Payments: Biggest Stories of 2017, Plus 2018 Predictions
In the payments world, 2017 was a year of reckoning. It was a year of revelation. And it was a year of reimagining. So as we prepare to bid farewell to 2017, here's a look back on a few of the year's biggest payments stories – and some expert predictions about what 2018 could bring.
6. Booming voice.
Voice technology had many credit unions dialing in during 2017 to fight account takeovers and call center fraud. “Phoneprinting,” which listens in on calls and helps decide whether they may be fraudulent, became a thing. Enrichment Federal Credit Union became the first credit union to let members move money, make payments and get account information using voice commands via Amazon's Alexa system
. Enrichment, which is based in Oak Ridge, Tenn., has $456 million in assets and about 42,000 members.
5. Blockchain gang.
This technology, most often associated with Bitcoin, took huge steps into the credit union mainstream during 2017. Research organization CU Ledger debuted prototype blockchain-like technology that could help verify identities and clamp down on fraud at credit union call centers. NAFCU became the first U.S. financial trade association to join Hyperledger – an open-source blockchain effort aimed at streamlining settlement processes, improving liquidity and adding transparency.
4. Futuristic ATMs.
Diebold Nixdorf and Samsung SDS America revealed technology that could soon allow credit union members to get money out of an ATM using only their faces. Utah-based Prosperity Investments, which owns Joyful ATM, partnered with Provision Interactive Technologies to put 3-D holographic displays into as many as 48,000 ATMs
throughout the United States and 68 other countries. Diebold also unveiled a prototype point-of-sale terminal that does away with mag-stripe readers and is fewer than 10 inches wide.
3. Getting real (time).
Person-to-person and real-time payments grappled with the future. In the fall, data showed only about 12% of financial institutions with mobile apps offered P2P payments in their apps, and just 1.2% of active users actually made P2P payments. But the technology marched on nonetheless. Zelle launched. Same-day ACH rolled out. And Apple Pay Cash happened, going head-to-head with Zelle, Venmo, Dwolla, Square and other players in the mushrooming fintech world. Square and Varo Money made even more waves by applying for bank charters.
2. Mobile domination.
The fintech world focused heavily on the smartphone, and a variety of mobile wallet options and “pays” kept growing, though Apple remained a frontrunner. Juniper Research predicted that the number of Apple Pay, Samsung Pay and Android Pay users would top 150 million by the end of 2017. Mobile's recognition as a powerful driver of interchange, which is now bigger than overdraft revenue, became unavoidable.
1. Fraud fury.
It was on everybody's mind all year, and for good reason: There was a huge increase in data breaches in 201
7, possibly a record year, and experts predicted that card-not-present fraud alone will cost merchants $71 billion over the next five years. Shimmers started appearing at credit union ATMs, and members became wary of banking apps that don't have biometric authentication. Even loyalty reward programs weren't safe. And then, of course, there was Equifax.
What Will 2018 Bring?
Here's what some payments experts think could happen in the credit union world next year.
1. More fraud. Many people already think fraud will get worse, but CSCU Director of Payments Strategy Lou Grilli said he’ll especially watch for the effects of the Equifax breach to appear in 2018. “What fraudsters are waiting for is the guard to be let down, the one-year fraud alerts to expire,” he explained. “I believe that 2018 will be the year that we will see record fraud – and not just fraud in the form of cards that are stolen from the point-of-sale terminal, but fraud as in account takeover.”
That could in turn make biometrics, two-factor authentication and facial and voice recognition even bigger in 2018, he said.
“I have a wish – unfortunately not a prediction, but it's a wish – that we would stop using Social Security numbers as the final form of authentication or verification of a person. Because they’re all out in the wild now,” he said.
2. P2P and cardless payments finally blossom (or not).
Adoption has been something of an uphill effort in 2017, but PSCU President/CEO Chuck Fagan said things are poised to change next year.
“I think 2018 may be the time where that generation that has grown up on Venmo gets others interested,” he said. “All of the new point-of-sale equipment that has been shipped over the last several years has that capability embedded in it; so if the merchants turn that on, I think we’re going to see a real jump in the volume of transactions done on mobile phones at the point of sale. A lot of contactless and tap-and-go type transactions.”
George Hofheimer, who is chief knowledge officer at Filene Research Institute, said customers will still need a compelling use case for any new product or feature. He also expects some fallout in the market.
“There are so many cool, new technologies out there. The question is how sustainable are they, how much will they truly change behavior and how much will they truly change the business model? My sense is that with all of the new innovations, there isn't this tremendous leap in value, especially from a consumer angle, to change behaviors,” he said.
3. Millennial obsession wanes – but pays off.
Credit unions and just about every other industry in America were thirsty for millennial customers in the last year. But a better job market and the passage of time means millennials are starting to look like many other regular credit union members, with jobs, mortgages, cars, families and other grown-up concerns, Grilli said. That could dramatically change credit union marketing efforts in 2018 because millennials are more open to messages about specific products and services rather than general appeals to think about the future, he noted.
“The focus of marketing to millennials changes to more mainstream – the same type of information is being targeted to the generation above them,” he explained.
In 2018, a new mission will be to woo the generation after the millennials, he said. “Now it's how do we target Gen Z, who's between the ages of 14 and 21.” Grilli noted. “But the millennials … they’re going to now become kind of more profitable. All those years of marketing to them, now we’ll start to see benefits.”