Suzanne, what have you observed as some of the most significant changes in the payments industry over the past couple of years?
The role of mobile payments has increased exponentially over the past couple of years. Mobile wallets like Apple Pay are really starting to gain traction and soon Samsung Pay and Android Pay will as well. Mobile wallets will continue to grow and benefit from the impending EMV shift in the United States.
With the rash of big industry data breaches since 2013 security has become more important than ever before. Financial institutions are not only investing in EMV and tokenization, but also Point-to-Point Encryption (P2PE), which cryptographically protects account data from the point where a merchant accepts the payment card to the secure point of decryption.
In addition to security, regulatory change has become a very high priority over the past couple of years. As milestone and liability shift dates pass we will see technology innovation move back to the forefront, especially with mobile and alternative payments providers.
We have seen new payment processors enter the stage and enjoy great success, often at the expense of traditional incumbents.
Lastly, we are beginning to see companies in the payments industry mine customer data and create analytics that can support increasingly sophisticated merchant-funded rewards programs.
The customer’s location — physical store, mobile computer or desktop, smartphone or tablet — as well as recent purchase history, browsing habits and type of credit card used are among the many data points that payments providers can help retailers evaluate to make rewards programs more relevant to individual consumers.
Elan manages over $44 billion in vault cash to more than 33,000 ATMs on an annual basis. What makes Elan’s program so unique and why are so many ISOs and financial institutions turning to Elan for Vault Cash Management services?
Elan has the largest cash vault program in the country and is the only provider that offers both vault cash and processing, eliminating the need for separate vendors. We obtain cash directly from the Federal Reserve Bank and have cash vaults located throughout the country, reducing the fees ISOs pay associated with alternative programs. Elan recycles all residuals vs. redeposit, saving costs incurred with alternative programs. Elan also provides claim management, including customer/Reg. E, armored carrier and processor claims. Finally, we issue preemptive cash outage alerts and adjusts forecasts for holidays and times when ATMs may need more cash.
The 24/7 digital age is alive and well in the financial services industry. Not only are customers changing the way customers are banking, they are changing the way they are using branches. How is Elan guiding customers through this period of “branch transformation”?
It is important to understand that the branch isn’t going away any time soon. But the traditional branch design is no longer viable due to declining teller transactions, given that banks are experiencing a challenging low interest-rate environment and the effect of the recent regulations such as Dodd-Frank. Additionally, the economics of traditional branch banking don’t work like they used to due to the growth of mobile and online banking, rapidly diminishing volumes of teller transactions in branches and growth in labor costs.
We think the branch cost issue can be resolved by migrating transactions from the teller line to the self-service channel using assisted self-service interactive teller units. This allows financial institutions to add sales jobs in the branches and reduce the teller count. The interactive teller machines combining ATM and teller transactions enable banks to extend their footprint at a low cost and provide services outside traditional banking hours. One other important change we are introducing is labor-saving cash recycling. The volume of cash has grown significantly in U.S. bank branches and ATMs, so using cash recycling helps with cost savings and the branch transformation process.
Successful branch transformation programs have already reduced branch real estate and operating costs by 40% to 60%, reduced the number of tellers needed by 50% and enabled customers to make 30% of teller transactions outside of “normal” business hours. Branch transformation is helping bankers across the country break out of the old paradigm and become more profitable and competitive.
2015 is a big milestone year for EMV. How are you preparing Elan clients to transition to the new chip-card technology?
Offering clients a manageable, cost-effective conversion is valuable to Elan. As a processor of payment transactions, it’s important Elan offer a solution with long-term cost reduction to clients, plus flexibility to create competitive, fast-to-market payment programs.
As part of our planning projects, the Elan Agent ISO user guide has already been updated with the latest EMV and Mobile specifications.
Elan has multiple EMV projects moving forward – to include ATM compliance, MoneyPass Debit AID licensing arrangement, and in-house chip data preparation to include guidance on chip card personalization, key management and online authorization.
ATM Acquiring – Elan has strategically mapped technical drop dates to deliver EMV compliant hardware and software upgrades for managed ATMs. Vendor readiness and certification for ATM will be done in a phased approach. In 2015, Phase 1 will certify selected Diebold and NCR EMV-enabled card readers. Phase 2 will certify the software and configuration changes to support EMV transaction messages at the ATM – prior to the announced MasterCard October 2016 and Visa 2017 ATM Acquirer Liability Shift dates.
