Three Things for Banks and Credit Unions to Keep an Eye on in 2016

Trevor Mast
Senior Vice President Financial Services Products
Posted on January 21, 2016

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Last week, I talked about the year past.  This week, I’d like to focus on the coming year.  There are numerous topics in the payments space to keep track of in 2016.  These are three major items that credit or debit card issuers will want to pay close attention to this year.

  • Machine Learning and Advanced Messaging – By now we have all heard the advanced warning of what is to come with card-not-present fraud in the coming years, but something much more impactful to an issuer’s bottom line may be right in front of us today.  MasterCard recently produced metrics that show losses from false positive transactions, as well as the future spend on those cards, outpaces the cost of actual fraud by 400%!  This is mainly because cardholders get fed up with over-restrictive rules and strategies and decide to take their business elsewhere.  Call it AI for fraud, Machine Learning uses algorithms that iteratively learn from multiple sources of fraud-related data, enabling systems to find hidden insights and trends without being explicitly programmed where to look. As fraud models and strategies are exposed to new data, they are able to independently adapt. This new type of adaptive analytics has the ability to improve fraud account detection by more than 20% while lowering the incidence of false positives.  Advanced Messaging assists with secure, proactive and streamlined communication methods with customers in the event of a fraudulent transaction or false positive event.  It is an intelligent engagement platform that delivers two-way, automated voice, text, email and mobile app notifications.  Say you are out of town at your favorite big box retailer and your card gets declined at the point of sale.  This advanced messaging tool will find the best means to contact you to find out if the block is real or not.  After confirmation that you are actually trying to make the purchase, the block is lifted and the transaction goes through.  These two solutions working together will help reduce fraud while maintaining a positive customer relationship.
  • Commercial Card Payables and Small Business applications – The commercial card space in the US has seen an amazing growth over the last couple of years and is attracting more and more attention as midsized and smaller issuers are realizing the potential and capturing some market share.  Analysts conservatively predict that the commercial card market will grow at a 12% CAGR over the next couple of years.  One of the largest segments in the commercial card space that shows the most potential with the largest addressable market is the B2B payments module also known as purchasing cards, or payables.  Some analysts state that the potential market opportunity for this segment is roughly $19 trillion – of which only about 10% has converted to payments, when compared to 60%+ conversion of consumer payments.  This division of commercial cards is expected to accelerate as a result of providers having already taken the necessary actions to reduce the known barriers (integration, acceptance, security, virtual…) and provide better guidance on the value proposition to suppliers (immediate guaranteed payments, more efficient reconciliation, working capital improvements). 2016 will also bring another component to the rest of the commercial card space as issuers try to differentiate themselves from the rest of the pack.  Differentiators to keep an eye on this year are small business budget and cash flow planning tools.  These tools allow a small or midsized business to manage the company budget, fund outflows and track expenses all from a single application.  The application provides simplified real-time reports, which helps reduce administrative time as well as helping employees eliminate time consuming expense reports with expense classification and receipt management assistance thus leading to increased employee satisfaction and productivity.
  • Streamlined customer on-boarding and authentication will be a hot topic in 2016 as banks and credit unions find ways to improve the customer on-boarding experience while meeting all regulatory guidelines and doing it in a secure manner.  These new tools are helping FI’s step over the outdated and difficult account opening process, which once included stacks of paperwork and redundant data requests, and providing benefits such as cost reduction, client satisfaction and faster realization of revenue.  These tools appeal to more than just the mobile generation and provide the ease of use that they are familiar with in other industries.   Wouldn’t it be great if a bank or credit union’s mobile app could ask a few simple questions, ask you to take a quick picture of some documentation, auto-decision an approval of your new account and provision the card right in the mobile wallet within 30 seconds?  Well, these tools that deliver this ideal customer experience with an automated and friction fee on-boarding process are here and will pick up steam in 2016.

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Trevor Mast
Senior Vice President Financial Services Products

Trevor’s expertise in product management, sales and client service; as well as team leadership; sets him apart from his peers and allows him to provide executive-level guidance to his teams and with his colleagues. At FIS, Trevor provides executive oversight of the credit, debit, ATM, software, and fraud prevention product portfolio.