The PaymentsJournal Podcast The PaymentsJournal Podcast

Now that the Payment Card Industry Data Security Standard 4.0 has gone into effect, merchants have a year to conform to the 63 new or updated requirements. With many moving parts to the standard, some businesses may struggle to understand their compliance obligations. Simultaneously, they also don’t want to risk creating friction in the customer experience as they introduce the new security measures.







In a recent PaymentsJournal podcast, Sukanya Madhavan, Payments Chief Product and Technology Officer, at CSG Forte and Don Apgar, Director of Merchants Payment Practice for Javelin Strategy & Research, discussed the new rules. They examined the implications of the change and mapped out steps business owners can take to ease the shift to the new standard.





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Evergreen and Ongoing







One of the main things to know about PCI compliance is that it’s an evergreen and ongoing process. The purpose of the compliance program is to build a safety net for consumers to make sure they’re protected against bad actors. It also streamlines merchants’ card payments operations.







“The program is designed to ensure that customers have peace of mind when they provide their data to us,” Madhavan said. “It should be considered a continuous improvement process, where businesses look for innovative ways to solve the evolving challenges.”







In response to ongoing data breaches, the PCI standard mandates that merchants conduct quarterly internal and external vulnerability scans. Due to the sophisticated technology involved, it’s critical to have an individual who is well-versed in the systems to review these scans.







If merchants need help, quality security assessors (QSAs) and payments processors can give guidance. Often, the issues turn out to be basic security vulnerabilities involving passwords, such as password sharing or passwords that aren’t strong enough. There is help, however, if the issue is more complex.







“Merchants should know they can reach out to their processors, and there is a whole network of support,” Madhavan said. “It’s a partnership between the processor and the merchant to ensure that they are jointly taking care of the consumers’ data. Some processors have gone so far as to create instructional webinars, and there’s even a hotline.”







Not a Burden







Maintaining PCI compliance isn’t just about protecting customers.

Though most people still refer to prepaid products as gift cards, that term has almost become a misnomer in today’s payments industry. Prepaid cards do so much more than carry gifts—not just for consumers but also for issuers. Savvy businesses use them to drive more consumer spending while increasing brand loyalty. 







To that end, Fiserv recently worked with Javelin Strategy & Research on a survey of more than 500 buyers in the incentives area to find out what’s driving their purposes. The survey provided a jumping-off point for a recent PaymentsJournal podcast with Tom Niedbalski, Vice President, Global Sales and Partnerships at Fiserv, and Jordan Hirschfield, Director of Prepaid Advisory Services with Javelin Strategy & Research.





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The survey was conducted from the buyer’s perspective rather than that of the consumer. Javelin spoke with individuals who are buying incentives for purchasers of their brands, spanning a wide variety of companies, each with revenue of $20 million or more. Their responses provided an incisive look at what the benefits these buyers are seeking in an incentive. 







Seeing the Buyers’ Side







Javelin’s research has shown that loyalty programs and rebates are highly beneficial for building long-term relationships. This can have a significant impact on customer retention but can also improve the efficiency of onboarding new customers as well.  







“It’s expensive to acquire a new customer, but these incentives had a very material impact on lowering acquisition costs and subsequently on improving customer retention,” Hirschfield said. “With so many useful benefits of offering an incentive to a consumer, you can have a material impact on your bottom line.” 







Despite a reliance on physical gift cards, the shift to digital formats is going strong, consumers by and large prefer digital, and the research shows that the balance is continuing to shift that way.  On the buyer side, people are still purchasing incentives by going to physical stores and buying hundreds of gift cards. They don’t seem to realize they could be doing this through a relationship with a provider in an easier distribution model that can save on costs. 







On the consumer side as well, retail purchases remain popular. There’s an opportunity here to bring in a provider and transition those purchases to a digital distribution method. That can be easier for the buyer and can foster a positive ongoing relationship wi...

The banking industry infamously divides itself into silos to address different aspects of the business, which can be problematic for customers who think they are dealing with a single entity. This can be especially difficult during onboarding and security checks, when different silos at the bank ask repeatedly for credentials.







In a recent PaymentsJournal podcast, Sunil Madhu, founder and CEO of Instnt, a fraud loss indemnification that covers the entire customer lifecycle, and Jennifer Pitt, Senior Analyst of Fraud and Security at Javelin Strategy & Research, discussed the challenges of providing an easy, frictionless process for consumers while still safeguarding their privacy.





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Breaking Down Silos







Retail banks have separate organizational units handling checking accounts, savings accounts, loans, and mortgages. Each of these silos has its own requirements for risk and compliance, comprising a half-dozen or more tools, that are used to vet individuals who are signing up for a particular product or service. Each has its own know-your-customer (KYC) protocols for compliance purposes.







The consequence of this is that anyone who signs up for a checking account has to go through a whole series of checks pertaining to KYC and other types of fraud. If that person comes back six weeks later and applies for a loan, they may have to provide the same information again, even though they have a relationship with the bank.







Obviously, different products have different types of risk, which is one of the reasons for these operational silos. But customers don’t care about that. They perceive themselves as working with a single bank, whether they’re dealing with a mortgage or a small-business loan or a checking account.







So there are advantages to connecting the silos with the technology that allows each line of business to have its own the independent risk and compliance management requirements. That can give the bank’s divisions the flexibility they need to maintain independent control while simplifying the user experience by giving customers a reusable, verifiable credential.







“We get a lot of reports that consumers are not happy with onboarding processes,” Pitt said. “They always say, ‘I thought I already gave you my information. Why do I keep having to give you this information?’ Having one place where that information is kept on the consumer’s device, and the consumer can dictate how they give that information.

