EMV Strategy for Card Issuers

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1 EMV Strategy for Card Issuers BY RENDER DAHIYA Page 1 of 9

2 INTRODUCTION Three little letters are causing quite a stir in the payments world these days: E-M-V. The liability shift is rapidly approaching, and as card issuers, retailers, and other players in the payments ecosystem are beginning to upgrade cards, ATMs and pointof-sale equipment, it is critical that those three little letters don t command too much of your attention. That s not to say that financial institutions shouldn t have an implementation plan well under way. You should. But many card issuers are approaching EMV as a one and done project, when it s anything but. Financial institutions in particular need to keep the bigger picture in mind, as you have the most to lose, in the form of members, deposits, and revenue. There are four critical factors that card issuers should be managing while their EMV implementation is coming together. 1 of 9

3 1. Stay on strategy while implementing EMV. We ve heard repeated reports of strategic and operational time outs that are being implemented because issuers are unable to maintain their current level of personalization and flexibility and manage the EMV transition. But this is not only unnecessary; it s a huge risk to their member acquisition and growth strategy. These brands will be hard pressed to catch up, let alone resume previous acquisition rates if their entire EMV plan is built on a neutered version of their marketing and retention strategy. This is a recipe for disaster at a time when competition is heating up for financial services across both consumer and business markets. There is no shortage of payment solutions that will be all too happy to snap up your disenfranchised cardholder if you stumble during the transition. It s easy to lose focus on your longterm strategy when a major business change is occurring across the industry, but try to resist. Transition is a time to press on, to look for opportunities and take them when lesser offerings fall short. The organizations that will be most successful after the October deadline will be those that did not Unnecessary sacrifice: Card issuers are taking a dangerous time out from member acquisition strategies to keep EMV implementation on track. Critical program elements, like targeted marketing campaigns, customized card design, and even coordinating EMV with reissue schedules based on card expiration date are being set-aside during the migration. slow down strategy implementation or put goals on hold in order to implement EMV. The winners will be those who used the changing waters to phase out competition and stand out from the crowd. Page 2 of 9

4 2. Don t Double Dip on Reissue. Even some of the largest issuers are still mailing mag stripe cards as their current card base expires, with promises to reissue with EMV by October. This means that any cardholder who uses their card for automated payments will have to take time to update payment information not once, but twice in less than six months. Cardholders are busy and they choose a payments provider be that credit, debit or prepaid because it adds convenience and other benefits to their life. But double dipping on initial reissuance is more than just an inconvenience it could prove to be a costly customer experience fail. This is due, in part, to the elevated role that payments have acquired in the member journey. Payments are in fact a critical step in that journey, and the bar is higher than ever because consumer attitudes are changing. Forrester calls this change the mobile mind shift, and defines it as the expectation that I can get what I want in my immediate context and moments of need. Even if your business had nothing to do with mobile, which we know is not the case, your members are making this shift in the rest of their life, and that means attention spans and expectations about how they engage with your brand have changed as well. As an example of the impact of the mobile mind shift, a recent Contact Solutions study showed that when shoppers need help within a mobile app, they expect to get it immediately and effortlessly, but if they don t the response is visceral. According to the study, one in four shoppers will likely not make a purchase with a brand at all once they have to leave the branded app to get help. And the effect is ever growing. Every time any one of us successfully receives the instant gratification we ve so come to expect using our smartphones or tablets, we become more accustomed to that level of service. By comparison, anything that falls short or, in the case of double reissuance, is a blatant disrespect of our time, will be noticed, and not in a good way. 25% 25% of shoppers will abandon a brand altogether when the member experience is fractured. Source: Contact Solutions Inc. Page 3 of 9

5 3. Mind your risk management: You still need a contingency plan. Your organization likely has numerous business-continuity and disasterrecovery plans already in place today. And you ll need to update them for EMV too. Once October 2015 has come and gone, the EMV transition is not going to be neatly completed and checked off a list of to do s. Only 50 percent of cards and point-ofsale machines are expected to be EMV-enabled by December of this year, and consumer adoption won t stabilize for at least another few years. At the same time, breaches will still occur and fraud will increase, exponentially. You probably already know that EMV will prevent POS fraud, and that history shows we should expect a spike in card-not-present (CNP) fraud as criminals move to the weakest point in the financial system. In fact, CNP fraud is expected to double in the US by 2018 to $6.4 billion annually. But what does all of this really mean for card issuers? It means that repeated card reissuance is likely for years to come, and along with it, a greater need to put resources toward card production and cardholder communication than ever before. What you may not know is that traditional card production schedules are already way behind, and issuers that are not already in production today have been given six or even nine-month lead time estimates just to issue an initial round of EMV cards. Imagine what will happen after the next major breach occurs, or when we start to feel the true impact of CNP fraud. All issuers need a business continuity plan that ensures members will have prompt access to a new card, when reissuance becomes necessary. Missing the mark here is probably the most costly mistake an issuing organization can make. Cardholder loyalty aside, one thing we know for sure is that a customer without your card in their wallet equates to revenue out of your pocket. Depending on the approach, putting contingency plans into place involves two or three critical steps. Market and regulatory uncertainty is the #1 concern for card issuers. Page 4 of 9

