rocky top this! handoutrocky top this.pdffraudsters will have plenty of pos opportunities over a 4...

Rocky Top This!The 2015 Fin-Tech-Mobi-Pay Report

1

Lee Wetherington, AAPDirector of Strategic Insight

Jack Henry & Associates, Inc.®

@leewetherington

© 2015 Jack Henry & Associates, Inc. All Rights Reserved

Lee WetheringtonDirector of Strategic Insight

• Develops actionable insight and strategy

for the financial services industry at large

• Delivers keynotes nationwide

• Technology Faculty Chair for several

graduate schools of banking

• Authors articles for industry trades

• Degrees in Economics and English

from Duke University

• Accredited ACH Professional (AAP)

Presenter

@leewetherington


Agenda

• Here & Now

• State of the Industry: Where We Are

• 2015 Fin-Tech-Mobi-Pay Freaks

• Loans; Mobile; Fraud; Authentication; Brains; URLs

• How to Get Your Freak On

• 5 Steps Forward for Banks


Branches are dying! Long live the branch!


“This is a stupid debate.”Ron Shevlin

Author, Smarter Bank


Branches: The Long View (Looking Back)

SOURCE: FDIC: “Brick-and-Mortar Banking Remains Prevalent in an

Increasingly Virtual World”; FDIC Quarterly; 2015, Volume 9, No. 1




Recent Branch Cycles: 1989-2014


Branch Density: Industry Comparisons

SOURCE:Source: US Department of Commerce, FDIC, Datamonitor, Celent analysis

http://bankingblog.celent.com/wp-content/uploads/sites/3/2015/02/Est-per-Million-Feb-15.jpg

Branch transaction activity declined 45% since 1992.

Check use declined 68% since 2003.

Top 50 U.S. banks have reduced branch networks.

…but branch density hasn’t changed significantly.


Branch Density in Decline Since ‘89



CONCLUSION: Branch density hasn’t changed

significantly, so technology is not impacting branching.


‘The FDIC is looking at lagging rather than

leading indicators of branch health.’ –Brett King

‘The FDIC doesn’t measure the average number of

visits to a branch per customer per year.’ –Brett King


Tipping Point:The digital channel reached parity with the physical

branch in 2014, with 49% of applicants opening

checking accounts online, or on a smartphone or tablet.

SOURCE: Javelin Strategy & Research; “Digital Account Opening Reaches Tipping Point”; February 2015


Tipping Point: Online Account Opening

SO

UR

CE

: Javelin

Str

ate

gy &

Researc

h;

“Dig

ital A

ccount

Openin

g R

eaches T

ippin

g P

oin

t”; F

ebru

ary

2015

Q47. Did you apply to open any of the following accounts in the past 12 months? Please choose the channel you used for the most recent application for each account type.Q51. If you were to apply to open the following accounts today, which channel would you prefer to use for each application? Please select one channel for each of the banking products.

September 2014; n = varies: 309-842Base: All consumers who opened each account type, past 12 months;

All consumers who plan to open each account type, next 12 months© 2015 Javelin Strategy & Research

49%

77%

70%

80%

Checking account Credit card

Opened account digitally in 2014 Plan to open account digitally in 2015

21-point jump

Accounts Opened Digitally in 2014 vs. Intent in 2015 (Checking vs. Credit Cards)


Tipping Point: Online Account Opening

SO

UR

CE

: Javelin

Str

ate

gy &

Researc

h;

“Dig

ital A

ccount

Openin

g R

eaches T

ippin

g P

oin

t”; F

ebru

ary

2015

Channels Used to Open Deposit, Loan, and Investment Accounts (Past 12 Months)

Q47. Did you apply to open any of the following accounts in the past 12 months? Please choose the channel you used for the most recent application for each account type.

September 2014; n = varies: 368-842Base: All consumers who opened each account type, past 12 months

© 2015 Javelin Strategy & Research

49% 52%58% 59%

66% 69% 70% 72%77%

51% 48%42% 41%

34% 31% 30% 28%23%

0%

10%

20%

30%

40%

50%

60%

70%

80%

90%

100%

Checking Savings Auto loan CD Mortgage Retirement Brokerage Ed. Acct. Credit card

Pe

rce

nta

ge o

f ac

cou

nts

op

en

ed

Digital Branch

19

Why are banks spending more on consumer tech?