As awareness of the dangers of identity theft grows, it’s important to highlight a particularly insidious threat: stealing children’s identities. Although children have very limited financial activity, this ironically makes them appealing targets for fraudsters.   







According to Javelin Strategy & Research, 1.7 million children had their personal information stolen in 2021-2022, resulting in nearly $1 billion in identity fraud loss. In a recent PaymentsJournal podcast, Tracy Kitten, Director of Fraud and Security at Javelin, explained what makes children so vulnerable to identity theft and what parents and guardians can do to protect them.





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Child’s Play







Obtaining a child’s personal information is alarmingly straightforward. When a criminal gets a child’s Social Security number, along with their physical mailing address and/or date of birth, that criminal possesses enough information to commit various forms of fraud, such as fraudulently opening bank accounts or applying for loans using the child’s information. 







The COVID-19 pandemic exacerbated risks to children’s identities. Government recovery programs, in particular, saw a fair amount of stimulus-related fraud. Additionally, the increase in online transactions revealed authentication gaps that were challenging to address. While strides have been made to close some of those gaps over the past year, vulnerabilities still exist. 







What’s tempting about using children’s identities is that they have no complicated background to deal with. “These kids don’t have bad credit,” Kitten said. “They don’t have any credit at all; so any type of account could be opened with a clean slate, maybe even a job application for someone who is here illegally.







What’s more, parents don’t readily detect this type of fraud. Since children aren’t applying for credit cards or mortgage loans, identity theft is not noticed until the child has reached maturity. 







More Information in the Wild







For many of us, our Social Security numbers, along with our email addresses and passwords, are floating around the dark web. We’ve become more adept at handling breached information and are increasingly mindful about the information we share about ourselves online. However, all it takes is one slip—such as the exposure of your Social security number—to cause significant and long-term challenges.  







“We like to think that the government is this well-oiled mac...

Even though the number of checks written continues to decline, mail theft remains on the rise. Beyond the theft of checks directly from mailboxes, there have been instances of stolen mail trucks. The ease of modifying checks allows criminals to simply wash and modify the payee’s name. 







Q2’s positive pay system, used by roughly 550 banks across the country, is on track to stop more than $2.5 billion in fraud this year. In a recent PaymentsJournal podcast, Bruce Dragoo, Manager, Solutions Consultant for Q2, and John Byl, SVP Product Development at Mercantile Bank of Michigan—a Q2 customer—discussed how to get people on board to combat check fraud with Albert Bodine, Director, Commercial and Enterprise Payments for Javelin Strategy & Research.





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A Problem for Businesses of All Sizes







In 2022, around $720 million of fraud was identified and stopped by Q2’s positive pay system. Last year, that number doubled to $1.4 billion.













“It seems like it’s wider-reaching at this point and coming downstream to smaller businesses,” Byl said. “It had been historically viewed as a large corporate need, but it’s indiscriminate at this point—and it’s affecting everybody.”







A third of commercial payments globally are still made by check, which presents a huge opportunity for criminals. But only 30% of eligible businesses use positive pay, which matches the details on a check to the details on file with the bank to ensure its validity. Some related solutions cover just checks, and others cover ACH transactions, but they don’t address the gamut of everything a business may need.







“In some cases, having a great technology provider that can provide not only check but ACH positive pay, along with full reconcilement capabilities, can be a barrier to some of these institutions signing up for a full breadth of what they need,” Dragoo said. “It’s about being either reactive or proactive in regards to the financial institution selling positive pay. At some financial institutions what I’ll hear is that the only time that they sell positive pay to a customer is when they’ve had check fraud on their account and they’re reacting to the situation.”







Talking to customers before they open a checking account can be critical. If they are a small business or a corporate client,

The evolution of digital card management has given financial institutions new opportunities to cultivate enduring customer relationships. By making consumers’ lives more convenient and complimenting physical cards, so consumers have the options that work for their lives at a particular time, issuers can foster ease of use and brand loyalty, leading to decades-long relationships.  







In a recent PaymentsJournal podcast, Wesley Suter, Senior Director of Product Solutions at Fiserv, spoke with Elisa Tavilla, Director of Debit Advisory Services for Javelin Strategy & Research, about the future of digital cards. They discussed what strategies can make cardholders develop loyalty to their issuer—or lead them to end the relationship.





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The Advantages of Digital Cards







Digital card management addresses two issues: Making it easier to do business with a financial institution and making consumers’ lives more convenient. The goal is to ensure that customers are more willing to use your card over a competing card in their wallet.







To understand where we are today, it helps to take a step back. During the COVID-19 era, many merchants amplified their touchless point-of-sale capabilities, and thus digital wallets such as Apple Pay and Google Pay became even more attractive.







“COVID accelerated consumers’ preferences toward the digital channel,” Tavilla said. “Our Javelin research has shown that consumers are using both credit and debit cards in digital and mobile wallets. And the expectations that consumers have, whether it’s in commerce or in online mobile banking, have trended more toward digital capabilities.”







In this digital environment, cardholders can handle most service issues more easily than calling into a call center or discussing their card relationship by going into an in-person branch.







Consider how information is more readily available with a tap of a finger: When you use Uber or Lyft, you can track the precise location of a vehicle. And when you order packages online, you can track every movement of the shipment—from the order confirmation to when the packages leave the warehouse to when they arrive on your doorstep—solely through your phone.







“I don’t necessarily walk out of the out of the house or out of the room with my wallet, but I always have my phone on me,” Suter said. “As we can drive more of that phone experience into the digital banking platforms that many financial institutions leverage, that’s going to create the adoption and loyalty that many issuers are looking for.”