By Ray Birch
ST. PETERSBURG, Fla.—What was missing at this year’s Money 20/20 conference in Las Vegas, where the latest in payments technology is introduced each year? A great deal of payments innovation, according to one analyst.
Instead, the focus of the show was much more around fraud prevention and advances in that area, noted Brian Scott, SVP of sales and solutions consulting at PSCU, who said it’s a sign the country is moving quickly toward significant improvements in cyber defense.
“I was looking for the new payments technology at the show and, honestly, I did not really see a lot of cool, new stuff. I was surprised by that,” said Scott.
What was also noticeable, observed Scott, was that more than half of the conference was dedicated to security.
“I guess it is not surprising that with all of the breaches security would be a focus, but more than half of the meeting? Security, in my mind, dominated the show,” said Scott. “That told me that there is less happening around payments innovation and more around security innovation.”
Passwords On Way Out
Scott, as other analysts have stated, said it’s no surprise security is moving away from traditional passwords. What may surprise some, suggested Scott, is just how fast that is happening.
“A lot of the companies at the show were talking about moving away from passwords—what we know—and from what we have—such as chip cards—to who we are,” said Scott. “A lot of the new technology at the conference was focused on fingerprint and voice print biometrics, retinal scans and facial recognition. Again, more about who you are than what you know and what you have.”
Brian Scott
Scott believes a much greater focus on security is good for the industry, not only to protect consumers’ sensitive financial data, but to also drive the bottom lines of retailers and financial institutions. Scott emphasized that while payments innovations can often be impressive, they may not always impact the bottom line.
“We implemented chip cards in the last five years, and we have not seen great reductions in fraud. No one is saying chip cards are here and now look how fraud has gone down. They have not had a demonstrable effect on fraud,” he said. “Take P2P payments. Yes, they make it easier for you to pay someone for lunch, but P2P does not drive the bottom line. Nothing against Zelle, but there is no real revenue being generated by FIs from Zelle. But being able to significantly reduce fraud by using some of these biometric markers can truly move a bottom line both for merchants and financial institutions.”
Scott thinks that with all of the focus on payments innovation in the last five years that a shift to more security innovation is needed.
“This is good. This is necessary,” said Scott. “If you look at what is being done from a security perspective in other parts of the world, you can see the U.S. is playing catch-up now.”
M-Pesa Process
Scott turned to the example of M-Pesa, underway in Kenya and Tanzania, making loans based off scanning information on a person’s phone. M-Pesa is a mobile phone-based money transfer, financing and microfinancing service, launched in 2007 by Vodafone for Safaricom and Vodacom.
“They can scan the information on your phone and in less than 20 seconds make a decision as to whether they should approve you,” explained Scott, who said this is not only an improvement in consumer service, but security as well. “If you scan someone’s phone you know their payment and financial history, because all their transactions are on their phone and you can not only make a better decision about giving them a loan, you can be sure that they are who they say they are. Other third-world counties like Kenya are doing this and we are not.”