Take On Payments, a blog sponsored by the Retail Payments Risk Forum of the Federal Reserve Bank of Atlanta, is intended to foster dialogue on emerging risks in retail payment systems and enhance collaborative efforts to improve risk detection and mitigation. We encourage your active participation in Take on Payments and look forward to collaborating with you.
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January 6, 2020
Phone Payment Bingo
Let's play a game of mobile payments bingo. Say yes to all five and you win!
In the last three days, did you use your mobile phone to:
Do your answers to these questions give you the idea that you are using your phone more and more to pay? If so, you're in line with the latest results from the Diary of Consumer Payment Choice.
As you can see below, using a phone to pay—especially to pay bills and other people—has increased as a share of payments in recent years. More payments are being made with phones.
- In October 2016, 11 percent of bill payments were made via mobile phone; in 2018, 18 percent.
- In October 2016, 5 percent of payments to another person were made via mobile phone, in 2018, 17 percent.
The Diary of Consumer Payment Choice records the daily payments behavior of U.S. consumers 18 and older. Consumers report not only whether or not they used a mobile phone but also if they used a computer or tablet—either remotely or in person—or snail mail to pay. They record the dollar amount of the payment, the payment instrument used (for example, cash, debit card), and the purpose or payee (utilities, grocery store). These consumer behavior data can be analyzed in the context of household income and demographic attributes.
You can read the full report online and download the data for analysis.
By the way, I couldn't complete my bingo card. My answers:
- Yes, 34-pound bag of dog food (using the web browser on my phone).
- Yes, coffee from my local barista (using a QR code).
- Yes, see my answers #2 and #3.
How about you? Did you win?
December 9, 2019
Payments in Review: A Webinar
Whether you are out dipping your payment card at a store, waiting in line behind a check writer, trying to look like you're working while you shop online for last-minute gifts using your digital wallet, or just always looking for more information about payments, grab your headphones for the last Talk About Payments webinar of 2019. On December 19, the Retail Payments Risk Forum team continues its tradition of discussing what we consider to be the significant payments events and issues of the year. We invite financial institutions, retailers, payments processors, law enforcement officials, academics, and other payments system stakeholders to participate.
The webinar 2019: Payments in Review features a live roundtable discussion with payments risk experts Doug King, Dave Lott, and Jessica Washington. You will be able to see how your reflections on 2019 payment events compare to the Risk Forum's perspectives and reflections on the year. To liven up the party, polling questions and real-time questions and comments will let you engage with the speakers.
Last year ended with increasing momentum in technology research and development—distributed ledger technology, contactless, machine learning—which continued into 2019, mixed with the some of the largest fintech mergers and acquisitions the industry has seen. Faster payments started taking new forms with added interest from industry stakeholders. The fight against payments fraud also changed shape during 2019, with some new collaborations and methods worth mentioning. Fintech is surely to be discussed along with other topics such as the proliferation of digital payment methods versus the state of cash.
Find out what you might need to consider as you promote safer payments innovation in the coming year.
The webinar will happen on Thursday, December 19, from 1 to 2 p.m. (ET). Participation is free, but you must register in advance. Once you register, you will receive a confirmation email with the log-in and toll-free call-in information. A recording of the webinar will be available to all registered participants in various formats within a couple of weeks after the event.
We look forward to you joining us on December 19 and sharing your perspectives on the payment events that took place in 2019.
October 7, 2019
Payments Webinar October 10: Cash in the 21st Century
As I write this, I am drinking my morning cup of joe. For me, that means half caf/half decaf, then cut in half with microwaved nonfat milk. (Slurp.)
Day in, day out, I want it just that way. No sugar for me. Nonfat milk, not 2 percent. Black only when I open the door to an empty fridge.
Odds are, you're like me when it comes to coffee and payments. Your habits—and mine—are sticky. We've found something that works for us and—day in, day out—we take our coffees and choose to pay the same way. These are our preferences.
What happens when we change our minds about what we prefer? Shaun O'Brien at the San Francisco Fed has been looking into the relationship between our stated preferences for making in-person purchases and the payment instruments we use in the moment.
In an economic model that incorporates consumer demographics, household income, transaction characteristics, and the payee, Shaun finds that, over time, a change in stated preference eventually results in an increased probability of using a newly preferred payment instrument.
