Following a pandemic-driven hiatus, the Payments Summit made its long-awaited return to Salt Lake City. More than 400 guests and 85 speakers from every facet of the payments ecosystem converged to chart a clear course for the industry’s future. This year’s event stood out among the rest, serving as the first opportunity for many attendees to socialize with peers in-person since recent events sparked considerable change in the payments landscape.

An optimistic and energetic aura was prevalent throughout the conference’s keynote addresses, roundtables and panel discussions. Those in attendance relished the opportunity to address the past two years’ unique challenges and the monumental successes in the implementation of new Fintech and payment opportunities.

The 2022 Payments Summit, hosted by the Secure Technology Alliance, centered around three distinct event tracks: Emerging technologies, Industry Gamechangers and Hot Topics. Each session explored the crucial themes that are shaping the payments industry right now, including major strides in contactless implementation, the peer-to-peer payments and buy now, pay later (BNPL) phenomenon, the evolution of authentication and fraud mitigation techniques, crypto and digital currencies, card-not-present (CNP) transactions and much more.

“In the past five years, there has been more innovation in payments than in the past 50 years combined,” remarked opening keynote speaker Ulrike Guigui, executive vice president and head of enterprise payments at Wells Fargo. “Payers have more options than ever before! Banks are launching digital cash; retailers are offering payment tools and cross-border transactions are reaching any country. The Payments Summit provided an opportunity to put a laser focus on solutions that serve our communities, clients and customers. Let’s strive to provide each customer segment with the digital, user-friendly experience they desire.”

Evolving card technologies and digital currencies in the future of payments

The past two years have pushed even the most resistant consumers toward e-commerce and omnichannel experiences. “Card-not-present transactions are now larger than card-present,” said Jason Bohrer, executive director of the Secure Technology Alliance, during his welcome address. Despite the growing number of options available to consumers, cards still have a place in the future of payments. “By 2026 we expect U.S. consumer payment transactions for card payments to exceed 60%,” said a speaker representing Euromonitor International. There is a desire for enhanced security and advancements in authentication as more purchases move to the digital space. In response, cards technologies are evolving to become more fraud resilient.

Biometric cards: One area of opportunity is biometric cards. Although these cards are already on the market, there is room for growth and an interest in using biometrics to facilitate pinless, one-tap transactions. “81% of consumers are ready to use fingerprints for the sake of both security and convenience instead of a pin,” said the CEO of IDEX. Biometric cards also allow for instant two-factor authentication at the point of sale (POS). “Biometrics can eliminate false declines due to the cardholder miss-entering their PIN, creating a simple, frictionless experience for the consumer,” said Idemia.

Dynamic CVV: Card security codes are a staple in CNP fraud mitigation, however, there are potential shortfalls with static CVV because fraudsters can gain access to the 3 or 4 digit code just as easily as the full credit or debit card number. One solution proposed at the Payments Summit is the implementation of a dynamic CVV. These card security codes change automatically during every card-present EMV transaction and extend to ecommerce payments. Consumers will be able to visually confirm the CVV change via a small digital display on the back of the card for an optimal user experience.

Greener cards: Sustainable payment options are rising in popularity as the younger generation gains more buying power. “73% of people surveyed say it’s important that their financial institution is environmentally conscious,” according to a speaker with CPI. Eliminating the use of plastic to manufacture cards is easier said than done, but there are efforts to make sustainability part of the payments process. The payments industry is currently exploring a more eco-focused strategy for payments, including upcycling ocean-bound plastic, metals and industrial plastic to create cards.

Cryptocurrency: Speakers found common ground in the belief that digital currencies are undoubtedly making their mark on the future of payments. According to a Kharpel statistic cited by a speaker with IDEMIA, the market value of cryptocurrencies has skyrocketed from $145B in 2017 to $2.5T in mid-2021.

