After a frantic week in Las Vegas for Money20/20, I can finally take a moment to reflect on some of the big themes and takeaways from the show. Here were the big ideas:
1. Identity is Front & Center
Because of the Equifax breach, there’s renewed interest in accurately establishing the true identity of online customers. There seems to be a growing chorus that static data and knowledge-based authentication methods can undermine the integrity of the financial services industry. More and more companies are exploring how can they evolve past KBA and SMS-based authentication to methods to reliably and accurately extend identity to an ecosystem of third parties across industries.
2. Blockchain is Going Mainstream
At last year’s Money20/20 show, Bitcoin was the topic du jour. This year, blockchain was hogging a lot of the limelight. Although blockchain technology is still in its nascent stage, blockchain technology proponents believe it can be used to create secure and convenient alternatives to time-consuming and expensive banking processes. And this theory seems to be gaining traction, as almost every major bank (including UBS, Goldman Sachs, and Morgan Stanley) around the world is testing it.
3. Fraud is the Fastest Growth Segment
According to Michael Abbott, Digital Lead for Financial Services at Accenture Consulting, “the industry could expect $31.3 billion in global card losses in 2018, which have increased by 18% every year since 2013.” Adding to the misery, there were 791 data breaches reported in the U.S. by the end of June 2017– a 29% increase over the same period in 2016, and the highest number recorded for any half-year period (source: Identity Theft Resource Center and CyberScout). It’s no wonder that bankers view data security and identity proofing as among the top challenges to compete in payments today.
4. Will Zelle be the Death of Venmo?
When PayPal reported its 2016 fourth quarter earnings, one of the most impressive items was the incredible growth of Venmo, the popular peer-to-peer (P2P) payment platform. In Q4, Venmo had processed $5.6 billion in total payment volume, a whopping 126% increase year over year. This year, banks are responding by launching Zelle, a jointly backed P2P app that links directly to a consumer’s account at one of the participating banks. Clearly, banks want their account holders more engaged with their own banking products and services than having their customers practically forced to retreat to third-party services like PayPal.
5. Secure Biometrics and Strong Authentication
With KBA quickly falling out of favor, the FinTech industry seems to be scrambling to understand how biometric-based authentication will work and whether it it can used to securely, reliably, and easily establish identity. On-device biometrics, like liveness detection, will likely be part of the authentication for account setup, service authorization, and/or access to apps and services, but it’s still a bit unclear how this will all shake out (naturally I have my own biases here;).
6. AI & Machine Learning
Boy, there was a lot of chatter about AI and machine learning at this year’s show. In fact, the first day of the show had a track entirely dedicated to AI’s implications for banking and commerce. A primary focal point for the AI conversation in payments is anti-fraud and many of the emerging vendors in this space, including Signifyd, Kount, and Jumio, are investing heavily in AI and machine learning to help identify criminal patterns.
But, I’m still not convinced that most merchants (and competing vendors) fully understand the underlying principles of machine learning. When it comes to machine learning, it’s not who has the best algorithms who wins, it’s who has the most data. Given that fraud generally represents a small fraction of overall traffic, the importance of having a large volume of fraudulent transactions is further underscored. Solutions such as Jumio that have amassed a massive database of attempted fraud have a huge competitive advantage because this data enables them to better train their ML algorithms to more accurately identify fraud and detect fraud patterns.
7. The Importance of User Experience
As the payments universe expands, customer experience is becoming the prime competitive differentiator. User experience is a genuine threat to banks because it usually translates to fewer touchpoints with their own customers. Consider this: 61% of consumers welcome open access to their finances so they can see checking account or credit card balances when paying with any mobile app.
8. The Chinese are Coming
AliPay and WeChat Pay, China’s two dominant mobile payment platforms, caused quite a stir and some of the most interesting conversations I had at the show were about how much adoption they can generate in North America. Alipay and WeChat Pay are ratcheting up their expansion plans through separate initiatives that will allow taxis outside the mainland to accept digital payments from Chinese travellers using these services.
9. Digital Wallets are Becoming Real. Really.
Despite our addition and love affair with our phones, broad adoption of mobile payments has been lackluster. But mobile payments are poised to make a move in 2018. Consider this: 64% of consumers plan to use a mobile wallet in 2020, up from 46% today (source: Accenture 2017 North America Consumer Payments Pulse Survey). Thanks to APIs and open banking, it’s finally possible for payments players to deliver more valuable, consumer-focused payments experiences—with immediate rewards, proactive balance alerts and more—that bring the power of mobile, the ecosystem and data sharing to life.
10. Will Apple’s Face ID Change the Face of Online Identity Verification?
With the introduction of Face ID, and the removal of the Touch ID button, Apple’s new iPhone triggered a lot of speculation about how this new technology might change the world of online identity verification. While you can now buy goods using your new iPhone X, authenticating your identity with facial recognition, does this work in a card-not-present environment. My quick take is no. Face ID is a fancy, biometric approach to two-factor authentication, but it is not intended to be used at scale to confirm identities of online users.
As a Money20/20 newbie, there was a lot to absorb. So, I’m genuinely curious about your takeaways from Money20/20.