Note that word eventually.
For example, say I stated a preference for cash in 2016 and then switched to a stated overall preference for debit card in 2017. It might not be until 2018 that you would start to see a small change in my mix of payments, with relatively less use of cash and more of debit. Like a coffee habit, my preferred payments habit is slow to change. (Keep in mind that, as I have blogged previously, preference is one of a number of factors that are important, including, for example, what a payee is willing to accept.)
Whatever your morning beverage, I hope you'll join Shaun, the Atlanta Fed's Oz Shy, and me for the next Talk About Payments webinar, October 10, 2019.
We'll look at current data from the Survey and Diary of Consumer Payment Choice and new research—including Shaun's findings reported above—to investigate the 5 Ws and also the How of cash:
- WHAT is happening with cash?
- WHO uses cash?
- WHERE do consumers use cash?
- WHEN do consumers use cash?
- WHAT might cause cash users to switch to another payment method?
- HOW do consumers get cash?
This webinar is open to the public but you must register in advance to participate. (Registration is free.) You can register online. Once registered, you will receive a confirmation email with login and call-in information.
Date: Thursday, October 10, 2019
Time: 1–2 p.m. (ET)
April 1, 2019
Contactless Cards: The Future King of Payments?
Just over two years ago, my colleague Doug King penned a post lamenting the lack of dual interface, or "contactless," chip payment cards in the United States. In addition to having the familiar embedded chip, a dual interface card contains a hidden antenna that allows the holder to tap the card on or wave it near the POS terminal. This is the same technology—near field communications (NFC)—that various pay wallets inside mobile devices use.
Doug is now doing his daily fitness runs with a bigger smile on his face as the indicators appear more and more promising that 2019 will be the year of the contactless card. Large issuers have been announcing plans to distribute dual interface cards either in mass reissues or as a cardholder's current card expires. Earlier this year, some of the global brand networks launched advertising campaigns to make customers aware of the convenience that contactless cards offer.
So why have U.S. issuers not moved on this idea before now? I think there have been several reasons. First, for the last several years, financial institutions have focused a lot of their resources on chip card migration. Contactless cards will create an additional expense for issuers and many of them wanted to let the market mature as it has done in a number of other countries. They were also concerned about the failure of contactless card programs that some of the large FIs introduced in the early 2000s—most merchants lacked terminals capable of handling the technology.
The EMV chip migration solved much of the merchant terminal acceptance problem as the vast majority of POS terminals upgraded to support EMV chips can also support contactless cards. (While a terminal may have the ability to support the technology, the merchant has to enable that support.) Visa claims that as of mid-2018, half of POS transactions in the United States were occurring at terminals that were contactless-enabled. Another factor favoring contactless transactions is the plan by major U.S. mass transit agencies to begin accepting contactless payment cards. According to the American Public Transportation Association's 2017 Ridership Report, there were 41 transit agencies in the United States with annual passenger trip volumes of over 20 million trips.
Given that consumer payments is largely a total sum environment, these developments have led me to ask myself and others what effect contactless cards will have on consumers' use of other payment forms—in particular, mobile payments. As my colleagues and I have written numerous times in this blog, mobile payments continue to struggle to obtain consumer adoption, despite earlier predictions that they would catch on quickly. There are some who believe that the convenience of ubiquity and fast transaction speed will favor the dual purpose card. Others think that the increased merchant acceptance of contactless will help push the mobile phone into becoming the primary payment form.
My personal perspective is that contactless cards will hinder the growth of in-person mobile payments. There are those who claim to leave their wallet at home and never their phone, and they will continue to be strong users of mobile payments. But the reality is that mobile payments are not accepted at all merchant locations, whereas payment cards are practically ubiquitous. While I am a frequent user of mobile payments, simply waving or tapping a card appeals to me. It's much more convenient than having to open the pay application on my phone, sign on, and then authorize the transaction.
Do you believe the adoption of contactless cards by consumers and merchants will be as successful as it was for EMV chip cards? And do you think that contactless cards will help or hinder the growth of mobile payments? Let us hear from you.
By David Lott, a payments risk expert in the Retail Payments Risk Forum at the Atlanta Fed
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