There is a consensus among payment industry leaders regarding the volatility of some forms of cryptocurrency, however, many touted the potential for stablecoins to be used for everyday payment transactions. These stablecoins are a class of cryptocurrency that tend to retain their monetary value because they are backed by a reserve asset, such as the U.S. dollar. Cryptography exists at the heart of cryptocurrency, meaning that access to the currency is limited to the person who holds the encryption keys, i.e., the cryptocurrency’s owner. De-centralized digital currencies offer “lower merchant fees, eliminate chargebacks and are resistant to fraud,” according to Rocketfuel Blockchain.

Keeping an eye on CBDC: On the other hand, Visa is urging commercial banks, merchants and technology developers to prepare themselves for the advent of Central Bank Digital Currencies (CBDC) in the U.S. CBDC is a digital representation of sovereign currency that is issued by a jurisdiction’s monetary authority and appears on the liability side of the monetary authority’s balance sheet. The digital currency is currently being piloted in China, Russia and Saudi Arabia. CBDC has been tied to lower transaction costs, increased convenience since they can be stored in mobile wallets and financial inclusion benefits for the unbanked and underbanked. 

The contactless wave continues to grow

What began out of necessity quickly became one of the most notable payments adoption efforts in recent history. In early 2020, industry stakeholders gathered at the Payments Summit to discuss ways to jumpstart consumer interest and merchant implementation of contactless payment methods. A few months later, fate would catapult the movement into the mainstream and contactless growth has soared since then. “Contactless penetration is now over 15%, more than double from just a year ago. We have 400 million contactless cards in market, quadruple the pre-pandemic number,” said Visa’s U.S. Head of Tap to Pay during the 2022 Payments Summit’s “Tap-to-pay” panel. Citing data shared by Wells Fargo, 75% of in-person payments are now chip. Five years ago, that number was less than 5%.

Transit payments: Quick, contactless payment experiences are a major area of interest for the transit sector, according to a number of speakers. NFC payments and pay as you go (PAYG) open loop travel are top of mind for public transit agencies across the U.S. Discover Global Network highlighted its Global Transit solution as a means of speeding customers through the transit system by allowing riders to use their own mobile wallet or contactless card to “tap and go” at transit terminals as they do for all their everyday purchases. Overall, there was consensus among speakers regarding the need for equity in transportation. The future of payments in transit is contactless, frictionless, interoperable across multiple transit networks and accessible to the unbanked.

Buy now, pay later (BNPL) and instant payments

Consumers have become much more accepting of new payment methods in the past few years and the industry is certainly taking notice. Speakers across several sessions indicated that the use of mobile payments apps has stretched far beyond the typical young and tech-savvy crowd. Whether it be peer-to-peer payment options, or credit alternatives like buy now, pay later, the modern consumer has an appetite for adaptive, accessible, on-the-go payment options.

P2P Payments: Peer-to-peer (P2P) applications like Venmo, Cash App and Zelle have become a staple for consumers across various age ranges and socioeconomic backgrounds. Survey data shared by Aptys Solutions found that 33% of people increased their use of mobile payment apps in the wake of the pandemic and 67% say they expect the increase to be permanent. Likewise, 28% increased their use of nonbank P2P payment tools. 

BNPL: In a session led by BNPL Fintech providers, Afterpay stated the fast-growing new payment option already represents 3% of U.S. e-commerce and forecasted it would reach 10 to 12% by 2024. American Express described the allure of BNPL financing, such as the commonly used “pay in 4” option, by highlighting the lack of interest or upfront fees to consumers. As to what is driving the popularity of BNPL, the consensus was that many people see it as a budgeting tool that prevents them from getting out of control with debt, since payments are made using debit or ACH instead of credit lines. Zip’s spokesperson said that 70% of Americans are credit revolvers and 70% live paycheck to paycheck.

BNPL can help them bridge small gaps before payday for essentials like food and transportation, as well as giving them a short-term financing option for small and affordable rewards in health, beauty and fashion without running the risk of a “credit debt hangover.” This is especially true for millennials and Gen-Z young people who saw their parents dealing with crushing debt during the 2008 recession. Speakers agreed that the majority of their customers are repeat users who want to maintain a good relationship with their BNPL account, so that they can continue to use it in a responsible way

Faster payments: “By 2025, instant payments and e-money payments will account for more than 25% of global non-cash transactions, up from 14.4% in 2020,” shared keynote speaker Judith McGuire, VP of global products and pricing at Discover Global Network. These days Instant gratification is the name of the game both inside and outside of the payments landscape. People want instant access to information, entertainment, social interactions and of course, money.

