The payments industry truly made history in 2015. Unprecedented technological growth and innovation made payments the focus of FinTech, bringing it to the forefront of consumer consciousness as shoppers sought out simpler, smarter, and safer ways to pay. Here are the year's highlights:
The Rise of Mobile Payments
The idea of a digital wallet has been around for about a decade, but it didn't become part of the average consumer's vocabulary until 2015. The 2014 launch of Apple Pay catalyzed interest, and the new payments platform easily found its footing in a market that was well prepared for its arrival. The arrival of Android Pay, Samsung Pay (utilizing LoopPay technology), and Current-C (by MCX) has propelled mobile payments into the mainstream. It only makes sense: it's easy for people to pay using a device that's within reach day or night. Undeniably, 2015 is the year that mobile payments took hold. Capgemini's "World Payments Report 2014″ predicts that mobile payments transactions will increase to 47 billion through 2015, up from 29.2 billion in 2013.
October 1st was a banner day in the fight for data security and consumer protection. That day, EMV--or "chip cards"--became the new standard in the United States. Having a "chip" means that the customer's payment method includes a tiny but powerful microprocessor, working around the clock to store and secure consumer data. As of October 1, 2015, any merchant that hasn't installed a chip card reader will face liability for counterfeit card fraud if the card issuing bank has upgraded to chip cards. Conversely, if a retailer has installed chip readers, fraud liability will remain with the card-issuing bank. As always, consumers are 100% protected against card fraud liability. Currently, 60% of U.S. cardholders have received EMV cards from their banks/card issuers and it is projected that 44% of merchants will be EMV ready by the end of the year.
Enhanced Security though Biometrics
As chip cards wipe out in-store counterfeit fraud, industry experts anticipate an increase in online fraud (also known as card-not-present fraud). Counterfeit card fraud in the U.S. is projected to fall more than 50% to $1.77 billion between 2015 and 2018 while card-not-present fraud will jump $3.3 billion (+106 percent) to $6.4 billion. Even though chip cards will address counterfeit card fraud, we must remain vigilant against criminals by deploying new in-store fraud mitigation tools. For example, multi-factor identification methods like live-time facial recognition and biometric social data mining are replacing static PINs as the best means of verifying identity. MasterCard is currently in a trial phase for facial and fingerprint biometric payments in Europe and the United States and Verifone offers a biometric sensor in its VX 520 point of sale terminal.
Established payments companies are embracing change and forming partnerships with technology companies--in some cases, they're turning into technology companies themselves. Industry titans are recognizing the vast opportunities for growth and innovation in the payments sector, and acting accordingly. The pace of mergers and acquisitions deals rose 2.8% in volume this year, while the value of those deals increased nearly 40% between 2014 and June 2015. Partnerships shaped the new face of payments this year.
Establishment of Payments Caucuses in House and Senate
Thanks to the unprecedented growth in payments, members of Congress and regulators are interested in - and enthusiastic about - understanding advancements in the industry. This year saw the formation of the Congressional Payments Technology Caucus in the House and the Senate Payments Innovation Caucus. Founded by U.S. Senators Gary Peters, Mike Rounds, Tom Carper, and Johnny Isakson, and Representatives Randy Neugebauer, David Scott, Kyrsten Sinema, and Lynn Westmoreland, both caucuses recognize the benefits that the payments industry confers on consumers and merchants alike by processing $5 trillion in payments every year. The two groups will explore issues around new and innovative technologies in the payments industry and field questions about data security, financial inclusion for the unbanked and underbanked, data collection, the Cybersecurity Information Sharing Act (CISA), uniform standards for data breach notification, and more.
As consumers continue to embrace electronic payments, there are multiple segments to watch: Peer-to-Peer payments are on the verge of a huge breakthrough. Alternative lending platforms for merchants are creating new cash flow management tools that allow small businesses to invest in their growth. Blockchain technology is attracting attention from financial firms seeking more efficient ways to record and manage transactions. Innovation is making the movement of money across borders more seamless and affordable. As the payments industry grows, payments will become even more frictionless and invisible.
I anticipate continued growth in technological developments and creative partnership opportunities in the immediate future--2016 will be another year of excellence in electronic payments.