1. Chip & Pin and Apple Pay: Vulnerabilities of the Changing Payment Systems
Jay Isaacson

2. Timing - “Crossing The Chasm”
Source: Crossing The Chasm Geoffrey Moore

3. Payment “Rails” Remain The Same
Electronic
(Web, Mobile, ATM, etc.)
Physical
(Cash, Checks, etc.)
Cash
Checking System
Credit Card System
Debit Card System
Automated Clearing House System
Wire Transfer Systems
Closed Loop Systems & Virtual Currencies
Source: BDU Analysis

4. Losses Related to Breaches Continue to Mount
Why Care?
Losses Related to Breaches Continue to Mount

5. 6 of 11 features are payment related
Consumers Care! 1 2 3 4 5 6
Security
Convenience
6 of 11 features are payment related
Two main payment categories

6. Payment Card Rise How are consumers paying?
Significant decline in checks
Debit remains the most preferred payment method

7. Key Elements Of Protection
EMV
Mobile Wallets
Internet Payments
Fraud Mgmt. 1 2 3 4

8. EMV Recap
EMV is an effort to provide a more secure payment card by using dynamic authentication
Why use EMV technology?
Europe has seen an 80% reduction in credit card fraud after completing migration to EMV…during the same timeframe, the U.S. has witnessed a 47% increase
U.S. is only industrialized nation not to implement EMV
Fraud liability will shift to weakest link in October 2015
There is more work to do:
Initial cards will come with both magnetic strips and EMV
EMV does not address Card Not Present fraud
EMV
Mobile Wallets
Internet Payments
Fraud Mgmt

9. Chip & ???
PIN
Signature
Provides additional protection resulting from lost or stolen related plastic card fraud
Merchant-friendly
Informal research showing greater adoption
Member-friendly
Ultimately a business decision as both will work to curb counterfeit-related fraud

10. Mobile Wallets / Apple Pay / Tokenization
EMV
Mobile Wallets
Internet Payments
Fraud Mgmt.

11. Mobile Wallets

12. Risks Resource strain and constraints
Sharing interchange or some products could lead to a complete loss of interchange
Brand identity concerns
Picking winners vs. technology that will become obsolete
Fraud

13. Apple Pay Adoption?
At the end of April, 19% of iPhone’s in the US were capable of utilizing Apple Pay
Only 13% of iPhone 6 users have used Apple Pay and an additional 11% plan to do so
Largest users are years old (35%), then year olds (23.5%)
Largest group that intends to use Apple Pay are individuals over 50
Source:

14. E-commerce Continues To Grow
EMV
Mobile Wallets
Internet Payments
Fraud Mgmt.

15. Main Types Of Fraud Management Services
1. Processor-based
2. Member-based
3. Merchant-based
EMV
Mobile Wallets
Internet Payments
Fraud Mgmt.

16. Tips & Guidance
Consumer Payments
As payments evolve…consider member convenience, fraud, and technology investments in your strategic plan
Don’t forget about the inherent risks
New payment methods are largely driven to enhance the member experience and minimize fraud risks
Education and communication can be one of the keys to success
Options exist in consumer payments and fraud management
Fraudsters will continue to focus on the weakest link
Contact a CUNA Mutual Group Risk Management Consultant at or Ask a Risk Manager
end

17. In Common… Recommendations:
Consumer Payments
Recommendations:
Review non-financial transaction report to legitimize changes – new, replacement or additional cards; PIN requests; increased credit limits; or address changes
Segregate duties involving payment card changes, file maintenance, and report review
Eliminate immediate credit for card payments
Restrict high risk merchant category codes such as wire transfers and cash disbursements
Avoid using VRU for member PIN changes
Review security controls at least annually to confirm adequacy and effectiveness – such as daily dollar limits; CVV / CVC / CV; and exact expiration date

18. Next Steps Education and communication are key
Educate credit union members and employees
Communicate through your credit union’s newsletter, website, statement messaging, workshops, etc.
Fraudsters will continue to focus on the weakest link
Leverage your resources at CUNA Mutual Group to help your credit union stay aligned with the changes

19. Wrap-up Session summary
Thanks to technology… consumer payments continue to evolve!
New payment methods are largely driven to enhance the member experience and minimize fraud risks
Clearly, options exist in consumer payments and fraud management
As usual…education and communication can be one of the keys to success
As you look at new technology related to Tokenization consider authentication 19