Keynote speaker Tim Boike, VP of industry relations and engagement at the Federal Reserve Bank of Chicago, spoke at length about the critical importance of faster payment methods. “Nearly two-thirds of surveyed businesses indicated they would factor access to faster payments into future decisions on whether to switch banks,” said Boike. The Federal Reserve is poised for a 2023 launch of its FedNow instant payments service, which will enable financial institutions across the U.S. to provide secure, instant payment services around the clock. The service includes integrated clearing functionality and spans a multitude of use cases including a transfer of funds from consumer-to-businesses, account-to-account, person-to-person, business-to-business and government-to-consumer.

Forging toward a fraud-resistant future

The payments industry is ever-changing, but no matter which way the wind blows, one thing remains consistent: fraudsters will always find new ways to get their hands on people’s hard-earned assets. Nearly every panel at the Payments Summit touched on fraud in some capacity. Keynote speaker Mike Lemberger, senior VP and chief risk officer for North America at Visa, took some time to celebrate the victories.

“We’re observing a 98% YoY increase in the card-not-present tokenization adoption rate and a 27% YoY increase in EMV 3-D Secure (3DS) adoption,” said Lemberger. “Meanwhile, the overall global fraud rate has decreased by 15% YoY. Card-present fraud is down 7% and card-not-present fraud has decreased by 11%.” However, there are major shortfalls regarding fraud prevention habits on the consumer side. “Unfortunately, according to stats shared on Security Boulevard’s website, 78% of people who receive unsolicited links click on them and 22% of all data breaches back in 2020 involved phishing attacks. 51% of people admitted to using the same password for everything, according to a survey by Google.” 

Merchant considerations: Fraud impacts every member of the payment stakeholdership in unique ways. According to statistics shared by Cybersource during the Summit, “For over two-thirds of merchants, the pandemic led to an increase in fraud. Enterprise merchants generally experience the broadest range of fraud attacks. 60% experienced say they experienced friendly fraud, and another 60% experienced card testing fraud.” Friendly fraud occurs when a fraudster claims they did not make a purchase or receive the good or service they paid for so they can request a refund. It is also referred to as chargeback fraud.  On the other hand, card testing fraud occurs when someone tries to determine if stolen card information can be used to make purchases. “Biometric indicators are by far the most effective way to detect and prevent fraud,” said the Senior Director of Cybersource. This of course includes fingerprint and facial scanning technology.

Quantum computing concerns: Quantum computing has garnered quite a bit of hype in recent years, especially in the security space. What are the benefits of quantum computing in the context of payments? Can it cause more harm than good? Both queries were addressed during the “Future of Authentication and Fraud Detection” panel. “In the not-so-distant future quantum brute force attacks could become a significant issue for card payment transactions,” said the Managing Director USA for SCIL.

Even highly encrypted forms of currency like Bitcoin may be at risk. “For example, if you consider RSA encryption with a 2,048-bit key, it will take a conventional computer 300 trillion years to break the key. A quantum computer powered by 4,099 qubits could crack it in ten seconds.” There is hope though. SCIL believes a fusion of quantum randomness with data, creating dynamic two-dimensional data, is a potential solution for quantum brute force attacks. The technology keeps the PAN value and adds a unique identity based on quantum randomness.

Fighting back against fraud: It wasn’t all “doom and gloom” among speakers and attendees on the fraud front. Many highlighted the benefits of EMV 3DS, authentication advancements and tokenization implementation in mitigating fraud risk. EMV 3DS is an ecommerce fraud prevention technology that enables consumer authentication for card-not-present purchases, without adding unnecessary friction to the checkout process. EMVCo’s Director of Engagement and Operations explains the benefits best. “Issuers gain enhanced authentication and fraud management. Merchants gain improved transaction security, fewer false declines and reduced risk of checkout abandonment. Even consumers benefit from EMV 3DS through safer checkout experiences,” he noted.

