The Secure Technology Alliance recently held its 14th annual Payments Summit. The event, which was held in Salt Lake City, brought together 417 payments professionals who were eager to resume engaging, face-to-face interactions. The payments industry is bouncing back from uncertain times, influenced by rapid innovation and consumer interest in faster, more reliable transactions. 85 prominent industry speakers highlighted key disruptors, including digital payments and currencies, new fraud strategies in the age of omnichannel commerce and the future of authentication.
The Summit was held in conjunction with the U.S. Payments Forum Member Meeting, which is made up of some of the top payments global and domestic payment networks, merchants, issuers, acquirers and technology makers.
A full post-event summary is available to view on the Secure Technology Alliance website.
Influential keynote speakers turned out in force, representing a diverse array of organizations across the payments ecosystem. The following provided standout quotes during the summit:
- “In the past five years, there has been more innovation in payments than in the past 50 years combined. 70% of global consumer payments will be digital by 2025.” - Ulrike Guigui, executive VP and head of enterprise payments, Wells Fargo
- “The fraud landscape is changing. Tokenization is up 98% YOY for Card-not-present adoption, and the global fraud rate is down 15% YOY.” – Mike Lemberger, Senior VP & Chief Risk Officer for North America, Visa
- “No industry is immune from today’s cyber threats. 20% of breaches were caused by compromised credentials in 2021. As an industry, we must emphasize secure user access, reconciliation, verification and detection protocols.” – Max Alexander, VP, cyber and tech emerging threats, JP Morgan Chase
- “The industry doesn’t have a single unified strategy to address remote payment authentication fraud. I think there is an opportunity to collaborate with industry stakeholders to enhance multi-factor authentication and passwordless authentication to thwart that fraud.” – Marianne Crowe, VP, secure payments innovation and research, Federal Reserve Bank of Boston
- “By 2026 we expect U.S. consumer payment transactions for card payments to exceed 60%” – Ryan Tuttle, consultant, Euromonitor International
The pandemic served as a catalyst for widespread contactless implementation at payment terminals across the country. Speakers agreed that consumers quickly adapted to a touchless world, and many are not turning back. Visa is reporting contactless penetration of over 15% with 400 million contactless cards in the market. That is four times higher than in 2019, prior to the pandemic.
Tracking ‘buy now, pay later’ trends
Millennials and Gen Z are shifting the focus away from rigid payment methods and pushing for payment inclusivity. In a session led by buy now, pay later (BNPL) Fintech providers, Afterpay stated the fast-growing new payment option already represents 3% of U.S. e-commerce and forecasted it would reach 10 to 12% by 2024. American Express described the allure of BNPL financing, such as the commonly used “pay in 4” option, by highlighting the lack of interest or upfront fees to consumers. As to what is driving the popularity of BNPL, the consensus was that many people see it as a budgeting tool that prevents them from getting out of control with debt, since payments are made using debit or ACH instead of credit lines. Zip’s spokesperson said that 70% of Americans are credit revolvers and 70% live paycheck to paycheck. BNPL can help them bridge small gaps before payday for essentials like food and transportation.
The future of payments fraud
Fraud has existed since the advent of payments and it is constantly evolving. Sessions at the Payments Summit emphasized both successful efforts to mitigate fraud and potential pain points. A cybersource report found that mid-market merchants experienced an 82% increase in fraud rates by revenue in 2021. The same report found that friendly fraud and card testing are the most common attacks impacting North American merchants.
All is not lost, however. Many industry stakeholders have seen great success in preventing fraud through the implementation of EMV 3-D Secure (3DS), tokenization and authentication solutions. Visa has observed an 11% decrease in card-not-present fraud alongside 27% growth YOY in EMV 3DS adoption. Discover Global Network said it expects to see a greater percentage of transactions that include authentication moving forward which will be validated by parties on all sides of the transaction process.
The rise of crypto and digital currencies
Speakers found common ground in the belief that digital currencies are undoubtedly making their mark on the payments space. According to a Kharpel statistic cited by a speaker with IDEMIA, the market value of cryptocurrencies has skyrocketed from $145B in 2017 to $2.5T in mid-2021. There is a consensus among payment industry leaders regarding the volatility of some forms of cryptocurrency. However, many suggested that stablecoins, which are backed by a reserve asset such as the U.S. dollar, could be viable for everyday payment transactions.
Some merchants and technology developers are preparing for the arrival of Central Bank Digital Currencies (CBDC) in the U.S. CBDC is a digital representation of sovereign currency that is issued by a jurisdiction’s monetary authority and appears on the liability side of the monetary authority’s balance sheet. CBDC has been tied to lower transaction costs, increased convenience since they can be stored in mobile wallets and financial inclusion benefits for the unbanked and underbanked.
Developments in cards
Despite the growing number of options available to consumers, most speakers expressed that cards still have a place in the future of payments. Pinless transactions have been touted for their fraud mitigation benefits. There are efforts to encourage the adoption of biometric cards to allow for instant two-factor authentication and pinless transactions at the POS. According to a survey by IDEX, 81% of consumers are ready to use fingerprints for the sake of both security and convenience instead of a pin. The industry is also keeping an eye on developments in sustainable cards, including those made with recycled ocean-bound plastic, metal and industrial materials.
Mobile driver’s licenses (mDLs) move authentication forward
The modern consumer craves more integrated experiences both inside and outside of the payment transaction process. The Payments Summit shined a spotlight on the fast-growing mDL movement, which is taking hold in more than 30 U.S. states. mDLs provide individuals with a valid, highly secure, cryptographically protected identification credential that can be stored on their mobile devices such as smartphones. Pilot programs in Utah, Louisiana, Maryland and Virginia are allowing mDL holders to use their mobile ID for age-based purchases such as alcohol and certain medications. Looking ahead, payments industry stakeholders expressed plans to eventually integrate mDLs to speed up data capture during lengthy transactions, including in-store credit card applications and mobile phone plan sign-up processes.
Soon, mDLs will be accepted as a valid form of identification authentication at select airports through TSA checkpoints. The TSA has already begun its pilot program in an Arizona airport. A speaker representing the TSA shared that the authentication process will be fully contactless and mDL holders will be able to consent before the transfer of personal data occurs. Users can choose which personal identification details to share and which not to share. For example, they may choose to share their name and birthdate, but not their address.
The Secure Technology Alliance has been a longtime proponent of mobile driver’s licenses. Alliance members’ efforts include the development of mDL Connection, a community resource for mDL awareness, education and coordination activities.