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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June 1, 2020
My Dog the Cybercriminal
As I write, my dog Coco gazes at me soulfully in a bid to wrangle a bite of my peanut butter sandwich or, even better, the whole sandwich. This cute yet parasitical behavior is typical. In fact, after some weeks of close association, I have come to realize that Coco exhibits not only the skills but also the personality traits of a cybercriminal:
- She tracks my every move and knows when she's most likely to get a treat, just as scammers prepare for phishing attacks by learning about a business's vendors, billing systems, and "even the CEO's style of communication ."
- She leaps at opportunities—butter on a counter, an open dishwasher—just as scammers are leaping at the chance to steal Economic Impact Payments, as Take On Payments reported in early May.
- She balances work and reward. Coco knows the difference between kibble and mozzarella cheese and differentiates her efforts accordingly. In trainer lingo, the mozzarella is a "high-value treat," analogous to the personal information a criminal might be able to obtain via health care and Medicare fraud.
- She repeats successful tactics, like counter surfing. Similarly, perpetrators of the "grandparent scam" know that what worked with imaginary bachelor parties in 2019 will work with imaginary emergency hospitalizations in 2020.
- She's persistent. Again and again, she noses my hand away from my keyboard. Eventually, a treat or walk will ensue. Again and again, scammers email fraudulent COVID-19 cures and investment opportunities in the hope of eventual success.
- She adapts. How can she get the treat? Sit? Lie down? Roll over? Sit again? Criminal enterprises continually experiment and adjust, for example, by changing the threat of shut-off in the "classic utility scam" to an offering of discounts on utility bills.
- She's adorable. Every dog is, but trust me, Coco is especially adorable, just like the photo in a phishing email posing as an appeal from a worthy charity .
- She is utterly unconcerned with the needs and preferences of others: the criminal mind at work.
No doggy day care. No walker. Me and Coco, 24/7. Did I mention that she's adorable?
It you sight any of these doggy behaviors, you can report coronavirus-related complaints to the Justice Department National Center for Disaster Fraud.
May 26, 2020
Some Seek Peace of Mind with Contactless
The COVID-19 pandemic has created a keen awareness of the need for enhancing personal practices to prevent the spread of the virus. The CDC has encouraged social distancing, face-mask wearing, frequent hand washing and sanitizing, and daily surface cleaning and disinfecting. When it comes to people buying things in person, it is that last guideline that has sparked widespread discussion about whether one type of payment method is safer than another.
Some stakeholders have been promoting contactless transactions as the most hygienic method of in-person payment. The consumer can perform such transactions with a minimal amount of contact with a payment terminal, either through a mobile pay wallet application or a contactless payment card—as long as the merchant has enabled the payment terminals with near-field communications technology. This post will focus on mobile contactless payments that began in the United States in late 2014, with the introduction of the Apple Pay digital wallet, followed shortly by the Google and Samsung pay wallets. Thus far, consumer use of mobile digital wallets has been anemic. Some research has found that mobile payments represented only 3 percent of U.S. retail sales in 2019.
Financial inclusion is a particular concern for the Atlanta Fed. Past Take On Payments posts have discussed the state of un- and underbanked households in the United States and efforts to make financial services more readily available and affordable. The mobile phone—in particular, the smartphone—is a key part of inclusion. Smartphones allow access to secure, low-cost banking services. Given the recent promotion of mobile contactless payments, here are some recent statistics from the Pew Research Center on mobile phone ownership that I want to share with you.
According to a survey conducted in early 2019, 96 percent of U.S. adults had a mobile phone, and 81 percent of that group had a smartphone. As you might expect, younger adults were more likely to own a smartphone than older adults.
Specifically related to the financial inclusion issue is the disparity in smartphone ownership based on household income. Ownership among households earning less than $30,000 annually was only 71 percent compared to 90-plus percent for those with more than $50,000 in annual income. Type of community also made a difference. Adults in rural areas had an ownership level of 71 percent compared to 83 percent for those in suburban and urban areas.
These statistics are a strong reminder of the message my colleague Claire Greene gave in a recent post that I am not the "average" consumer. Similarly, just because I have a smartphone and you have one, we can't make assumptions about ubiquitous smartphone ownership. Consequently, some digital payment services may lock out people who use cash. As the industry moves forward with enhanced and sometimes preferred payment options, we should remember Atlanta Fed president Raphael Bostic's suggestion that financial inclusion should mean that the consumer should be able to pay how they want to pay.