6 Traditional 3-Step Contingency Plan Step 1 Step 2 Step 3 Set up your program on a printing / personalization platform and integrate with your processor. Put card and collateral designs through the setup process and approval cycle. Forecast, purchase, preprint and store EMV chip card inventory. It s essential to have a solution in place that can be implemented quickly in the event of a supply or production issue, or a cardholder situation that could drive the need for reissuance. A data breach or fraud are only two of many potential scenarios that drive the need for a solid plan. The objective here is to have your back up plan set up, managed, and ready for production at a moment s notice. The first two steps in this process are imperative regardless of your processor, card production provider or personalization house. Step 3, however, is only necessary if you don t deploy an on-demand solution. This step tends to be more costly and requires additional forecasting and an advanced investment in card production and inventory up front. The idea of contingency planning is to protect your organization from unexpected events and reduce risk. Using an on-demand solution eliminates considerable risk because there are no card forecasts to make and no inventory to invest in or store. The expiration clock doesn t even start on cards until you need to put one in a member s hand. More importantly, all of this can happen with your existing marketing campaigns in place, and as new seasonal or market-sensitive campaigns are brought online so that you can build and protect your cardholder base at the same time. No matter which implementation route you take, it s time to dust off those BC/DR plans and add EMV to the mix. Page 5 of 9

7 4. Cardholders must remain at the forefront of your longterm strategy. It s not because financial institutions don t care about members. Ask anyone if cardholders matter in their business and you ll get an immediate and emphatic yes. But sometimes market disruptions throw our focus out of whack and we actually forget about those very people who are most important part of our business. The fact is, the entire EMV process has been inwardly focused on process, rather than people. EMV is complex to be sure, so its understandable that the industry can be distracted by the EMV ecosystem and the many layers of industry collaboration that are necessary to get the transition done right. Amazon s Jeff Bezos actually leaves an empty chair at key executive meetings to remind the team that the customer is always the most important person in the room. But consider for a moment just how important it is to serve and retain the cardholders you have today, so that you can grow tomorrow. Bain and Company reports that a 5 percent By contrast, in our recent poll of more than 400 FI professionals, only 7 percent cited cardholder satisfaction as one of their biggest concerns during the EMV transition. increase in customer retention can increase business profitability up to 95 percent, and 70 percent of repeat customers are willing to consider future products that the business produces. A 5 percent increase in member retention can increase business profitability up to 95 percent. Page 6 of 9

8 As technology advances and business changes, there are more and more payments options available to consumers and business accountholders from prepaid card accounts to purchasing card programs and myriad corporate and expense solutions and retaining your customer base is key. Loyalty will be fleeting for many, so ensure that you are continuing to meet the needs of So again, the bar has been raised and consumers are responding to content that has been designed especially for them. In fact, 40 percent of consumers buy more from retailers who personalize the shopping experience across channels1 and leads who are nurtured with targeted content produce a 20 percent increase in sales opportunities.2 These kinds of results are absolutely unachievable with mass 40 percent of consumers buy more from retailers who personalize the shopping experience across channels. your cardholders. As we ve discussed, cardholder contact opportunities have shifted, with the rise of mobile banking and other remote services that keep account holders out of a branch. While there may be more communications platforms than ever, there s also a lot more noise. Financial institutions must take a multi-channel approach and maximize customer connections at every opportunity. At the same time, personalization has gone a step further to individualized yes, one-to-one communication and marketing. Source: MyBuys Source: DemandGen produced materials and static campaigns that are planned a year in advance. The EMV shift is actually a great opportunity to re-connect with cardholders and re-engage with your brand through timely, thoughtful, clear and individualized communication. And this scenario requires an ondemand approach to card programs, where you have maximum flexibility and minimum risk to respond to your customers and the market as needs arise. Everyone knows that change is coming. A customer-centric approach to navigating that change is a considerable competitive advantage. Page 7 of 9

9 Essential communications begins before you start reissuing cards and runs well after cards are in the market. Assume that your cardholders need to know everything about how to use an EMV card from activation to point of sale. The following grid outlines key communications topics and channels to use throughout the EMV migration process. EMV Member Communications Best Practices There are many opportunities for missteps when it comes to EMV. Don t let your organization become collateral damage in the transition because you didn t put cardholders first. Read more about best practices for communicating during the EMV transition. Page 8 of 9

10 Where to Go From Here Approaching the EMV transition with a thoughtful, holistic plan will be critical for not only a successful shift to chip technology, but also for a successful long-term business strategy. Ensure that you continue to keep your longterm goals on track while transitioning to EMV. will permanently change how business is done. Finally, remember that you aren t the only party transitioning to EMV so are your cardholders. Make sure that you don t take them for granted and use this unprecedented time to pull them closer to your brand. For more about the EMV transition and how it will impact issuing credit unions, take a look our EMV Roadmap Webinar FAQ. Synchronized project execution is nothing new to businesses and think of EMV as a long-term undertaking that ABOUT ARROWEYE Arroweye is a leading payment technology provider of innovative card marketing and production solutions for the financial industry. The company s patented digital on-demand technology is the most efficient and profitable model for card marketers and issuers to bring highly customized programs to market. Founded in 2000, Arroweye offers the first fully-digital card solution approved by Visa, MasterCard, American Express and Discover. The company delivers EMV, hybrid and traditional card technology to some of the largest prepaid, credit and debit card programs around the world. A state-of-the-art manufacturing facility allows Arroweye to integrate with any number of processors and be a single source provider for their clients. Arroweye serves closed and open loop markets in prepaid, credit, debit, reward and incentive, employee programs and emerging payments. Arroweye Solutions, Inc. 549 West Randolph, Suite 200 Chicago, Illinois (sales) sales@arroweye.com Want more information? Contact us today or visit arroweye.com 2015Arroweye Solutions, Inc. All rights reserved. Page 9 of 9