This article previously appeared on CUInsight.com
by Tom Church-Adams, SVP, Pay Products
Over the past decade, consumers have enjoyed a large and growing number of choices for making payments. Picking one for a particular transaction generally has come down to two things: user convenience and merchant acceptance. A third consideration, however, is emerging. Thanks to massive, headline-grabbing cybercrime and data breach incidents, consumers are paying much closer attention to the security implications of their payment choices.
As consumer concern around personal data security grows, big tech companies are speaking loudly about the advanced safety features of digital payments. Many of the recently developed channels for electronic payments are, in fact, very secure, and it makes good business sense for providers to promote that aspect of their innovation. There’s an unfortunate side effect of this promotion, though. Because big tech companies are talking more frequently and more confidently about security, consumers may believe that digital payments are moresecure than traditional ones, such as debit cards. That is, of course, not the case, and correcting the misconception is something every consumer-centric, not-for-profit financial institution should feel duty-bound to pursue.
Talking about the security benefits of debit cards, specifically, is a smart place to begin your efforts to educate members. That’s because debit cards are a favorite target of sensationalized content. Generally speaking, such content either misses (or intentionally leaves out) four facts about the security of debit cards.
1. Debit card fraud is falling.
Nearly every debit card provider today issues EMV chip cards. EMV chips, embedded in a card’s plastic, store account information directly on the card. That information is encrypted uniquely each time it is accessed. This improves upon the traditional magstripe, which uses a static code for verification, making it much more difficult for scammers to clone cards. The impact on fraud has been dramatic. Among retailers with EMV-enabled POS systems, counterfeit fraud dropped by 76 percent from September 2015 to December 2018.
Most of today’s EMV chip cards also contain a magstripe to enable transactions at merchant locations that aren’t yet equipped to accept chip card payments. Although so-called fallback transactions, in which a failed chip prompts the terminal to access the magstripe, do occur, they are becoming much less prevalent thanks to improved fraud strategies. In 2018, fallback losses decreased by more than 45 percent.
Fraudsters are well aware of the extra layer of protection that comes with EMV chip cards. Their solution is to attack the data at the local source via skimming devices. To avoid detection, criminals typically plant these devices on unmanned terminals, such as ATMs and gas pumps. Consumers are becoming savvier about spotting skimmers. Their physical nature alone makes them much easier to detect than malware and other digital tools of the cybercrime trade.
2. Debit cardholders are protected by network liability terms.
Long-standing, network-backed dispute and liability practices are among the most meaningful benefits to tout among debit cardholders. Whereas many of the emerging electronic payment channels are backed by large companies that consumers are beginning to trust, a sizable number of them are entirely new to the financial space.
Visa, Mastercard and other card networks, not to mention regulators, have developed well-defined rules and practices debit card issuers must follow anytime a cardholder reports fraud. There are even more rules for circumstances in which the fraud is confirmed. Most important of these rules is that the credit union or bank that issued the card must, in most circumstances, reimburse the cardholder for his or her losses.
The key point is this – when debit cardholders run into issues with suspicious transactions, there are several reputable and accountable partners to help in the rare circumstance their issue is not immediately resolved.
Digital wallet and P2P network providers are no doubt iterating their own dispute and liability policies and procedures to provide an experience equal to that of credit unions and their network partners. But for the time being, a member’s greatest chance for a painless dispute resolution and funds replacement is with their trusted credit union.
3. Debit issuers consider the whole cardholder relationship.
When debit fraud results in stolen funds, it can take several days for the issuer that holds the account to get those funds back into the checking account associated with the card. This is a fact often exploited by content that seeks to compare debit cards to digital wallets. But, here’s the lesser discussed angle: Credit union issuers especially have a lot of flexibility – and incentive – to help out their members during this three- or four-day window. This is especially true when the debit card is one of several accounts or products a member has with their credit union.
Let’s say, for instance, the account of a victimized credit union member was completely drained of funds, leaving the member with no money to make an auto loan payment. When the credit union also holds that loan, it’s much easier to waive a late fee or even float the member an interest-free loan to get the payment taken care of. Although it may one day be possible for financial startups and digital native competitors to offer the same kind of support, no such practice exists (at least for free) today.
4. Debit programs are iterative and evolving.
Like most every aspect of financial services, debit cards are going through something of an evolution. Much of the innovation the channel is experiencing strikes directly at the heart of the three things consumers demand of their debit cards: convenience, acceptance and security. Among these developments is contactless debit cards. Transmitting data through RFID achieves much of the same objectives as EMV chip cards and also adds an element of convenience. While a swipe or an insert doesn’t take herculean effort on the part of a cardholder, it certainly is easier to wave a piece of plastic over a terminal. As for acceptance, contactless capabilities were baked into the millions of EMV terminals installed in locations across the globe over the past several years. If merchants can accept chip cards, they can accept contactless.
Another way the debit card channel is improving is found in the digital realm. Online and mobile apps like CardNav by CO-OP allow cardholders to set spending controls and manage two-way fraud alerts to keep themselves and their funds even safer. Issuers are big fans of the apps because they deputize members in the fight against fraud and they increase engagement at different points across a cardholder’s lifecycle.
Consumers love choice, and every credit union issuer should be strategizing around offering as many payment options as they can reasonably sustain for their members. Digital wallets and P2P are popular, some may even say they have become table stakes for capturing the love and loyalty of members. But, credit unions also have a responsibility to help members separate reality from hype when it comes to discussions around payments security. Debit cards continue to be one of the safest ways to transact, and members should feel confident relying on them to push forward on their financial goals.
Learn how to turn your debit program into a key source of revenue and member engagement with CO-OP Debit.
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