May 18, 2020
Why the Decline in Average Value of Remote General-Purpose Card Payments?
The COVID-19 pandemic is affecting many aspects of our lives: interactions with friends and family, jobs, shopping habits—grocery shopping in particular. Lots of us have been speculating about those groceries, making predictions about ecommerce growth in the long run and also about how the composition of ecommerce sales could change.
Data from the Federal Reserve Payments Study give us a benchmark for thinking about remote card payments during and after the pandemic. For example, the average dollar value of remote card payments can suggest ways that consumer behavior has changed in recent years. And going forward, future data collection could give insights into behavior during the health crisis.
The average value of general-purpose card payments conducted remotely fell faster than the average value of in-person general-purpose card payments in the most recent three-year period for which data is available, 2015 to 2108. Remote payments by general-purpose credit, debit, or prepaid cards averaged $98 in 2018, compared to $121 in 2015. The chart shows the drop in average values.
What's going on here? Various factors likely play into this change in average dollar value. Here are three.
First, more and more people are shopping and paying bills remotely, which includes online. This measurement—"How many people make card payments remotely?"—is broad. It could be that people on the margin, those who have recently started making online payments, are different from others. Maybe they are older. Less card-centric. Less wealthy. Maybe they still are most comfortable writing paper checks for their biggest bills. These individual characteristics could reduce the average dollar value of their online payments compared to others.
Second, people who shop and pay bills remotely are doing it more frequently. This measurement—"How much are remote payers paying?"—is deep. For example, compared to the number of payments you made online during a typical month in 2015, think about the number you made in 2018. Are you making more? Are you paying online more intensively?
Third, people already making remote payments could be more willing to make what my colleague Jessica Washington calls "micropayments" with cards. When shopping online, do you buy a toothbrush one day, a pack of gum the next, and a candy bar on day three? Do you buy digital goods: a music download, the in-app purchase of virtual goods, access behind a news paywall? These tiny payments could be pushing down the average dollar value.
All three of these factors could be in flux right now. They could be changing due to the mix of things we are buying, our income and employment status, changes in household members, payees' willingness to accept different payment methods, etc. etc. etc. This bigger picture is important for payments choice.
Going forward, our short-term reactions to the pandemic—buying groceries online, for example—may or may not equal long-term change in remote purchasing behavior. The Federal Reserve Payments Study continues to collect data related to these behaviors. More data about payments trends is available in the 2019 report of the Federal Reserve Payments Study.
May 11, 2020
Seeing the Future through a Morning with Fifth Graders
Early in March, I spent the morning with four fifth-grade classes at an elementary school as part of their college and career day. My son had asked me not to talk about writing blogs and papers but rather to talk about "cool" things in payments and fraud. So that's exactly what I did with each class for 15 minutes, leaving the remaining 10 minutes of the time for questions or discussion. Looking back, I wish I had allotted more time for the final portion because these fifth graders were as engaging an audience as I have ever had. I left the school with two thoughts that I think the payments industry could find valuable, so thought it would be worthy of sharing with our readers today.
First, I was surprised by the general level of awareness that the fifth graders exhibited around online safety. Many had stories to share of both successful and unsuccessful attempts of their relatives being scammed online or through the phone. Others shared stories of their parents' bank accounts or cards being compromised. Several students talked about how they search safely on the internet. I was probably naïve going into the day about their level of knowledge and awareness seeing that these kids have grown up with this technology a part of their daily lives, but call me impressed that many of them are well aware of dangers lurking and eager to learn how to better protect themselves.
Second, I was blown away by the kids' access to and use of smart-assistant speakers. I have heard a number of people project that speech recognition is the future of commerce and if the kids I met with are any indication of their generation, then I think I can get on board with those projections. In an unscientific survey, I would estimate that nearly 90 percent of the kids had access to at least one smart-assistant speaker, and amazingly 75 percent had one in their room. Without naming any names, one company dominated this space for the group. While the "phone" aspect of the mobile phone for many kids is foreign as it's primarily used as a camera or texting device, it seems that they actually are comfortable having a conversation with a speaker.
As I walked back to my car, my mind was filled with thoughts about the future. On the one hand, I was smiling because this young generation is going to be better prepared in understanding the risks of the cyberworld that will continue to play a more prominent role in our lives. People will always be vulnerable but I left with confidence that our young people are aware that there are bad people lurking behind computer screens. On the other hand, my mind was spinning because I predict that commerce through a smart-assistant speaker will be as common a practice for them as dipping a card is for me. How different that world will look from where we are today!
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