REDWOOD CITY, Calif., April 4, 2023 – The Secure Technology Alliance today recognizes the success of its 15th annual Payments Summit and the U.S. Payments Forum Spring All-Member Meeting. The events were held jointly in Salt Lake City. More than 400 payments professionals gathered to take advantage of the networking opportunities and educational sessions. Together, 77 speakers provided a comprehensive look at the transformative state of the industry, digging into business strategies for trending payment topics, including mobile wallets, digital currencies, buy now, pay later (BNPL), faster payments, and fraud mitigation techniques.
While the U.S. Payments Forum Meeting is closed to non-members, The Payments Summit is open to the public. This year’s Summit featured a lineup of knowledgeable keynote speakers who provided the following standout quotes on the global payments ecosystem:
“We need to keep an eye on payments in the metaverse, digital currencies and Wallet-based transactions. Fraudsters are turning their attention to these less mature payment rails. Provisioning is a crucial gateway for secure payments. Research shows 29% of token fraud occurs within the first day the token was activated in a mobile wallet. Real-time monitoring is critical to prevent current and future fraud.” – Mike Lemberger, SVP, Chief Risk Officer for North America, Visa
“Looking toward the future, BNPL appears to be here to stay. User penetration among Gen Z is estimated to reach 59% by 2026 and 53% for Millennials. Effective consumer protections will be key to its long-term success.” – David Mallow, Head of Government, Healthcare, Higher Ed, Non-Profit & Embedded Payments, J.P. Morgan
“Contactless payments are making transit experiences more efficient on a global scale! The next step is to make transit payments completely open loop. Moving forward, we must work toward a world where riders can pay with any card, any smart device, on any transit system nationwide.” – Kevin Burgess, Director, Payment Strategy, Bytemark
“9 in 10 businesses surveyed want to be able to make instant payments in 2023 and 70% of consumers want access to faster payments from their financial institutions. We’re launching FedNow in July, the first Fed service offering instant payments and instant settlement of funds at any time, any day of the year, 24/7/365.” – Daniel Baum, SVP Head of Payments Product Management, Federal Reserve Bank of Atlanta
“It’s time to address Account Takeover (ATO) fraud. Fraudsters aren’t targeting the payment rail in these cases…they’re targeting the consumer and their data. Visa research finds that 23% of merchants globally are experiencing ATO fraud. Bad actors are gaining access to valuable rewards accounts, crypto wallets and more to utilize loyalty perks and funds. Behavioral analytics is key to spotting unusual consumer activity on these accounts and thwarting ATO.” – Paul Baer, Head of Managed Solutions, Visa
Mobile wallet momentum
The industry is observing a generational shift in payment trends led by Millennial and Gen Z consumers. Many speakers noted consistent growth in the adoption of digital payment rails. During the Forum’s Member Meeting, Bank of America reported the number of cardholders actively using digital wallets doubled in under 3 years, with 73% of total consumer households being digitally active and 11% of all debit card transactions made via mobile wallets in Q4 2022. According to data shared by J.P. Morgan at the Payments Summit, nearly 30% of consumers’ average retail spending could be done through mobile wallets by 2026.
Peer-to-peer and faster/instant payments
Speed and convenience are top of mind for many in today’s marketplace. Access to smart devices has never been greater and people are increasingly turning to instant payment methods and peer-to-peer (P2P) payment apps to send funds fast. American Express found that a substantial 81% of consumers utilize P2P payments regularly and 80% of merchants accept these types of payments. That’s according to data from the Amex Trendex: Digital Payment Edition shared during the U.S. Payment Forum’s meeting. Overall, the industry views instant payments as somewhat of an economic driver because apps like Cash App, Venmo and Zelle streamline the payment acceptance process for small businesses and first-time entrepreneurs.
Looking ahead to this summer, the Federal Reserve is entering the instant payments marketplace with its highly anticipated FedNow service. The bank-to-bank faster payments method will allow financial institutions to instantly settle transferred funds. The transfers will occur within seconds, according to a Federal Reserve Bank of Atlanta spokesperson. At launch, the max transaction limit will be $500K, with options for smaller financial institutions to lower the limit as needed. The Fed also provided some insight into the back-end cost, which is a concern for interested banks. FedNow will cost 4.5 cents per item for participating financial institutions, with a $25 overall monthly fee. Financial institutions can expect to pay 1 cent for requests for payment. One key difference for consumers who are accustomed to using P2P apps is that they will need to know the routing and account number of the intended funds recipient to send money with FedNow.
