Our own Chuck Crawford, SVP Payment Acceptance, sits down with PaymentEye's Senior Reporter, Sarah Gill, to discuss the growing importance of and the new challenges presented by EMV chips, in our Finetics™ Studio at Money20/20.
Sarah Gill, Reporter: I'm joined by Chuck Crawford, SVP of Payments Acceptance at The Bancorp. The shift to EMV is going to play like an important role in that. How big a step is that for the US?
Chuck Crawford: It's a little deceptive. I'm very glad to see it, and it's a big moment for card security. Because we're doing what Europe has had for 20 years, in some cases, which is putting a chip on a card, and then that is read by the system and it secures the transaction and largely helps prevent a counterfeit transaction from taking place.
I say it's a little bit mixed, though, because in Europe, that's coupled with a PIN. Here, we're going to have it dual. It's a card you insert or a signature card can be an alternate transaction, so we're doing it kind of a half-step in the United States. It's also been enormously costly for the issuers, and there are 15 million terminals that are going to have to be converted. We're only about a quarter of the way through that process here in the United States. So it's important because it will definitely prevent fraud from a POS transaction, one at the retail level, as the card is inserted.
Now, the other side of it, though, just interestingly, is unintended consequences of things you do. And one of those is that what was a three- to five-second transaction, swiping a card, now the card gets inserted in a POS device, and it's five to 10 seconds. It doesn't seem like a lot unless you're in the line in a drive-through lane or a quick-service restaurant, or you're at Target, where they count by seconds the sales they have to get through, and a few seconds' delay. And mostly for the customer, that inconvenience adds up. So that's one of the effects.
The other is while this will reduce fraud at the retail level, crooks are still going to be there, and they're still going to want to make money. So now what do they do? They go to the online business, and that's a very interesting time for that, because it's not just e-commerce on websites. Mobile commerce is becoming more and more prevalent, and your chance of fraud of the type we're talking about is twice as likely on a mobile transaction than it is on any other type of transaction.
So if, as happened in Europe and then happened in Canada when they went to EMV, it happens in the United States very likely, that fraud is going to shift just simply to another venue, which means those merchants that are selling on both retail lanes as well as online are going to have to be all the more careful, and new techniques have to be built to make it safer for mobile and e-commerce in general.
Sarah Gill, Reporter: Yes, I mean, what do you think are the main challenges around, you know, preparing for this new sort of increasingly sophisticated fraud?
Chuck Crawford: Well, I think this show shows it. There are amazing new approaches. And I personally think what's going to happen is this shift to EMV in the United States is actually going to trigger an accelerated growth in contactless cards, possibly. Those are cards that can be read about an inch and a half from, you know, tap-and-pay, which haven't been popular yet because they don't really speed up the transaction. I think now, because EMV is a slower transaction, a little bit more cumbersome, you might see that.
But even more so, it will be to new devices, including your mobile phone or wearables. We already see that. And, of course, there's a lot of advantage to that as far as couponing and loyalty programs and other things that will go with it. So this may be kind of an inspiration for those technologies that are being talked about all over the show floor here to actually get traction. Because it won't be as easy anymore, and especially if they attempt in the United States in the next phase to add PIN to the card so that you have to put in a PIN number, which is the safest way you could do the transaction.
And by the way, the fraud is only about 35% of fraud. The rest of it is still going to be there with enterprise fraud. You have Target; that was 70 million cards breached. And there were 1,500 notable in the United States--in the United States alone, there were 1,500 card breaches last year. It was a record year, and doubling the amount of dollars on fraud. So something will have to be done to make sure that that doesn't keep growing. It's fascinating times, really fascinating.
Sarah Gill, Reporter: Absolutely. And just coming back to that fraud and breach issue, do you feel like the industry approach is handling those in the right way? I mean, it feels like up until now, there's been quite a lot of finger-pointing, which hasn't really helped anyone. Because if a customer has their data breached or they know that the data's been breached, they don't really care necessarily who's responsible. So do you think the industry has approached that in the right way? Do you think there need to be more conversations?
Chuck Crawford: I think it's behind. You know, it's not unusual for that to be the case. But you just take the laws that have to support these new technologies, and we have various regulatory agencies in the United States--the FTC, the CFPB, many others, many levels of laws, anti-money laundering, other things that have to be taken into account--and those haven't caught up to mobile and some of these other technologies that we're talking about.
So having said that, we have some really, really smart people trying to make a difference. And I think we will catch up and it will be a new day. And for an old hand like me, been in the industry for 20 years, to have this happen now is fascinating. Because, again, I'm used to an industry from before, where the payment was just a necessary evil to have the payment, all these thousands of things that happen in the background. And now payment is looked at as an advantage. That payment can lead you to loyalty and ease of use and more purchases and become a reason for a transaction that prompts it, not just a supporting element to it. And it's brought in a lot new players.
One of the issues for Bancorp and all banks is where do banks fit into this new set of dynamics? How do we remain relevant? How are we enabling those new things to happen? And that's a culture where our bank, fortunately, is we like to be around innovators. We get excited by them. We like to be helpful to them. And I think it may not be traditional bank services, but there will be many ways. And we already have many of our partners doing some of these innovations, and we like that a lot.
The opinions, findings, or perspectives expressed in this content are those of the participants and do not reflect the official policy or position of The Bancorp, Inc., its affiliates, or its or their employees.