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Emerging Payments: Understanding and Leveraging the Opportunities (Credit Union Conference Session Presentation Slides)


As we all know, the payments landscape is changing. EMV is here. Mobile payments are growing and mobile sales in the U.S. are expected to increase at a 68% compounded annualized growth rate over the …

As we all know, the payments landscape is changing. EMV is here. Mobile payments are growing and mobile sales in the U.S. are expected to increase at a 68% compounded annualized growth rate over the next five years. This session will provide you with an understanding of the impact and value these initiatives can bring to your credit union. Learn how to leverage the opportunities with key data and actionable take-aways for implementing a successful emerging payment strategy. More info at:

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  • 1. Emerging Payment Trends Navigating Turbulent Waters Troy Bernard Global Head of Chip Payments March 15, 2012
  • 2. Today’s “Mag Stripe” Payments Model is Being Challenged Big Data Mobile  Social Media &  Mobile Wallets Commerce  P2P Payment  Highly Targeted  Mobile Offers Marketing  Tokens  “Open Hand”  EMV  Proxy Cards  Contactless  Virtual Wallets Dynamic Data Cloud©2011 Discover Financial Services LLC Confidential & Proprietary 2
  • 3. Credit unions, merchants and credit union members face a multitude of choices, many of them competingConfidential & Proprietary 3
  • 4. Many ways to pay Mag Stripe EMV Offsite Remote “Cloud” Proximity Card-based Chip-based eCommerce or A token or proxy Sending payment transaction at payment device mCommerce number is information directly existing terminal or that generates (mobile web or provided to the from payment mobile card reader one-time use data mobile app) POS. The token is device to reader & authenticates exchanged for card & user traditional card QR Code data in the cloud Contact NFC ContactlessConfidential & Proprietary Source: Market Platform Dynamics 4
  • 5. Profusion of choices ? ? ? Members Merchants Credit Unions • Which shopping channels? • What POS? • Which data storage location? –Store? –Traditional? –Merchant? –Online? –Portable? –Third party? –Mobile web? –Customer-based mobile? –Device? –App? –Cloud? • What form factor? • What device? –Mag stripe card? –Samsung Nexus S 4G? –EMV? –BlackBerry 9900? –NFC? –iPhone? –Barcode? –Empty hand? • How to identify myself? –Card? –PIN? –Phone #? –Fingerprint?Confidential & Proprietary 5
  • 6. Building a Mobile Commerce Strategy Cloud (software-based) • M-Web /Offsite Remote • QR/Bar • Boku Code • Contactless Stickers • Mobile Offers Issuer- Centric Carrier- • NFC • Google Wallet Centric Accessories • IsisConfidential & Proprietary NFC (hardware-based) 6
  • 7. Strategy, continued • Simplicity • Price • Profitability Needs: • Relevance • Standardization • Security Collaborate with partners Build your own solution Promote contextually-appropriate payments
  • 8. Base your emerging payments strategy on your assessment of market direction, your own strengths and weaknesses, and what is relevant to your members Your mobile payments strategy should not be a mere placement of today’s plastic card and paper coupons in a digital wallet. Which products will best resonate with your credit union members?Confidential & Proprietary 8
  • 9. Due to recent U.S. payment network announcements, any emerging payments strategy must account for EMVConfidential & Proprietary 9
  • 10. EMV  EMV is a chip-based payments standard created by Europay, MasterCard and Visa in the mid-1990s – Current EMVCo owners are: MasterCard, Visa, Amex, and JCB – Discover participates as business and technical associates  The EMV specifications create an open standard for the interoperability of chip cards and terminals with the purpose of combating card-present fraud – Prior to having a widespread, low-cost telecom infrastructure, merchants and issuers would not authorize every purchase transaction online – These offline approvals, using floor limits, left the door open to counterfeit, overlimit, and stolen cards  EMV combats this by: – Using a secret key embedded in the chip so the terminal can validate that the card is not counterfeit using public/private key infrastructure – Using an optional PIN stored in the chip, validated offline, or an online, issuer- validated PIN to ensure the account holder is the rightful owner of the card©2011 Discover Financial Services LLC Confidential & Proprietary 10
  • 11. Anatomy of a traditional EMV transaction Contact Chip Options: Chip Contains: •Card validates offline •Account data data (prevent •D-PAS applet & counterfeiting) Application ID# (AID) •Determine • Unique encryption Cardholder key for each card Verification Method • Offline PIN (optional) (CVM) • Record of last few - PIN validated transactions ($, MCC) locally (not by issuer) • Est. available credit - Signature line - None (low $) 1. Insert contact Using Issuer*-driven rules, EMV card in EMV card determines: terminal •What is the $ amount of Contact Card Slot purchase? 2. Validate D- • MCC high or low risk? PAS AID present • Last time card authed in card and online? terminal • Nearing credit limit? Options: • Is this a domestic or • Validate cryptogram 3. Initiate D-PAS international transaction? • Return a cryptogram toTerminal Contains: card applet and the card• Generic EMV kernal read terminal • Determine Cardholder(V/MC/Amex/D) data Verification Method• D-PAS AID (CVM)• D-PAS Public Key - PIN• D-PAS Terminal Parameters * Issuer must comply w/ Payment Network and/or local regulators’ EMV mandates - Signature - None
  • 12. EMV Globally©2011 Discover Financial Services LLC Confidential & Proprietary 12
  • 13. Overview of U.S. EMV Statements Visa MasterCard MAG Acquirer • EMV mandate -April 2013 • EMV mandate- April 2013 • All parties should Certification collaborate on date Merchant • Waive Annual PCI Audit if • Waive annual PCI audit • Underlying message is that Incentives 75% of purchases • Payments Hierarchy to be PIN should reduce through a EMV/NFC implemented by Oct 2015 chargebacks & interchange terminal in the long run. Dynamic data can reduce PCI costs. Issuer Impacts / • 2015 Fraud Liability Shift • Payments Hierarchy to be • N/A Fraud Liability for card present, implemented by Oct 2015 Shift (FLS) counterfeit cards • More secure payment will be lower cost Mobile / NFC • Advocate installation of • Included in roadmap. No • Agreed upon roadmap Support EMV/NFC terminals specifics provided should include mobile/NFC • No mandate Online vs. • Encourages online • Not mentioned • N/A Offline transactions in U.S. Transactions PIN vs. • Discourages offline PIN in • “Providing consumers with • Advocate use of PIN for all Signature & U.S. greater control & to reduce card transactions, including Cardholder fraudulent transactions” credit Verification Multi-channel • N/A • “Tap, click or touch in-store, • Advocate “chip” solutions Approach online or on a mobile device” for in-store and e- commerce purchases©2011 Discover Financial Services LLC Confidential & Proprietary 13
  • 14. EMV Summary EMV is coming to the U.S. Acquirers are the first to be impacted – October 2013 Incentives for merchants and issuers to comply continue to grow Continuing debate on online vs. offline transactions and the use of PIN for credit card transactions
  • 15. Final Thoughts Today’s payments ecosystem is about to undergo a dramatic evolution. The way consumers will conduct commerce will drastically change within the next 5 years. – EMV – Mobile – Increased security (dynamic data, PINs, biometrics) How well you navigate these waters and deliver meaningful, contextually-relevant, and easy-to-use products will differentiate you from the competition. How will you help your credit union navigate this sea of change?
  • 16. Thank you!Troy BernardGlobal Head of Chip PaymentsEmail: troybernard@discover.comOffice: 224.405.2127