Card networks and financial institutions are preparing for the future of payments by expanding their investments into artificial intelligence (AI) and machine learning to quickly identify instances of fraud. Unfortunately, retailers have yet to show the same amount of dedication when it comes to investing in payments technologies of tomorrow, hindering innovation and leaving consumers at risk of future data breaches.
From the shift to EMV-enabled payments cards and the rapid expansion of contactless transactions to the latest in tokenization and biometrics, investments in the future of these emerging payments technologies will only better serve the demands of consumers, retailers and card networks. So why won’t retailers invest? The problem is PIN.
The benefits of emerging technologies in the payments system have rallied the shift from outdated PIN technology to EMV that can better protect transactions and consumers’ sensitive data. However, retailers still argue that PIN technology is the best way forward, ignoring the real harm and lack of fraud prevention. Consumers across the nation have grown accustomed to dipping their chip cards through the advancement of EMV technology. As data shows, 70 percent of consumers believe technologies like biometrics are an easier form of verification than payments, and 46 percent think biometrics are more secure than passwords or PIN. And innovations don’t stop at EMV and biometrics.
We’ve seen a jump in card networks’ and financial institutions’ expansion into mobile payment options, enhancing their ability to protect consumer information through tokenization and biometrics. Thanks to the continued commitment by card networks and financial institutions to invest in innovation, the roll out of contactless cards is finally picking up steam here in the United States. Through the use of virtual wallets, consumers are securely uploading their credit cards to their phones to complete transactions with simply a tap. Most recently, Apple announced Apple Card to offer consumers the ability to earn cash back, simplify their finances while being completely mobile.
While contactless is poised to take over the checkout line, card networks are also partnering with technology companies, creating first-of-its-kind, integrated systems to enhance the consumer experience — in this case, changing how you pick up a quick meal on the go. Mastercard announced its partnership with ZIVELO to deploy kiosks to quick service restaurants, like Sonic, to improve their drive-in capabilities for consumers. This is an example of how networks help bridge retailers’ innovation gap, helping them to refine their business model to increase and build a loyal customer base and increase revenues.
However, we don’t anticipate much progress on the retailer side as the Secure Payments Partnership (SPP), a group representing retailers, continues to advocate for outdated PIN technologies rather than following consumer trends that points to increased innovation to prevent fraud on e-commerce and card-not-present (CNP) transactions. SPP has most recently pushed out misleading claims regarding a Verizon data breach report, saying fraud is increasing with CNP transactions, ignoring the impending implementation of Secure Remote Commerce (SRC) technology for CNP.
What SPP and retailers fail to mention is that the PIN technology they support fails to protect against counterfeit or card not present (CNP) fraud. In fact, multiple citations in the same Verizon report noted a dramatic decline from 2010 in breaches or incidents involving ATM skimming and point-of-sale attacks, which it suggests may be attributed to the implementation of EMV chip. Retailers also neglect to mention that fraud prevention in the CNP sphere is about to take a quantum leap with the implementation of the SRC standards. This technology permits the widespread application of tokenization and artificial intelligence, providing numerous and substantial benefits to both merchants and consumers — it merits an article in its own right.
While further innovations in electronic payments improve, so must the ability for all participants to keep consumers’ sensitive information secure – but innovations come at a price. Unfortunately, retailers are spending in “all the wrong places” when it comes to technology investments. According to 2018 Thales Data Threat Report, U.S. retailers experience the highest number of data breaches despite increased investments in cybersecurity. And much of this can be attributed to the fact that retailers have yet to move on from PIN and invest in the emerging technologies like EMV and AI that are driving the future of payments and security.
Emerging technologies, including tokenization and biometrics, are the future of payments, especially as they personalize the payments experience through developments like fingerprint technology. Consumers are catching on, too. Data shows 70 percent believe biometrics are an easier form of verification, with 46 percent believing biometrics are more secure than passwords or PIN. While card networks and financial institutions are taking action to prepare and anticipate what the future may hold for payments technology that are faster and more secure. It is not just the job of the card networks, financial institutions or retailers to invest in tomorrow, but is instead the shared responsibility among all three to develop a faster and more secure payments system.
It’s time retailers recognize the trend in consumer payment preferences toward convenience and security, and join with card networks and financial institutions to invest in the future of payments.
Jeff Tassey is Chairman of the Board of the Electronic Payments Coalition (EPC).
Morning Consult welcomes op-ed submissions on policy, politics and business strategy in our coverage areas. Updated submission guidelines can be found here.
Get the latest global financial news and analysis delivered to your inbox every morning.