Digital currencies
There is consensus among stakeholders that digital currencies will shape the future of payments in one way or another. Over the course of the Payments Summit, the industry weighed the impacts and potential risks of digital currencies on a broad scale.
During a panel on the subject, a speaker with M13 explained that different forms of digital assets support specific use cases. For example, there are assets like Bitcoin - which although historically volatile in nature - is largely seen as a store of value and potential inflation hedge given its finite supply and decentralized structure. Additionally, there are cryptocurrencies like stablecoins that peg their market value to another asset, most commonly sovereign dollars. A well-known example is $USDC, a stablecoin that is pegged to the US Dollar. $USDC is largely stable in volume, and while tied to a traditional fiat currency, it allows users to seamlessly transact in crypto and avoid the price volatility of other crypto assets.
For some, this represents a new frontier for payments, making way for a far less complicated international financial system. A currency that can be used across borders for investment, blockchain used for secure contracts, and swift, digital payments without any third-party involvement. For others, it is a frightful, unregulated landscape that is primed for bad actors and fraud.
The antithesis of crypto is Central Bank Digital Currencies (CBDC). Citing Payments Canada, CBDC is a digital, interest-bearing currency, controlled by a central bank. For example, it could be a digital version of the U.S. Dollar, subject to the same interest rates. For those who are unbanked or underbanked, CBDC can be stored in a mobile wallet. Proponents of CBDC say that it promotes financial inclusion, reduces net transaction cost and possibly deters fraud because of the cryptography that comes with digital currencies. On the other hand, detractors believe it defeats the purpose of utilizing digital currencies because cryptocurrency was, in part, developed to allow consumers to transact anonymously and privately, outside of the view of government entities and central banks. Regardless, the regulatory implications of both crypto and CBDC are certainly something to watch as digital currencies continue to gain traction internationally.
Buy now, pay later
What was once a burgeoning payment rail is now a booming category with steep competition. Buy now, pay later (BNPL) has skyrocketed in the past year, with big names like Apple now entering the fray. Millennials and Gen Z are driving this growth. During the Payments Summit, Affirm shared that BNPL is capturing this next generation of buyers, used to a “digital first” environment. The company says that Affirm partners have reported an 85% average order value lift compared to a non-affirm tender. Beyond day-to-day purchases, BNPL providers are exploring ways to help finance travel, larger expenses like rent and even medical expenses.
BNPL can be more accessible to younger buyers without established credit, but this has its drawbacks. There’s concern among industry stakeholders than “buy now, pay later” could become “buy now, pay never.” BNPL providers in attendance said they are taking steps to get ahead of potentially malicious activity. TreviPay shared that it is leveraging loyalty programs and rewards with its clients to incentivize repayment with B2B customers. Others are exploring stricter identity verification methods during the application approval process to weed out fraudsters and get a better understanding of a potential customer’s repayment history. There are also efforts to supplement short term “pay in four” BNPL offerings with longer installment programs to help consumers who may have fallen on hard times.
Contactless stands strong
From an industry perspective, contactless payments have proven to be much more than a pandemic-driven fad. The category has seen an increase in merchant acceptance and consumer adoption for three consecutive years with no plateau in sight. During the U.S. Payments Forum meeting, Discover Global Network shared that it has observed 76% YOY growth in contactless transactions from 2021 to 2022 and sales growth increased by more than 100% YOY in that same period. Meanwhile, Mastercard says 83% of all card-present transactions are happening at contactless-enabled locations. The presence of magnetic stripe data contactless among petroleum merchants has been a barrier to EMV contactless growth in recent years. Even still, many payment networks agreed that magnetic stripe data contactless transaction volume has been considerably reduced.
Recent fraud developments
Financial gain is perhaps the most significant motivator for fraudsters globally. The payments ecosystem has been battling fraud since its inception, constantly adjusting mitigation techniques to compete with increasingly sophisticated attacks. Throughout the Payments Summit and U.S. Payments Forum meeting, a variety of payments stakeholders noted that they are dealing with an increase in fraud targeting consumers directly – their identity – as opposed to specific payment rails.
