U.S. Payments Forum Spring Market Snapshot: Fraud Trends Shifting, All Eyes on Crypto and Touchless Payments Continue to Grow
U.S. Payments Forum
ENGLEWOOD, Colo., March 30, 2022 – The U.S. Payments Forum today released its latest Market Snapshot providing an overview of the state of the industry including sustained growth in contactless payments, EMV at the pump and ecommerce; the rising interest in hot topics such as cryptocurrency, buy now pay later (BNPL) and EMV 3D Secure fraud mitigation; and cross-industry discussions of current challenges facing members of the Forum.
The Snapshot follows the conclusion of the Forum’s spring meeting, co-located with the Secure Technology Alliance’s U.S. Payments Summit, which returned as a well-attended, in-person event in Salt Lake City.
“Attendees were upbeat as the payments industry is on a fast track toward a full post-pandemic recovery and innovation is booming,” said Jason Bohrer, executive director of the U.S. Payments Forum. “Members enthusiastically embraced the opportunity to come together as an industry again to share insights about the latest trends and innovations, and work through potential pain points to facilitate industry-wide advancement.”
State of the Market: Contactless transactions and ecommerce retain popularity
After two years of uncertainty, the payments ecosystem has launched headlong into recovery. American Express reports that Q421 spending in the hard-hit travel industry was up 24% globally compared to Q419, and overall travel and entertainment spending was at about 82% of its 2019 pre-pandemic volume. Amex also cited a Global Business Travel Association blog which expects global business travel to make a full recovery by the end of 2024.
All presenters agreed touchless payment use grew phenomenally in 2021 and is here to stay, although they have not seen a commensurate uptick in the use of mobile phone wallets. Discover observed a staggering 260% YOY growth in contactless volume in stores in the U.S last year. Meanwhile, Visa reported in FY2022 Q1 earnings that U.S. contactless penetration is nearing 20%, with key metro areas including New York, San Francisco, Los Angeles, Seattle, Detroit and Miami showing even stronger growth.
EMV payment at the pump has also grown sharply since the April 2021 liability shift. Mastercard reported 75% of its automated fuel dispenser transactions in December 2021 processed as EMV chip transactions.
The pandemic clearly brought more consumers into the ecommerce fold. Research commissioned by Discover found that one in three digital payment consumers were first-time users last year and more than half transitioned all in-store purchases to online.
CNP fraud and EMV 3DS. While all stakeholders agreed the shift to chip cards dramatically reduced in-store fraud losses, “fraud finds a way” as one spokesperson quipped, and the new battlefront is card-not-present online fraud. In this fight, the EMV 3-D Secure protocol is being praised for its fraud reduction benefits. Jack Henry & Associates observed a 20% reduction in large-scale fraud attacks for financial institutions using EMV 3DS. In addition, the organization is reporting a 10% increase in FI adoption of EMV 3DS over the last year. Even dark web fraudsters acknowledge the efficacy of 3DS, one presenter observed, noting that compromised BINs that do not support 3DS were being “promoted” as more desirable.
Cryptocurrency. Most industry leaders mentioned crypto as a prime interest for their organization. A global survey from FIS’s Worldpay and Crypto.com showed that 75% of Crypto.com consumers would like to pay merchants with cryptocurrency and 60% of merchants say they would like to accept it, primarily for online-only, while only 4% do today.
The Biden administration agrees crypto is a critical topic. On March 9th, President Biden signed an Executive Order outlining the first-ever, whole-of-government approach to address the risks and harness the potential benefits of digital cryptocurrency assets and their underlying technology. The Order lays out a national policy for digital assets across six key priorities: consumer and investor protection; financial stability; illicit finance; U.S. leadership in the global financial system and economic competitiveness; financial inclusion; and responsible innovation.
BNPL. Consensus among presenters at the Forum meeting was that BNPL is not only hot and growing fast, it is here to stay. Retailers were particularly positive about the growth in sales from BNPL programs. Citing data from the last quarter, Jack Henry & Associates stated that 96% of their financial institution clients have debit cardholders taking advantage of BNPL with fintech providers, with 4.6% of all active accounts engaged in BNPL purchases. Most agreed that like any new payment innovation, there is work to be done in areas such as better industry visibility into the debt consumers are taking on with BNPL, improvements in communications with consumers and fraud prevention.
Cross-industry troubleshooting. A main advantage of the U.S. Payments Forum is it provides a venue where industry stakeholders at all levels, including competitors, can discuss challenges that affect the entire payments ecosystem. And engage in joint discussions to find solutions. Topics in this meeting included:
· Issues with releasing pre-authorization debit holds at the pump
· Pinless debit routing
· How BNPL consumer confusion can affect merchants
· Providing more information, especially for online transactions, when issuers decline payment authorization (Do Not Honor response codes)
8-digit BINs white paper. The Forum recently published “Industry Considerations for 8-Digit BIN Migration.” The paper, prepared by subject experts in the Forum’s project working group, explains in detail what all payments industry stakeholders should be doing to support both 6- and 8-digit BINs, as required by certain payment networks starting next month in April 2022.
The Forum has numerous other projects currently underway that will benefit stakeholders throughout the payments ecosystem, including:
A webinar on Electric Vehicle (EV) technology and open payments
A white paper detailing considerations for payment industry stakeholders in response to global chip supply challenges
An EMV 3DS Data Elements white paper
A series of webinars on tokenization
An FAQ to help facilitate a better understanding of QR codes in payments
The U.S. Payments Forum has recently published the following resources:
Debit Routing and EMV 3-D Secure: a white paper describing a solution concept that allows merchants to determine which EMV 3DS Directory Server to use, where the selection will consider transaction authorization routing choices
Global Chip Supply Challenges: Considerations for Payment Industry Stakeholders: a white paper that raises awareness about the chip supply challenges and the potential impacts on the payments ecosystem
Card-on-File Tokenization Considerations: a resource providing an overview of different card-on-file tokenization options and stakeholder deliberations for each, including debit routing
Payments Resource Brief: Data Integrity Fraud, a first-of-its-kind resource on fraud topics by the Forum Payments Fraud Working Committee [members only]
Organizations, associations, government agencies and individuals interested in participating in upcoming projects and initiatives can visit the Forum website to learn about how to become a member. For membership levels, benefits and the application, visit http://www.uspaymentsforum.org/membership/membership-benefits/.
About the U.S. Payments Forum
The U.S. Payments Forum is a cross-industry body focused on supporting the introduction and implementation of new and emerging technologies that protect the security of, and enhance opportunities for payment transactions within the U.S. The Forum is the only non-profit organization whose membership includes the whole payments ecosystem, ensuring that all stakeholders have the opportunity to coordinate, cooperate on, and have a voice in the future of the U.S. payments industry.