The payments industry is experiencing more change now than it has in the last 50 years, making this the perfect time for financial institutions to re-examine conventional approaches to problem-solving. If executives on the “cards” side of the bank changed their question from "How can I upgrade to EMV with minimal disruption?” to “How can I enable the payment mechanisms my customers will prefer?,” they could pave the way to establishing new relationships with account holders that encompass the two dominant form factors for the next decade: EMV cards and mobile wallets. In short – now more than ever – banks need to address their payment silos.
The Opportunity at Hand
The US payment industry is being transformed with the upcoming EMV migration and the increasing popularity of mobile payments. EMV, a universal security standard for many years in more than 120 countries, is being used in both card-based and mobile payments. April 2013 marked the date for acquirers and acquirer-processors to support EMV for both card and mobile transactions. The rest of the industry is continuing its work on upgrading point-of-sale and network infrastructure, which is targeted for completion in conjunction with the 2015 EMV liability shift. Issuers began providing EMV cards for international travelers last year.
In the mobile payments space, several recent mobile payment announcements have been stirring up the market, including the imminent nationwide expansion of the NFC enabled Isis Mobile Wallet, MCX launching its own cloud-based mobile wallet, and other players announcing low-power Bluetooth technology for mobile payments.
In response to this tsunami of change, most large issuers have various payment innovation initiatives underway simultaneously: the migration from magnetic stripe to EMV chip cards; mobile NFC contactless projects and cloud-based payment projects, among others.
The challenge is that these payments projects are being developed in different parts of the organization, and each technology is managed by different back-office systems, in much the same way that banking functions, such as checking and credit cards, were handled in different silos before the advent of core banking systems. Before the IT infrastructure to support core banking functions was deployed, checking, credit card and mortgage accounts were all on different systems, so bank customers had no way of getting a single unified overview of their dealings with the bank, and the bank missed opportunities to cross-sell products and increase lifetime customer value. Similarly today, because of the lack of appropriate infrastructure, account holders have no one unified overview that allows them to choose and manage the various payment mechanisms they may wish to use.
The Advent of Core Payment Provisioning
As the industry moves in a new direction, the terminology and approach have yet to be defined. What’s missing is something I refer to as “core payment provisioning,” or the infrastructure that provides bank customers with a unified interface for the payment methods they prefer. A core payment provisioning platform enables consumers to request a credit/debit card, provision an NFC phone or enable a cloud wallet, all from a webpage in the bank’s e-banking portal, effectively bridging EMV, mobile and cloud payments. The customer can then delete, disable or enable each service (card, NFC or cloud wallet) from the same page or from the bank’s mobile application.
Using the core payment provisioning architecture allows the bank to expand the relationship it has with customers and remain “top-of-wallet” by giving account holders a choice of the payment experience they prefer, in the form factor they choose.
The changes sweeping the payment industry are creating the perfect opportunity for issuers to cement the relationship they have with account holders and to increase revenue. The convergence creates an unmet need which the bank can capitalize on by taking a core payment provisioning approach. However, we only have a short window of opportunity, as plenty of entrants new and old are stepping in to provide alternative payment methods that reduce bank revenues, and even worse, risk the privileged customer relationship that banks have worked so long to create.
Phillipe Benitez is the VP of business development for Gemalto Secure Transactions North America, where he works with financial institutions on mobile payments and EMV.