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New Ideas, Next Steps for Credit Unions
Tokenization, NFC & Apple Pay
TODAY’S PRESENTERS
CAROLINEWILLARD Executive Vice President,
Markets & Strategy
CO-OP Financial Services
MICHELLETHORNTON Manager – Core Products
CO-OP Financial Services
With Special Guests:
SUNNYWALIA Visa Strategy
Visa
RITARAMIREZ Vice President, Emerging Payments
MasterCard
AGENDA
Apple Takes a Bite out of Payments
What Is Tokenization, Anyway?
Why Members Will Love It – And Where It Might Lead
How Do Credit Unions Get in?
Your Message to Members
1
2
4
5
3
Questions? 6
APPLE TAKES A BITE OUT OF PAYMENTS
HOT TOPIC
5
We’ve created an entirely new payment
process and we call it Apple Pay.”
“ Tim Cook CEO, Apple September 9, 2014
APPLE PAY IS (ALMOST) HERE
› Announced Sept 9
› iPhone 6 and 6 Plus hit the market September 19, both will support NFC/touch ID payment and in-app payments through Apple Pay
› Apple sold more than 10 million new iPhone 6 and 6 Plus models over the weekend, breaking company records
› Apple Pay released in an October software update
› iOS 8 released Sept 17
› iWatch: out in 2015
APPLE’S ROLLOUT TEAM
PA
RTIC
IP
AT
IN
G
CA
RD
S
PA
RTIC
IP
AT
IN
G
BA
NK
S
CO
MIN
G S
OO
N
ACCEPTED WHERE?
MERCHANT LOCATIONS
INCLUDING:
iTUNES ACCOUNTS – MANY WITH YOUR CARDS IN THEM
WHAT ABOUT THE 8,870,000 OTHER U.S. MERCHANTS?
& say “NO”
Will it work with Square?
Retailers need NFC at point of sale: Less than 10 percent currently do
RIVAL WALLETS RESPOND
10
WHAT ABOUT ANDROID?
11
THE BIG NEWS
Apple Pay has created instant awareness and interest.
WHAT IS TOKENIZATION, ANYWAY?
GET THE FACTS
TOKENIZATION FEATURES
› Card number replaced by randomly-generated “token”
› Specific to the phone or merchant
› Changes the game for data breaches
› Token can be disabled with card still protected
› Process is effortless to consumer
› Credit union authorizes with actual card number
15
TOKENIZATION
MERCHANTS ISSUERS YOU?
WHO’S IN?
Tokens can be processed by all
participants in the payments ecosystem.
Payment tokens map back to the
underlying account, providing issuers
with full transaction details.
Yes, but you must enroll
SECURITY ON APPLE PAY
› Touch ID authentication on iPhone
› Two-factor authentication on iWatch
› NFC terminal encrypts information
› Tokenized transaction
› PAN remains hidden
› Apple does not see/store transaction information: enhanced privacy
HOW TOKENIZATION HELPS YOU
› Improves merchant security
› Hides PAN information
› Frustrating for hackers
› Minimizes fraud loss
› Reduces need for replacing plastic
WHAT MEMBERS WANT
WHY MEMBERS WILL LOVE IT – AND WHERE IT MIGHT LEAD
TO WALLETS AND BEYOND
MOBILE IS MOMENTUM
Source: Javelin Strategy Mobile Payments Market: Tablet Payments Surge as Overall Mobile Retail Sales Top $60 Billion
IN-SECURITY IS AN OBSTACLE
Security Privacy
TOP CONCERNS OF CONSUMERS WHO DON’T MAKE MOBILE PAYMENTS
Source: "Driving Value and Adoption of Mobile Payments -- Consumers Want More," Accenture, 2013
340
BILLION
$18 MILLION
13.1
NEW CHALLENGES TO SAFETY
Source: Javelin Strategy, 2014 Identity Fraud Study, study of credit card issuers, Payment Card Data Security Report
between 2010 and 2012
outscore retailers in card security
victims of identity fraud in 2013
IDENTITY FRAUD
in losses annually
PERCENT
UP
CARD BREACH-RELATED FRAUD
FINANCIAL INSTITUTIONS
THE APPLE EXPERIENCE
ACTIVATING MOBILE WALLETS
› Will Apple Pay inspire consumers to try, use mobile wallets?
› Will it inspire consumers to try other wallets?
› Is this a warm-up for an “immersive” mCommerce experience?
› Will mCommerce become widespread – and fast?
NFC: TIME AT LAST?
Capability will rise with EMV terminal adoption
Apple Pay may spark activation of terminals
NEAR-FIELD COMMUNICATION
“TAP-AND-PAY”
Source: Mark Hung, analyst at Gartner, quoted in Reuters, "Apple gives NFC chip technology a prized seal of approval," September 10, 2014
550 MILLION
NFC-enabled devices in 2014
10 PERCENT
of retail POS uses NFC
LESS THAN
EMBRACING
HOW DO CREDIT UNIONS GET IN?
NUTS AND BOLTS
APPLE PAY: CAN YOU PLAY?
HOW CLOSE ARE WE?
THREE STEPS TO IMPLEMENTING TOKENIZATION
1
2
3
Check with your PIN networks to see if they are ready.
Enroll your BINs.
Let your members know.
ECONOMICS
Cost will be higher.
Savings in fraud and card reissuance may offset higher costs.
Pricing is still being worked out.
CO-OP IS ON IT
Enrollment Processes
New world of Apple
Defining what is ready
among partners
Pricing, contracts,
testing
Leveraging
other technologies
TOKENIZATION IN CONTEXT
› Tokenization fits into CO-OP’s overall strategy; it doesn’t disrupt our strategy
› Tokenization isn’t meant to replace anything, but rather to enhance security and convenience for most at risk payments
› Not a replacement for EMV. Remember:
› EMV is for cards
› Tokenization for digital payment
+
KEEPING YOU INFORMED
Apple Pay has accelerated interest in tokenization.
CO-OP will keep you informed on new developments and opportunities:
www.co-opfs.org/tokenization
VISA AND MASTERCARD RESOURCES
35
Visa Token Service www.visa.com/digitalsolutions
Visa Online – with Visa Token Service content www.visaonline.com
MasterCard Mobile Payment Information
www.mastercard.us/mobilepayments/index.html?cmp=ilc-mc.us.index.thumbnail.MOBILEPAYMENTS
MasterCard Connect – for MasterCard Digital Enablement Service Content
www.mastercardconnect.com
CONNECTING WITH YOUR MEMBERS
SPREAD THE WORD
THE ROAD BEST TRAVELED
DECLARE
Will you take on tokenization? (HINT: Yes)
Are you bullish on mobile payments?
Why is Apple Pay an important product to you?
WILL YOU DO APPLE PAY?
1. Yes
2. No
THOUGHTS ON
MAKE IT EXCITING
Highlight the benefits
Reward & Incentivize
Play up convenience and security across the board
Be part of the Apple experience
Q&A
WHAT DO YOU WANT TO KNOW?
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