REDWOOD CITY, Calif., Dec. 07, 2022 (GLOBE NEWSWIRE) -- The U.S. Payments Forum today released its latest Market Snapshot. It provides an overview of the state of the industry including successes in tap-to-pay and tap-to-phone transactions, up-and-coming payment verticals and growing concerns in the card-not-present (CNP) fraud space. The snapshot also provides an update on global chip supply challenges from a payments perspective and explores concerns regarding recent payment regulations, and momentum with regard to alternative payment methods.
This industry update is an amalgamation of information gathered during the Forum’s recent All Member Meeting in Nashville, Tennessee. The event brought together more than 242 global payment leaders representing top payment networks, merchants, issuers, processors and acquirers.
State of the Market:
Building frictionless and convenient payment experiences is of the utmost importance for industry stakeholders at every stage of the payment process. During the pandemic, contactless implementation grew rapidly out of necessity. These days the focus has shifted from the speed of implementation to nurturing positive touchless experiences and expanding beyond the traditional chip card to POS terminal transaction.
During a roundtable session for global payment networks many stakeholders agreed that while most contactless transactions have been card-present tap-to-pay, networks are observing increased interest in emerging contactless payment methods such as tap-to-mobile, QR code payments, and wearable/ IoT payments. According to American Express, using mobile devices to pay has grown significantly YOY, and channels such as wearable payments are expected to reach an estimated market size of $80.39 billion in the U.S. by 2028.
Looking ahead, the triple-digit YOY increase in contactless transaction volume the industry observed during the pandemic is expected to slow down. This can be attributed to the fact that many consumers have already made contactless payments part of their day-to-day lives since 2021. Discover Global Network reports that Discover Card is on track to have 90% of its card portfolio enabled for contactless by the end of the year. Visa says tap-to-pay transactions have become the de facto way to pay in card-present scenarios, sharing that it accounts for 54% of card-present transactions globally. In the U.S. tap-to-pay accounts for 28% face to face transactions, five times what Visa observed pre-pandemic. Meanwhile, Mastercard reports 82% of card-present transactions are happening at contactless-enabled locations in the U.S.
Potential Inflation Effects –
In recent months the payments industry has noted shifts in spending habits that may be linked to economic uncertainty for many U.S. consumers. One domestic payment network is observing an increase in average ticket (transaction) sizes in line with nationwide inflation. Similarly, PULSE observed a 9% growth in average ticket since 2019 across its portfolio (both CP and CNP).
Omnichannel payments –
Merchants in attendance explored how omnichannel payment experiences have become the norm post-pandemic. One major retailer reported increases in digital and drive-up sales, and in-store sales have nearly reached pre-pandemic levels. Merchants are also focused on providing flexibility at the checkout by offering buy now, pay later options and enabling SNAP benefits for online purchases, among other things. The acquirers who were present expressed similar sentiments, reflecting upon their efforts to create more seamless, integrated experiences for consumers. This can be achieved by facilitating scenarios where consumers can pay, earn loyalty points, book, and more, all in one place.
Ecommerce CNP volume has been significant since the rise in omnichannel purchasing. During the meeting’s keynote address, Mastercard’s Senior Vice President of North American Cyber and Intelligence shared that digital transaction volume is projected to reach $9 trillion by 2024. This is a 60% increase over four years since 2020. An issuing bank that prefers to remain anonymous is reporting that CNP represents 40% of the gross dollar volume running through its business. Target echoed this, stating that the line is blurring between digital and physical sales. The retailer says digital comparable sales were up 9% in Q2 of this year.
Fraud in Focus -
Fraud will likely always be a cause for concern in the payments ecosystem. Stakeholders across the board agreed that while the implementation of EMV has thwarted many fraud instances in the card-present environment, fraudsters have set their sights on the CNP space instead. CNP fraud is growing six times faster than card-present fraud, according to one global payment network. Forum members expressed concern regarding a rise in bot activity and enumeration fraud attacks, with one issuing bank seeing a 50% YOY increase in these brute-force attacks.
Friendly fraud or first-party fraud is also increasing in the payments space, particularly with consumers disputing charges and taking advantage of lenient return policies during times of economic uncertainty. Accertify, an American Express company, also shared that first-party fraud has been increasing as more transactions are conducted digitally, including newer industries like sports betting and food and grocery delivery. Some consumers choose to fraudulently dispute these sports betting charges when they don’t turn a profit. Synthetic ID fraud, a more malicious tactic, is gaining traction as well. These types of attacks are typically orchestrated by cybercrime groups that create bank accounts, rewards accounts and more. They then use these accounts to facilitate chargebacks or move funds via peer-to-peer transactions, gift cards and, in some cases, cryptocurrency.