It’s often said that fraudsters prefer low-hanging fruit. It is usually easier to move on to the next target than work to overcome barriers put in place to prevent fraud, such as tokenization and authentication tools. “Tokenization is a very powerful tool, especially when authentication is combined with it. It provides a powerful signal of identity which helps the entire payments ecosystem,” said a speaker representing Discover Global Network. “Tokens can be held in place of the payment card data and it de-scopes your environment and reduces your compliance costs,” added the Chief Operating Officer at TokenEx. Tokenization is an especially impactful tool given the significant rise in online transactions in recent years. Tokenization allows these transactions to take place without the consumer’s actual sensitive card data being provided. 

Mobile driver’s licenses on the move

The modern consumer has grown accustomed to having everything available at their fingertips. Smartphones and mobile devices store payment information, photos, important contacts, social media accounts, mission-critical emails and much more. Therefore, for many, mobile IDs are the logical next step in the digitization process. The Payments Summit shined a spotlight on the fast-growing mobile driver’s license (mDL) movement, which is taking hold in more than 30 U.S. states. mDLs provide individuals with a valid, highly secure, cryptographically protected identification credential that can be stored on their mobile devices such as smartphones.

Mobile driver’s licenses and mobile IDs are supported by the ISO/IEC 18013-5 standard, which establishes clear guidance and secure, interoperable specifications for the implementation of mDLs and mobile IDs. The standard empowers relying parties including retailers, transportation networks, financial institutions and government agencies to confidently deploy mDL and mID readers.

Age-based purchases: Pilot programs in Utah, Louisiana, Maryland and Virginia are allowing mDL holders to use their mobile ID for age-based purchases such as alcohol and certain medications. Looking ahead, payments industry stakeholders expressed plans to eventually integrate mDLs to speed up data capture during lengthy transactions, including in-store credit card applications and mobile phone plan sign-up processes.

Taking to the skies with TSA: Just days ago the Transportation Security Administration began accepting mDLs as a valid form of identification via Apple Wallet at select TSA checkpoints inside Phoenix Sky Harbor International Airport. A speaker representing the TSA shared that the authentication process is fully contactless and mDL holders will be able to consent before the transfer of personal data occurs. Users can choose which personal identification details to share and which not to share. For example, they may choose to share their name and birthdate, but not their address. Face or fingerprint biometrics will also be involved in the verification process. According to TSA, the airport in Arizona will serve as the jumping-off point for a more expansive mDL launch in the coming months.

The Secure Technology Alliance has been a longtime proponent of mobile driver’s licenses. Alliance members’ efforts include the development of mDL Connection, a community resource for mDL awareness, education and coordination activities.

Closing remarks

In bringing key payments stakeholders together, the Payments Summit provided a space to work toward a goal of providing faster payments, more payment inclusivity for the underserved and superb consumer experiences through every step of the transaction process. The industry is thinking outside of the box and beyond its traditional perception of payments possibilities to create technology that is as diverse as the average consumer base. By sharing this wealth of information, the Secure Technology Alliance proves that it pays to be at the Payments Summit!

About the Secure Technology Alliance

The Secure Technology Alliance is the digital security industry’s premier association. The Alliance brings together leading providers and adopters of end-to-end security solutions designed to protect privacy and digital assets in payments, mobile, identity and access, healthcare, transportation and the emerging Internet of Things (IoT) markets.

The Alliance’s mission is to stimulate understanding, adoption and widespread application of connected digital solutions based on secure chip and other technologies and systems needed to protect data, enable secure authentication and facilitate commerce.

The Alliance is driven by its U.S.-focused member companies. They collaborate by sharing expertise and industry best practices through industry and technology councils, focused events, educational resources, industry outreach, advocacy, training and certification programs. Through participation in the breadth of Alliance activities, members strengthen personal and organizational networks and take away the insights to build the business strategies needed to commercialize secure products and services in this dynamic environment. For more information, please visit www.securetechalliance.org.