Overall, the industry is seeing a rise in first party and account takeover (ATO) fraud, along with the typical enumeration attacks observed in years past. With the rise in mobile and crypto wallet use, fraudsters are realizing the value in securing a single, verified Wallet or loyalty account in good standing. As one speaker shared, these “clean” accounts are worth thousands to fraudsters, and they can be acquired cheaply on the dark web. With access to these accounts, fraudsters can make numerous purchases, gain access to PII and in some cases even create new fraudulent accounts.
AI and behavioral analytics will be a critical tool for preventing these instances of fraud moving forward. Fraudsters often learn from one another, so patterns will likely emerge. The industry believes AI can be leveraged to identify recurring behavioral patterns across verified accounts to flag potentially fraudulent activity. Keystrokes, mouse gestures and typical spending patterns are just a few examples of what can be analyzed with the help of AI.
U.S. Payments Forum Priorities:
The U.S. Payments Forum’s primary focus is to provide a platform for solving cross-industry challenges and promoting innovation. This is achieved through collaborative discussion, networking events and educational resources. During the Forum’s member meeting, stakeholders identified key opportunities for improvement and growth within the payments landscape.
PAR use cases
Payment Account Reference (PAR) is a non-financial reference assigned to each unique PAN and used to link a payment account represented by that PAN to its affiliated payment tokens. This 29-character identification number can be used in place of sensitive consumer identification fields and transmitted across the payments ecosystem. Although it is not new, there has been renewed interest across the payments landscape. The Forum is currently exploring potential use cases for PAR and its value as a fraud prevention tool.
From a global and domestic payment network perspective, PAR is gaining relevance with regard to loyalty programs. A PAR can be used to re-establish an effective payment-card-linked loyalty program and preserve simplified recognition of customers. It can also allow card brands to better serve existing customers by providing some insight into their card portfolio. The Forum is also exploring PAR as part of compelling evidence for fraud mitigation and reconciliation.
The Forum has numerous other projects currently underway that will benefit stakeholders throughout the payments ecosystem, including resources on:
SRC (Click-to-Pay) demand, enrollment and benefits
POS Use Acceptance Testing (UAT) considerations
mPOS and Tap to Mobile solutions
ODCVM and the U.S. Common Debit AID
Real-time payments with mobile
Connected Car and Contextual Payments
Resource Recap
The U.S. Payments Forum has recently published the following resources:
Device Authentication and Consumer Verification Techniques for Mobile In-App and Remote Payments: a white paper providing the industry with a coordinated, in-depth reference point to establish best practices for the implementation of mobile-initiated ecommerce/CNP fraud reduction techniques and tools.
PINless Debit Processing: a white paper which seeks to streamline the implementation process by identifying example transaction flows for EMV PINless debit processing, defining key terms related to PINless debit and providing implementation guidance for the U.S. market.
Customer Messaging for Transit Open Payments: a webinar designed to help listeners gain a deeper understanding of how transit open payments work and learn messaging strategies for educating commuters and bolstering the adoption of these payment systems.
Fraud Mitigation Techniques webpage: a compilation of definitions, use cases and industry resources designed to help stakeholders navigate fraud mitigation
Organizations, associations, government agencies and individuals interested in participating in upcoming Forum projects and initiatives can visit the Secure Technology Alliance’s website to learn how to become a member. By joining the Secure Technology Alliance, members will have access to activities within the U.S. Payments Forum and additional Alliance affiliated organizations.
About the Secure Technology Alliance
The Secure Technology Alliance is the digital security industry’s premier association. Through its U.S. Payments Forum, Identity and Access Forum and its collaborative working groups, the Alliance fosters open dialogue among industry stakeholders to explore and develop secure technology innovations in the payments, identity and access markets. By collaborating on education and guidance, the Alliance helps enable efficient, timely and effective implementation of large-scale, disruptive technologies. For more information, please visit https://www.securetechalliance.org.
About the U.S. Payments Forum
The U.S. Payments Forum is a cross-industry body that brings stakeholders together on neutral ground to enable efficient, timely and effective implementation of emerging and existing payment technologies. This is achieved through education, guidance and alternative paths to adoption. The Forum is the only non-profit organization whose membership includes the whole payments ecosystem, ensuring that all stakeholders have the opportunity to coordinate, cooperate on and have a voice in the future of the U.S. payments industry. The organization operates within the Secure Technology Alliance, an association that encompasses all aspects of secure digital technologies.