Are the two largest global payment networks taking advantage of the coronavirus crisis to diminish competition? That’s the question posed to Fed Chairman Jerome Powell in a letter from Sen. Richard Durbin. The namesake of the Durbin Amendment asked the Federal Reserve to probe practices around debit card fees levied during the coronavirus crisis by global networks. The letter called on the Fed to determine whether the global networks have a shared incentive to limit the transactions processed by EFT debit networks. He said practices by the large card networks are diminishing competition in the online payments marketplace.
Read the letter in its entirety here
Read The Wall Street Journal article here
PULSE Perspective: Efforts by any organization to constrain debit routing choice, if shown to be true, could be a threat to a vibrant and healthy competition in the market. An issuer is better served if they have a network partner they are aligned with, especially an unaffiliated network, because a merchant is more likely to choose a network with the lowest cost.
The pandemic has done what years of hype could not – accelerated the growth of mobile payments. According to eMarketer, mobile wallet volume in the U.S. is set to swell from an estimated $662.3 billion in 2019 to an estimated $1.33 trillion in 2023. This includes mobile commerce, mobile P2P payments, and mobile proximity payments (i.e., in-store payments via smartphone).
PULSE Perspective: After about a decade of buzz, 2/3 of issuers are expected to offer contactless by the end of 2020. Consumer preferences on how, when and where they want to pay are expected to continue to evolve and change.
In another example of how the pandemic is affecting the way banks and credit unions operate, Wells Fargo reported its teller and ATM transactions plunged 28% in the second quarter. General-purpose credit card volumes fell 22% to $15.8 billion, while active general-purpose credit card accounts dropped 9% to 7.3 million. The company also reported that it had 5,300 branches during the quarter, down from 5,442 in the same period last year.
PULSE Perspective: Financial Institutions can conduct most business remotely and securely — if the proper precautions are taken. Resisting the changes in consumer behavior could potentially put issuers at a competitive disadvantage. Learn more about how you can positively impact your debit bottom line here.
The security efforts of Financial Institutions depend on analyzing consumers’ transaction histories to gain understandings of their normal behaviors. The COVID-19 pandemic has undermined this practice, as normal purchasing behavior has been disrupted. Machine learning can help Financial Institutionss ensure their fraud-fighting models quickly adapt as consumer behavior changes. The technology can help detect developing patterns and compare specific behaviors with those of the larger customer base. This analysis helps machine learning predict which transaction behaviors consumers are likely to exhibit in the future.
PULSE Perspective: Financial Institutions’ fraud response must adapt quickly to defend cardholders amid rapidly evolving circumstances. The fraud experts who manage PULSE DebitProtect®, a core service available to all PULSE participating issuers, are using machine learning analytics and artificial intelligence for fraud decisioning.
The role of marketing has increased in importance at most banks and credit unions in the wake of the pandemic. Jim Marous, Co-Publisher of The Financial Brand offered analysis in the article, Digital Channels Critical to Financial Marketers in the COVID Economy. Marous believes marketers who had the capability to communicate personalized, relevant and compassionate messages in real time using multiple channels were the most prepared for this unprecedented period. According to a special Covid-19 edition of The CMO Survey sponsored by Deloitte, Duke University and the American Marketing Association, 70% of financial institutions indicated they have shifted resources to building customer-facing digital interfaces, with 57% investing in new communication technologies and 48% transforming their go-to-market business models.
PULSE Perspective: The pandemic has highlighted the importance of agility, as the marketplace changes quickly and frequently. Financial institutions need to be able to pivot while maintaining a focus on customer needs as many experience economic hardship. Understanding various customer journeys is essential since consumers can negatively react to ‘tone-deaf’ marketing in an instant with a push of a button.