Technology Developments in Card-Based Payments WACHA Payments 2013

Transcription

1 Technology Developments in Card-Based Payments WACHA Payments 2013 April 9, 2013

2 The information contained on these slides is considered the Confidential & Proprietary Information of Two Sparrows Consulting, LLC. It may not be distributed or reproduced without the expressed written permission of an officer of Two Sparrows Consulting, LLC. The opinions expressed by Mr. Tomasofsky during this presentation are exclusively his own and subject to change.

3 About Two Sparrows Consulting Independent Consulting Firm Payments Specialists Credit Cards, Debit Cards, Prepaid Cards, ACH, Internet Payments, Mobile, EMV Loyalty, Merchant Acquiring, Bill Payment, Electronic Banking Strategy Project Management Product Management Training Marketing and Business Development Association Management

4 Agenda EMV - card technology is about to make a big change Debit is a problem Merchant acquiring in a post-durbin world Routing changes VISA FANF and PAVD Mobile Payments Industry Benefits Technology Risks

5 EMV

6 EMV and Debit EMV Refresher Europay, MasterCard and VISA Plastic card (or other device) with a chip Worldwide: 1.3 billion cards; 20.7 million card readers. Contact or Contactless Four ways to verify cardholder as authorized user Purchase amount authorized locally or online to host Dynamic cryptograms

7 EMV and Debit Problem: Current EMV rules will not allow merchants to exercise their debit routing rights since the EMV architecture and international brand deployment requires Issuer to determine routing preference if multiple network applications are present on the card.

8 SRPc Forms Chip and PIN WG Founding Networks CO-OP, STAR, SHAZAM, PULSE NYCE, AFFN, ATH NETS, JEANIE, Presto!

9 Common US Debit AID Parameters At least 3 CVMs Required: Signature; PIN; No PIN. Authorization is Online with deferred authorizations allowed for downtime situations. Online PIN (Host authenticated) $0.00 transaction floor limit. POS Cash back supported via PIN only. ATM support required; online PIN only. Fall Back support required.

10 Common US Debit AID Parameters Networks would agree to work on a common testing and certification process. Existing processes should be leveraged. Contactless required (parameters same as Contact) (ATM may need special consideration.) Governance; many topics. Overriding principal: Fairness and a Voice. Agreed to on December 20, 2013.

11 Proposals Offered MasterCard proposal offered on January 18, 2012 (revised in March 5, 2013) VISA proposal offered on February 4 th

12 March 19, 2013 Announcement Original ten debit networks agree to license Discover s D-PAS for common U.S. AID. Evaluate STAR s dynamic pan technology. Agree to form consortium. Both D-PAS and STAR technology contributed to consortium at $0 licensing fee. Consortium decides on future enhancements- owns IP. Application parameters match up with December 20, 2012 requirements.

13 Governance Ownership open to all U.S. debit networks. Advisory membership open to all qualified payments stakeholders. Financial structure goal: breakeven each year based on resources needed and work conducted.

14 Benefits of Decision Debit networks collectively bring to market and manage deployment. Individual networks still make decisions for their own networks. D-PAS in market already no anticipated changes for acquirer development and certification. Leverage current acquirer certification activities Issuers get portability. Merchants get minimized routing complexity.

15 Next Steps Finalize governance structure. Welcome additional debit networks. Make technical decisions. Choose application options Obtain AID Work with industry on testing and certification and commercialization

16 What Should Debit Issuers Do? Take time to understand the strategic implications, especially network portability Question international brand roadmap timelines Insist that a truly Common US Debit AID solution be adopted by all debit networks Anticipate lots of work is needed by all stakeholders; this is a big project Be aware that ecommerce fraud rates will rise as rollout occurs

17 Merchant Acquiring

18 Two Unaffiliated Debit Networks Rule: all debit cards must have at least two unaffiliated debit networks operational for routing Repercussions Shift in network volumes (VISA Interlink was loser) Large FIs loss revenue because of loss of exclusivity deals

19 Merchant Routing Rule: merchants choose which debit network to route transactions to. Repercussions Large merchants leverage new rights with lower cost of acceptance deals from networks. Acquirers leverage new rights for smaller merchants (if they pass along savings is a question).

20 Competitive Reactions to Durbin VISA FANF and other networks VISA PAVD

21 VISA FANF Fixed Acquirer Network Fee Billed to Acquirers by VISA; Acquirers charge merchants 3 Tiers Card Present Card Present High Volume Card Not Present Tiers can overlap and combined based on merchant channel mix.

22 FANF Card Present

23 FANF Card Present (High Volume)

24 FANF Card Not Present

25 PIN Authenticated VISA Debit Issuers required to support PIN debit VISA transactions through the dual message system. Effectively allows VISA to have both signature and PIN as channel options Issuer still must have a third network on card. If merchant can steer towards PIN; Exempt Issuers will get reduced interchange.

26 Questions? Paul Tomasofsky President Two Sparrows Consulting, LLC (201)

27 Mobile Payments Dan Kramer Sr. Vice President Marketing & Merchant Services

28 Agenda Mobile Payments Industry Benefits Technology Risks SHAZAM BOLT$ Pentagon

29 Mobile Payments Barter, coins, paper, plastic phones Mobile payments transactions exceed $240b annually By 2015, the value of all mobile money transactions is expected to be $670b

30 How Mobile Payments Work Card reader provided to retailers Merchants charged a % per swipe Reader plugs in headphone jack of phone Receipts are sent by text or Customer s card is swiped through the reader

31 Mobile Payments Benefits Fast Saves Money Targeted Marketing Secure Sales Growth Merchants & Consumers Benefit

32 Mobile Payments Technology Near Field Communications Wireless protocol Allows encrypted exchange of payment credentials Cloud Based Leverages mobile connection to Internet to obtain credentials not stored on device Imaged Based Coded images similar to barcodes, used to initiate payments credentials may be encrypted within image or stored in cloud

33 Mobile Payments Technology Carrier Based Payments billed directly to mobile phone account; merchants paid by carrier Proximity Based Geolocation used to initiate payments Merchant identifies active users credential exchange is cloud based Mobile P2P Payment initiated on mobile device, using recipients or mobile phone number Payment is via ACH, card networks, or intra account

34 Mobile Payments Risks Bad Data Storage Practices Malware Unauthorized Access Data Leaks No Encryption Rooting

35 SHAZAM BOLT$

36 Pentagon

37 Additional Discussion Thank You!