MoneyPass® Network – Elan has signed an agreement with MasterCard and Visa to adopt the common U.S. Debit Application Identifier (AID) specification for the MoneyPass surcharge-free ATM network. The agreement with MasterCard and Visa will further expand EMV adoption in the United States.
Card Personalization – Elan has selected from multiple chip profiles to provide issuer guidance on the chip card set-up, based on individual business needs. Advising on which card data is stored on the secure microprocessor chip, and preferred Cardholder Verification Method (CVM) settings, will ensure broader acceptance at the point of sale and ATM.
Online Authorization – Elan will support the processing of chip card transactions with EMV Data Element Field 55 sent by the merchant and ATM acquirer for authorization.
Cryptogram Authentication – Our abilities will include the interrogation of the online cryptogram, to advise the card is authenticated as genuine, as defined by issuer-determined risk parameters.
Key Management – Elan will support online, offline and dual interface chip card profiles by performing key generation, key import and export, and protection of Issuer Master Keys, all within the security of Hierarchical Storage Management systems. With key management, Elan will have ability to control the cryptographic security keys associated with cards and manage the entire card lifecycle.
Scripting – Allows card issuers a greater acceptance footprint, cost savings, and fraud risk protection, by changing card behavior in the field, post issuance. Scripts are essential to the management of offline PIN profiles and can be used to change a PIN, or synchronize an offline PIN, stored on the chip.
Elan will also support enhanced fraud prevention services through issuer scripting – to immediately block a card, or force the card online to verify PIN check.
Other card management benefits include ability to activate, and deactivate, payment applications personalized to the chip.
Cardless ATMs – are they a fad or are they here to stay?
They are definitely here to stay. The move to cardless ATM withdrawals is gathering speed and over the past year several pilot programs have successfully launched across the country.
There are many reasons why cardless ATMs will grow in popularity. One of the unexpected benefits is that going cardless adds convenience by quickening transactions by increments of 10 seconds.
Pre-staged transactions, where customers queue up their transaction with their smartphone happen in as little as seven seconds as opposed to the more than 45 seconds it can take for a traditional card-based ATM transaction.
Cardless ATM transactions are seen as “friendlier” to customers and over the next few years will become a customer acquisition tool to attract millennials to any institution offering the service.
And most importantly, the absence of physical cards circumvents a persistent ATM threat: skimming. You can’t skim a card because there is no card to skim.
Financial institutions are facing increased compliance and regulatory requirements year after year. What kind of impact has this had on Elan? How are you able to help your clients with their compliance and regulatory needs?
Elan has invested in a dedicated team of compliance professionals to help our ATM and card clients remain compliant and up to date on all regulatory changes. Our customers know we will help them stay current on everything from 3DES, PCI, Windows 7, ADA and EMV. We remain focused on customer needs and have redefined compliance support to make it a competitive advantage for our valued clients. In addition, we continue to harden our environment, reducing the potential for security issues and fraud occurrence.
Data is showing that millennials are heavy debit users over other forms of payment. How can financial institutions capitalize on this trend and attract and retain this desirable demographic?
With 79 million U.S. millennials (people between the ages of 16 and 34) making up about one third of the U.S. population you must have a strategy for this key demographic. Millennials are the most eco-friendly, socially adapted and connected citizens in today’s world. Millennials are masters of the Internet, social media and mobile mediums and they are redefining the engagement model for almost every business.
In order to meet the needs of the technology savvy millennials we will introduce new mobile and ATM capabilities that transform the debit card and ATM into a customer focused channel for value added services, which in turn will provide greater customer retention and profits.
Global smartphone adoption has exploded, growing faster than any consumer technology in history. So far, acceptance of smartphone/mobile wallet technology is split among generational lines, with many young people more than willing to use their devices to pay for everything from a cup of coffee to a taxi ride. Most millennials expect their smartphones to eventually replace cash, debit and credit cards.
Millennials are embracing mobile technology because it is both more convenient and safer than traditional cards. For example, using a smartphone prevents skimming, where fraudsters set up cameras on ATMs to capture card numbers and PINs.
Keep in mind that every financial institution is sitting on a tremendous amount of valuable data enables them to communicate and position effectively to this group and others. Not only is it important to capitalize on millennials, as they start their financial life journey, but equally important to focus on other demographic groups, such as baby boomers, who are more financially secure. Regardless, understanding the needs of your customers and communicating the value you bring and the services you offer is essential. So, to the younger audience, mobile, ATM, Debit are a critical mix. Ensuring these channels are linked, so that an offer or message presented in one can be fulfilled through another, will be perceived as very customer friendly and customer experience driven. We can help FIs in this area, due to our breadth of experience.