The effect of emerging payments, tokenization, mobile wallets, fraud, millennial spending, social media, the cloud and machine learning at credit unions took center stage at the CSCU 2017 Annual Conference.
“The landscape of the payment industry is changing rapidly,” Jenny Lewis, senior director, product development, tokenization services at the Jacksonville, Fla.-based FIS.
She said when an account is provisioned and replaced with a token, members connect that token to payment. Token provisioning entails consumers enrolling their credit card account with a digital payment service provider (such as an online retailer or mobile wallet) by providing their primary account number, security code and other account information.
Meanwhile, U.S. financial institutions should not overlook the mobile wallet market, which is expected to exceed $4 trillion by 2021.
“Mobile wallet users are customers no credit union can afford to lose,” Lewis said. However, there is skepticism of it as a payment vehicle stemming mostly from security, the value of mobile wallets, provisioning and use of one-time passcodes.
Lori Hodges, manager of U.S. Rick Services at Visa, emphasized fraud is on the rise. Visa, for example, recently alerted U.S. card issuers about increasing global ATM cash-out schemes, which could extract hundreds of thousands or millions of dollars from institutions. A security cash-out is a large-scale effort to withdraw a lot of cash in a short period.
The real concern is how quickly credit unions can detect an ATM cash-out scheme and shut down its ATMs remotely. A Japanese ATM cash-out scheme, which stole $19 million from South Africa’s Standard Bank in less than three hours, illustrates risks posed by such schemes for financial institutions that still depend on magnetic stripe debit cards.
In addition, millennials are not only coming – they are here. Michelle Featherstone, a Tampa, Fla.-based CSCU senior portfolio consultant, pointed out cards represent 55% of millennial spending. In addition, 92% of millennials are active social users, and 36% prefer to enlist in an online or mobile community.
Social media should appeal to credit unions wanting to attract millennials. “[Credit unions] have always been social. Social drives purchase decisions. Millennials are your early social media adopters,” Featherstone said.
Victor Oliveira, vice president, digital payments and labs at MasterCard, warned, “Millennials expect more from financial institutions.” He pointed out millennials’ annual spending power is expected to surpass baby boomers’ by 2018. Plus, homebuying by millennials has ticked up.
In addition, Oliveira spoke of fintech threats to retail banking. “Startups are cherry-picking profitable banking products,” he said. “Digital growth overall threatens traditional financial institution relationships. Credit unions must engage their members by growing with them using tools and services members want.”
Loren Hudziak, solutions architect at Google, focused on the potential of the cloud. “The cloud changes everything” because of the amount of data that now exists, he said. He explained there is no such thing as “the cloud,” since shared computer processing resources exists through Google, Amazon, Microsoft and others.
Hudziak also touched on the dawn of the age of artificial intelligence and its subset, machine learning, which he held will cause every successful IPO win in the next five years. In addition, there is a rapidly accelerating use of deep learning at Google.