20

…and on mobile banking?

21

Because digital banking is exploding.


…and why is

digital exploding?


23

How do you roll?


“Good self-service beats

great personal service.”--David Peterson, i7Strategies


1. Consumers access finances across multiple devices

and expect consistent features and data

2. Banks now choose solutions that deliver best

consumer self-service and unified support

3. Consumer experience drives everything going forward

25

State of the Industry


26

Consumers expect consistency across devices


27

Sequential device use requires cross-channel

Digital CIF Digital CIF


• The modern web addresses the full spectrum of

devices, including those that are not iOS and Android.

• Examples:

• Kindle Fire

• Samsung NOOK

• Windows Surface

• Windows Phones

• Chromebook

• Sony Playstation4

• Xbox One

• Nintendo Wii U

28

Consumers access their finances everywhere


Evolution of Digital Banking

Multi-Channel

Cross-Channel

Omni-Channel

29

32

80% of online adults own a smartphone


Gen Y Income > Gen X Income by 2020

Personal income by demographic segment (2010-2025)

SOURCE: Javelin Strategy & Research; “The Three Costliest Myths About Gen Y”; May 2014

35

Marketshare of Total Assets: Banks & CUs


Loan Freaks


The Skinny on Small-Biz Lending

• “$300 billion small-business lending market has an

estimated unmet demand of around $80 billion to

$120 billion because traditional lenders are ignoring the

sector.”

• “Traditional lenders are reluctant to lend to small

businesses because of the difficulty in assessing their

credit worthiness in a uniform manner.”

• “50% of FI customers rejected for a loan never

return to the FI.”

SOURCE: http://www.valuewalk.com/2015/01/ondeck-capital-ondk-btig/


Small Biz Loan Approval Rates

Source: National Federation for Independent Businesses (NFIB). NFIB recognizes the following entities as the resources for data contained in their charts: Small Business Lending Index, Biz2Credit, January 2014; 2013CF The Crowdfunding Industry Report, Massolution; “Retail Businesses That Try Crowdfunding Face Some Skepticism,” New York Times, February 2014; “Can’t Get a Bank Loan? The Alternatives Are Expanding,” New York Times, March 2014


New Wave of Alternative Lenders

• Small Business Alternative Lenders

• Behalf https://beta.behalf.com/

• Fundbox https://fundbox.com/

• Loanz https://www.loanz.com/

• Consumer Alternative Lenders

• Lenda https://www.lenda.com/

• Vouch https://vouch.com/

• Earnest https://www.meetearnest.com/

https://beta.behalf.com/

https://fundbox.com/

https://www.loanz.com/

https://www.lenda.com/

https://vouch.com/

https://www.meetearnest.com/


Harness the Alternative Lender Marketplace?

FI


Other Big News


Mobile Freaks

A story about me and my dongle…


49


50

Apple Pay vs. LoopPay: Merchant Acceptance


51

Apple Pay vs. LoopPay: Card Eligibility


52

Apple Pay vs. LoopPay: Smartphone Coverage


54


Fraud Freaks


Somethin’ ain’t right…


But here’s the

good news…


Click to edit Master title style

Identity Fraud: Fewer Victims, Less Losses

Overall Measures of the Impact of Identity Fraud, 2009–2014

59

SOURCE: Javelin Strategy & Research 2015 Identity Fraud Report; March 2015


Things You Should Know

• One in four consumers received data breach

notifications in 2014, but a smaller proportion became

fraud victims than in 2013.

• Number of card fraud victims among notified breach

victims increased by 13%, claiming 7.2M victims in

2014 compared to 6.36M in 2013.

• Despite the onslaught of breaches, 2014 was a banner

year for improvements in fraud prevention,

detection, and resolution.

60SOURCE: Javelin Strategy & Research 2015 Identity Fraud Report; March 2015


U.S. accounts for 25%

of global card volume

and 50% of card fraud…

because we rely on

magnetic stripes and

signatures in cursive.


