Michael Jabbara, senior director, global risk, Visa
Sixty years ago, the idea that a plastic card was the future of payments would have been perceived quite skeptically, but eventually it became a standard way to pay. Today, there is once again skepticism about the plastic card but for entirely different reasons. As the world shifts to a digital-first mindset, some experts predict the industry will outgrow the plastic card. Regardless of the form of payment, a foundation based on security and enhanced customer trust needs to be established. A recent survey from Forrester Consulting commissioned by Visa confirms that as businesses respond to this digital shift, they need to balance payment innovation with responsible security.
The near-universal adoption of mobile technology and internet connectivity have significantly reshaped consumers’ purchasing behavior and expectations. Companies in the global payments ecosystem (merchants, banks, and fintechs) recognize that payments are a core component of the digital experience and are consequently transforming their operational models to enable digital payments with dynamic security when the card is present at the point of sale. In order to stay relevant in the rapidly changing payment landscape and to enable the future of payments from connected devices of all types, innovation and investment across strategic security initiatives is required. So what is the current status of the North American market and how are firms in the region preparing for a fast-approaching future state?
- Digitization of payments will accelerate with 62% of surveyed firms in North America expecting consumer use to increase within the next 2 years. As Internet of Things (IoT) expands the consumers’ collection of networked devices beyond the smartphone, they will likely want their connected devices to make seamless, secure payments across multiple merchant channels and payment use cases. This will further accelerate the shift of purchases away from cash and card to stored, digitized payment credentials.
- The shift to digital presents complex security challenges. More than half (59%) of respondents believe new payment technologies make their firms more susceptible to fraud. New opportunities for convenience and speed also open up new avenues for criminals to exploit. Malicious actors follow the money and as payment volumes become digitized, criminals will look for vulnerabilities in payment systems, fraud prevention tools, and business logic to exploit.
- Fraud management capabilities need to evolve to keep pace and realize the digital opportunity. With 64% of North America firms reporting the use of usernames and passwords as their main capability within their payment risk management suite, there is much room for improvement. It is well documented that this form of authentication is insecure. As payments become digital and more sophisticated, fraud management capabilities need to modernize and be more sophisticated to keep pace. And firms that can manage these challenges believe the opportunity is worthwhile, as 71% of respondents believe the benefits of new payment technologies outweigh the risks.
- To do so, North American firms are taking a holistic approach to remain on the forefront of payment security with 83% of firms confirming they are investing in hiring talent specializing in fraud/security, 80% investing in new fraud management tools (e.g. biometrics, tokenization, and AI/ML), and 76% leveraging industry standards (e.g. EMVCo’s 3DS protocol) to innovate securely at scale. This is critical since payment security requires a multilayered approach. It typically includes investments in intelligence and technology by using talent and technology to prevent, detect and help decrease threats; adopting governance processes that proactively support and manage key regulatory and risk governance matters; and empowering payment ecosystem stakeholders with tools, resources and control so their customers can make better decisions to manage risk.
- Lastly, organizations know that payment security is central to the consumer experience with 54% of North America firms hoping to achieve higher customer satisfaction through improving the security of new payment technologies and 47% use higher customer satisfaction as the measure of success for their fraud detection capabilities. Payment security and consumer experience need to be balanced with each other in order for digital payment growth to continue.
We are already seeing just how much, and how quickly, technological advancements are affecting payments today. The imperative is not just keeping pace with this technological change, but also being able to manage the risks associated with the change itself to allow digital innovation to scale. The success of an organization in this environment will be dependent on how it aligns its resources to deliver a seamless, secure payment experience to customers in the digital age.
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