The consensus among payments stakeholders is that the industry must take a layered approach to fraud mitigation, beginning with strong authentication techniques, data analytics tools and consistent monitoring.
Alternative Payment Momentum –
As technology rapidly evolves, so do payment preferences. The younger generation of consumers is expanding their horizons beyond legacy payment methods and the industry is working toward embracing the change. Buy now, pay later, cryptocurrency and peer-to-peer transactions are among the most buzzworthy topics stakeholders are exploring. From a payment network perspective, there is a desire to provide the same secure transaction opportunities to crypto users as core merchants. Currently, there are services in place to analyze how consumers are using digital currencies, the investment component and the potential fraud risks.
Peer-to-peer (P2P) services such as PayPal, Venmo, Square and Zelle are being used for B2B and B2C commerce more frequently, according to W. Capra Consulting Group. The group is observing a notable uptick in small businesses turning to apps on mobile devices to accept payments and instantly receive funds. They are also seeing a lot of P2P transactions displacing some level of card-based or even account-based payments for these small businesses.
Chip Supply Update –
Payments stakeholders are still keeping a close eye on the global chip supply problem that has been impacting multiple industries for nearly three years. Experiences differ from stakeholder to stakeholder, with some reporting a delay in the progress of contactless card implementation because of chip shortages. One issuer processor said that plastic cards can take four to eight months to reach them because they have relationships with multiple card production vendors, using multiple chips for their financial institution clients. On the opposite end of the spectrum, another issuer reports minimal consequences from the chip supply challenges due to their decision to switch to a more widely available chip when the shortage first began. One payment processor shared that there is an increased demand among merchants to seek EMV L3 certification for older devices because chip supply challenges are preventing them from getting new ones.
The U.S. Payments Forum’s primary focus is to provide a platform for solving cross-industry challenges and promoting innovation. This is achieved through collaborative discussion, networking events and educational resources.
Federal Regulation II –
The payment stakeholdership is addressing the recent update and enforcement of federal regulation II (debit card routing) ruling. Many agreed that while CNP participation isn’t new to them, the Forum is working to ensure that issuers and other stakeholders are prepared to comply with the regulation. Specifically, the portion which requires issuers to enable at least two unaffiliated networks for routing of all debit transactions, in-store and online.
The Forum has numerous other projects currently underway that will benefit stakeholders throughout the payments ecosystem, including resources on:
- EMV contactless implementation at ATMs
- SRC (Click-to-Pay) demand, enrollment and benefits
- Phishing resistant authentication
- Synthetic ID fraud
- PINless debit processing implementation
- EMV fleet enhanced testing and certification
- On-device authentication data in contactless debit payments
- Mobile POS (mPOS) and tap-to-mobile solutions
The U.S. Payments Forum has recently published the following resources:
- QR Code FAQ: a brief resource aimed at addressing common questions associated with the implementation and use of QR codes in a payments setting. The resource is aimed at merchants, providers and consumers
- Fraud Mitigation Techniques webpage: a compilation of definitions, use cases and industry resources designed to help stakeholders navigate fraud mitigation
- Electric Vehicle (EV) Technology for Open Payments: a webinar exploring the EV market in the U.S., as well as strategies to improve interoperability and the implementation of open payments at EV charging stations.
Organizations, associations, government agencies and individuals interested in participating in upcoming projects and initiatives can visit the Forum website to learn about how to become a member. For membership levels, benefits and the application, visit http://www.uspaymentsforum.org/membership/membership-benefits/.
About the U.S. Payments Forum
The U.S. Payments Forum is a cross-industry body that brings stakeholders together on neutral ground to enable efficient, timely and effective implementation of emerging and existing payment technologies. This is achieved through education, guidance and alternative paths to adoption. The Forum is the only non-profit organization whose membership includes the whole payments ecosystem, ensuring that all stakeholders have the opportunity to coordinate, cooperate on and have a voice in the future of the U.S. payments industry. The organization operates within the Secure Technology Alliance, an association that encompasses all aspects of secure digital technologies.
About the Secure Technology Alliance
The Secure Technology Alliance is the digital security industry’s premier association. Through its U.S. Payments Forum, Identity and Access Forum and its collaborative working groups, the Alliance fosters open dialogue among industry stakeholders to explore and develop secure technology innovations in the payments, identity and access markets. By collaborating on education and guidance, the Alliance helps enable efficient, timely and effective implementation of large-scale, disruptive technologies. For more information, please visit https://www.securetechalliance.org.
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