62 SOURCE: Federal Reserve Payments Study; Summary of Findings; Dave Beck; 05/22/14


63 SOURCE: Federal Reserve Payments Study; Summary of Findings; Dave Beck; 05/22/14


64

Post-EMV Credit Card Fraud Projections


65

Post-EMV Card-Not-Present Fraud Explodes


CNP Fraud Forecast: 2018

CNP FRAUD WILL BE

POS CARD FRAUD BY

2018

CNP FRAUD WILL HAVE A CONSISTENT YET DRAMATIC GROWTH

4X

SOURCE: Javelin Strategy & Research; “Fixing CNP Fraud: Solutions for a Pre- and Post-EMV U.S. Market; October 2014


CNP Forecast: 4 Things to Know

CNP FRAUD VOLUMES HAVE GROWN IN TANDEM WITH LEGITIMATE VOLUME IN BOTH THE US AND OVERSEAS.

US CNP FRAUD IS ALREADY TREMENDOUS (LIKE TURNING A BATTLESHIP)

RISK-BASED AUTHENTICATION AND IMPROVED DATA ANALYTICS WILL KEEP THE SHORT-TERM LOSSES FROM GETTING OUT OF HAND.

FRAUDSTERS WILL HAVE PLENTY OF POS OPPORTUNITIES OVER A

4 YEAR PERIOD, MITIGATING ANY CHANCE OF AN OVERNIGHT SHIFT TO CNP.



EMV: What We’ve Learned from Others



EMV: Transitional Fraud Targets

WHILE BIG MERCHANTS ARE WELL ON THEIR WAY, FRAUDSTERS WILL STILL HAVE TARGETS.

SMALL MERCHANTS AND UNATTENDED TERMINALS WILL REMAIN VULNERABLE

ATMSSMALL MERCHANTS

GAS PUMPS


SMALL ISSUERS


71


72

odds: 1/3 odds: 1/3 odds: 1/3


73

odds: 1/3 odds: 2/3


74

odds: 1/3 odds: 2/3


So, should you

choose door #3?


76

odds: 1/3 odds: 2/3


During the EMV transition,

the probability of fraud will

concentrate among the

last to migrate.


78

odds: 1/3 odds: 1/3 odds: 1/3

Counterfeit Card Fraud Probability


79

odds: 0 odds: 1/2 odds: 1/2



80

odds: 0 odds: 0 odds: 100%



A Holistic Approach: Fighting CNP Fraud

81

ANALYTICS

BEHAVIORMETRICS

CUSTOMER- DEFINED CONTROLS

AUTHENTICATION

DRIVING DOWN CNP FRAUD WILL REQUIRE A COMPREHENSIVE STRATEGY



82

Customer-Defined Controls for Cards


83


Detect Breaches Early with Big Data

85


• Transitional concentrations of fraud on weakest links

and last to the party

• Debit Cards

• Smaller Merchants

• Get ready: tokenization ain’t free (see MasterCard)

• Signatures are meaningless…and we’re transitioning to,

you guessed it, Chip & Signature EMV

• The learning curve for consumers

• Dip and leave vs. dip and yank (gas pump)

86

EMV Challenges


Authentication

Freaks


Signatures are worthless!


POS Pad Signatures: Seriously?

89


So, guess how

we’re securing

card payments

next year?!


EMV Chip & Quill!!!

91

+


User Names & Passwords Are Done



Half of Consumers Recycle Passwords

Number of Accounts for Which Consumers Use the Same Password

SO

UR

CE

: Ja

ve

lin S

tra

teg

y &

Rese

arc

h 2

01

4 Id

en

tity

Fra

ud

Rep

ort

; F

eb

rua

ry 2

01

4

5%

10%

7%

5%

9%

14%

51%

0% 10% 20% 30% 40% 50% 60%

More than ten

Six through ten

Five

Four

Three

Two

One

Percent of consumersOctober 2013, n = 5,521

Base: Consumers with online accounts.© 2014 Javelin Strategy & ResearchQ61: For how many of your online accounts do you use the same password?



More Accounts, Fewer Passwords

Ratio of Passwords to Online Accounts Owned

0.78

0.50

0.35

0.00

0.10

0.20

0.30

0.40

0.50

0.60

0.70

0.80

0.90

1 to 10 online accounts 11 to 20 online accounts More than 20 online accounts

Nu

mb

er o

f p

assw

ord

s fo

r ea

ch a

cco

unt

ow

ned

October 2013, n varies 490 to 4,249Base: Consumers by number of online accounts owned.

