VyStar Credit Union

Consumers will always use cash in some manner, but the push to utilize alternative payment methods such as credit and debit cards, mobile wallets and contactless payments offers an exciting future, one that will ideally prevent fraud while also providing a better customer experience. In recent years, we have seen a tremendous change across the payments landscape. While some countries still transact mostly through cash, others have almost completely abandoned it as a payment method. Mobile applications have decreased the reliance on cash in the United States by allowing consumers to store their cards securely. That increased mobile usage is a positive development for payments businesses because fraud is reduced.

As debit and credit card usage has increased in the U.S., so, too, has the need to protect consumer information. The creation of EMV chip cards has helped consumers and financial institutions prevent losses due to fraud because of how these cards are uniquely encrypted each time they are used. However, as more merchants utilize EMV-enabled terminals, fraudsters have turned to other creative techniques. For example, attacks on consumers at gas pumps using card-skimming devices have become more prevalent, largely because gas stations are not required to become EMV-enabled until October 2020. Fraudsters can use replicated or stolen cards at gas stations and for online purchases. Major breaches have also enabled card accounts to be sold, which has led to increased fraudulent online purchases. Tools currently exist that allow consumers to control their card activity, such as turning cards on and off as needed and allowing cards to be used only at specific merchants or locations. As consumers become more inclined to use plastic cards as their main payment method, we will need to be proactive in creating additional strategies to detect and prevent fraud.

 Cash will never be eliminated, but alternative payment methods such as debit and credit cards, mobile wallets and contactless payments will offer secure, convenient options for consumers 

In addition to EMV chip cards, contactless payment is another promising technology. Contactless payments are facilitated by Near Field Communication (NFC) Technology and provide consumers with the ability to “touch and go” without swiping or inserting their debit or credit cards. Contactless payments are tokenized, meaning merchants never actually have the card information. Instead, a merchant gets a one-time token from the card issuer, and that is used to complete the transaction. If the token is stolen, there is no way for a fraudster to obtain the cardholder’s personal information. About 63% of U.S. merchants have contactless terminals, which has become a better purchasing experience for consumers because of the added convenience and security.

More and more applications are giving consumers the ability to store their cards on file, and payments can be made only when the consumer adheres to their device’s security protocols. Uber has become an industry leader in allowing its customers to store a card on file and pay through its app, removing the need for a physical card or cash. This protects both the merchant/driver in the case of Uber and the customer. Uber drivers do not have to handle cash and know the service they provide will be paid for when they arrive at their destination. Meanwhile, riders know the set price they are being charged and do not have to worry about theft.

The electronic movement of cash has become another form in which consumers are transferring money. PayPalTM was the pioneer in person-toperson money transfer. However, newer services such as ZelleTM and Venmo, also allow customers to complete personto-person money transfers, such as splitting food tabs at a restaurant among multiple people or sending money to an out-of-town relative. 

ACH transactions have also evolved in recent years. This remains the main method for companies to complete direct deposit transfers, such as employee payroll. To meet additional consumer needs, modification of the Federal Reserve Bank’s settlement process was approved, which now gives financial institutions the ability to complete sameday ACH transactions. This means financial institutions can send same-day payments to merchants, such as auto dealers if they are attempting to fund a loan. It also reduces fraud by eliminating manual checks. In the future, we expect to see more of the transactions process handled through the real-time network.

Finally, data analytics has become the next big thing in business. There is an extraordinary amount of data that can be utilized to help create better customer engagement, from purchase offers to know what discounts will attract customers. Many financial institutions and businesses are using data analytics and machine learning to understand their customers’ needs and behaviors better. This has resulted in savings for customers while allowing financial institutions to drive revenue by creating a better overall experience.

Cash will never be eliminated, but alternative payment methods such as debit and credit cards, mobile wallets, and contactless payments will offer secure, convenient options for consumers.