile, wearables, Internet of Things and all the big topics EMV wants to continue.”
- When the discussion turned to mobile wallets, TMG’s Day asked Dupaco’s Link why the credit union, which he called an early adopter of mobile wallet technology, decided to deploy all three wallets from Apple, Android and Samsung. “The barrier to entry was low, so we got in on the ground floor,” responded Link. “Now, if we start to see six, eight, 12 new wallets, we’ll have to start picking and choosing. All of us have to take a step back and see if [the wallets] are friend or foe.”
- Andreae said the payments industry needs to be focused on what he called “capacity of the mind.” Referring to the set number of retailers to which a consumer is loyal, he cautions issuers to consider when retailers add loyalty and frictionless pay to the consumer experience. Fodor agreed, saying soon merchants will offer a digital pay solution that has zero acceptance fees. “Coupled with the utility of loyalty and targeted promotions, that’s what you need to pull it all together. No one has created the ‘killer app’ with all the functionality that meets that level.:
- During a discussion of data analytics, TMG’s Brodsack shared her experience with predictive modeling from her work in the debt collection industry prior to joining TMG. “We had been looking at things like income level and addresses, but as it turned out, none of that mattered. Once the data scientists came in to do the analytics, we found things like propensity to pay depended on some odd factors. So we made a change to the treatments received by each of the segments the data scientists had identified, and our debt recovery rates soared. Our competition wondered what we were doing. Today, analytics plays a very large role with all kinds of models increasing revenue and decreasing cost.”
When asked how that experience has been applied at TMG, Brodsack explained, “It’s about the art of the possible. What story does our data tell? You have to think about being an exponential organization. How do we iterate? It’s okay to fail; nothing’s perfect. Fail fast and move forward.”
- Link said that mastering analytics is about securing the right strategic partnerships, like the one he reports having with data analytics firm IQR Consulting. “It comes down to the partners we carefully choose who are reading the tea leaves for us every day. We’re all serving members; we need partners with a holistic view to bring extrapolated data back to us with intelligence we can do something with. Right now is not a time to be out there alone.”
- For Coopera’s De Dios, data will become exponentially more important as credit unions and community banks compete in culturally diverse communities. “The world is becoming more multicultural; the U.S. is becoming more Hispanic. How do you integrate all of the consumers you want to serve into a total market strategy? Different ethnicities and cultural preferences are driving a need for us to understand markets before we create processes to align our strategies with that intelligence.”
- Blockchain and Bitcoin, including the distinctness of the two technologies, was another topic addressed by the panel. “The fact blockchain is immutable is so important,” said Broadsack. “That no one can change what has been recorded provides the level of security so many in the industry are excited about.”
Fodor added that “The empirical evidence says blockchain is far from ready for consumer payments.” Among the reasons Fodor cited were blockchains’ inability to process transactions quickly enough. “We have less than a second to authenticate, and that’s not how blockchain works. Now, there are some use cases where if it takes 20 minutes, that’s still light-years ahead [of where other solutions are today].”
Brodsack, who recently penned a white paper on the subject, agreed and explained this is part of the reason TMG and its strategic partner, CO-OP Financial Services, have commissioned studies of blockchain technology from Mercator Advisory Services.
Predictions And Forecasts
Day closed out the session by asking each of the panelists to make a few predictions. “We’ve talked about quite a few things today. What will we be talking about next year that we’re not talking about today?”
- Andreae: Authentication and cybersecurity -- “If you haven’t been attacked, it’s probably because you don’t know they’ve been there.”
- Fodor: App-based commerce -- “Most digital traffic coming to you is through apps. Retailers like Panera are really shooting the lights out, gaining marketshare from competitors, with their apps.”
- Brodsack: Video -- “Video is the future. We’re seeing it everywhere from the browser to video tellers. It’s becoming more affordable and reliable.”
- De Dios: Data analytics for right customer -- “We will gain a deeper understanding of the needs and behaviors of multicultural consumers, allowing us to target exactly the right ones.”
- Link: Regulation of payday lenders -- “The CFPB will come with strong legislation that will impact payday lenders, creating a tremendous opportunity for those of us in the room.”