© 2014 Javelin Strategy & Research

Q60: How many separate online accounts would you estimate currently belong to you?Q62: About how many separate passwords do you use to access your various internet accounts? --mean

SO

UR

CE

: Ja

ve

lin S

tra

teg

y &

Rese

arc

h 2

01

4 Id

en

tity

Fra

ud

Rep

ort

; F

eb

rua

ry 2

01

4


So, guess how

the new Visa

Checkout is

secured?!


96

Visa Checkout


When does requiring

a password diminish

security?


Behavior

Freaks

98


99


100


101


Freaky Freaks


Why are we so

distracted?


Neuro Science 101: 3 Questions

1. What organ in your body is the last to mature?

• A: The brain

2. When does that organ fully mature?

• A: Late 20’s, early 30’s

3. In what order does it mature?

• A: From the back to the front


Myelin


107

Generation Y


Gen Y Surpasses Gen X in Income by 2020

Personal income by demographic segment (2010-2025)

SOURCE: Javelin Strategy & Research; “The Three Costliest Myths About Gen Y”; May 2014


Gen Y Financial Concerns


Gen Y Financial Goals


Threat: Alternative Banking

SOURCE: Accenture


112

Gen Y Churn Risk is High


Gen Y Woes

• First to have lower standard of living than their

parents’ generation

• First to have higher student loan debt, poverty and

unemployment than their two immediate predecessor

generations had at the same age

• 60% “young Gen Yers” (21-26), and 50% of older Gen

Yers” (27-34) say they have an “impulse purchase”

problem.

• Nearly half of all Gen Y consumers looking to switch FIs

want their next FI to offer PFM tools

113

SOURCE: Pew Research; June 2014


So what’s the

answer to the

impulse problem?


115

Real-time

feedback

loops?


A third of US consumers

who have owned an

activity tracker stopped

using it within six months.Endeavour Partners, July 2014


So how to help

those immune to

feedback loops?

(because their brains aren’t fully mature yet)


Opt-outs and automation.


121

Automated savings?


Marketing

Freaks

123


Activity Based Marketing Marketing within the context

of an activity being performedby a customer or prospect.


126


Wearable

Freaks

127


129


URL Freaks


• ICANN opens “.bank” domains for registration

• Plus 2000 more: directory at https://gtldresult.icann.org

• fTLD Registry Services, LLC

• ICANN granted fTLD the right to operate .BANK on September 25, 2014 and facilitate secure/vetted registration of .bank domains

• .bank domains will help prevent redirects to fake bank websites, make it more difficult to spoof emails from a .bank website, and provide a higher level of encryption

• https://www.ftld.com/

132

.bank Domains Available: Get Ready to Grab!

SOURCE: http://thefinancialbrand.com/42264/aba-dot-bank-website-domains/

https://gtldresult.icann.org/

https://www.ftld.com/


• May 2015 (Sunrise Period)

• Banks that have registered trademarks should register with

ICANN’s Trademark Clearinghouse prior to May 1, 2015.

• If you own a registered trademark, you may register the

trademark with ICANN’s Trademark Clearinghouse and

apply for the .bank version of that domain name during the

Sunrise Period before general availability.

• June 2015 (General Availability)

• .bank domains will be available to the wider banking

community on June 1, 2015, following the Sunrise Period.

• For more info: http://www.aba.com/dotbank

133

What to Do When? .bank Domains


http://www.aba.com/dotbank


• .loan

• .loans

• .credit

• .pay

• .financial

• .creditcard

• .mortgage

• .insurance

• .money

• .cash

• .finance

• .banque

134

Other Domains On the Horizon



So, how should you

get your freak on?


5 Steps Forward: FIs Must…

1. Master their data, so that they can use it to…

2. Serve personalized, relevant ads for the bank’s products and services across all channels consistently and in context.

3. Expedite customer’s acquisition of bank’s products and services when they choose (without data re-entry).

4. Curate “partners” who may use bank’s ad engines to serve customers with relevant ads that can be one-clicked to acquire.

5. Earn ad fee income wearing a white hat.

136


Lee Wetherington, AAP

[email protected]

http://discover.profitstars.com/leewetherington

@leewetherington

http://www.linkedin.com/in/leewetherington

rocky top this! handoutrocky top this.pdffraudsters will have plenty of pos opportunities over a 4...

Documents