At the end of 2015, the Retail Payments Risk Forum, which is part of the Federal Reserve, promised the payments community it would provide its projections for the year 2016.
And, as promised, the group delivered this week with eight bold projections that don't give such a positive outlook for mobile payments as many in the industry may have hoped. But, in its brief report, it did also note that the forecast comes from the Retail Payments Risk Forum staff and is not representative of the Federal Reserve System's or Board of Governors' opinions.
Those eight projections (in no particular order) are: Cyberattacks will be the top threat to payments security; mobile point-of-sale payments will not take off in 2016; EMV chip card POS migration will pick up pace; ACH same-day service will not be a huge hit; EMV ATM liability shift will cause the number of ATMs to shrink; Mobile wallet space will continue to see turbulence; Blockchain technology interest will accelerate; Biometric technology improves, but passwords remain supreme.
To dig further into the issues, here's what the crew said about the above eight topics.
- Cyberattacks: "Cyberattacks and data breaches will be as robust as ever and will be the number one threat in the payments ecosystem. As retailers and financial service companies strengthen their defenses, the Risk Forum predicts that hackers will widen their focus."
- Mobile POS Payments: "Like the broken analog clock face that is correct twice a day, we believe that those forecasting 2016 as the 'year of mobile payments' (as they did in 2013, 2014 and 2015) will be a little bit right but will still be waiting for this optimistic prediction to be fully true. While the adoption pace of mobile payments is growing because of the increasing influence of millennials, the issues of limited merchant acceptance points, fragmentation and consumer concerns over security and privacy will remain as substantial hurdles. Major educational efforts will be launched stressing the increased security provided by mobile payments through tokenization and biometrics."
- EMV Migration: "Credit and debit card reissuance will continue during 2016 and should reach significant conversion levels by the end of the year. The Risk Forum expects the pace of merchant terminal conversions to pick up as certifications are completed and merchants targeted by counterfeit card fraudsters feel the sting of losses. However, we also think some merchant categories, such as restaurants, will continue to proceed at a tepid pace."
- ACH Same-Day Service: "The Risk Forum forecasts that the rollout of NACHA's mandated same-day ACH service in September will, at least initially, have modest adoption because corporate originators will have to update internal systems to support faster payments, the dollar cap of $25,000 per payment and the imposition of the interbank fee. Consumer payment applications will have modest uptake due to competing payment alternatives."
- EMV ATM Liability Shift: "The implementation of chip card readers in ATMs will follow the same pattern as POS terminals did in 2015: The large ATM owners and operators will meet the Oct. 2016 deadline, but many of the small and midsized operators, especially those owned by nonfinancial institutions, will not and will be faced with absorbing the loss of transactions made with counterfeit cards — a fraud loss they haven't experienced in the past. Overall, the Risk Forum looks for the ATM base in the U.S. to contract by 10 to 15 percent because of financial institution mergers and the cost of EMV upgrades."
- Mobile Wallets: "2015 saw the launch or announcement of more mobile wallets by payment stakeholders, such as Samsung, Google, Chase, Capital One, Walmart and Target. Then, add the retailer and credit union consortiums (MCX CurrentC and CU Wallet) that are struggling to emerge from uncertainty. How many wallets will the consumer be willing to load on a phone, and which providers do they trust to keep their payments and banking credentials safe? We believe we'll see continued turbulence in this space during 2016, with some settling of the dust by next year."
- Blockchain Tech: "Cryptocurrencies will continue to exist in the 'novelty' space, but we think large payments players will direct efforts to leveraging the distributed ledger technology for various uses and will proceed at an accelerated pace."
- Biometrics vs. Passwords: "Despite continued cries for intervention, the user ID and password will remain the primary authentication method that consumers use to access their various applications. Biometrics technology for payment and customer authentication applications will continue to improve while decreasing in price. Fingerprint, facial recognition and eye/iris recognition will dominate as the most-used biometrics, although voice recognition will serve as a key method in certain environments, such as call centers. The Risk Forum believes that the technology will continue to face critical adoption challenges due to concerns about privacy, security and safety, but educational programs will lower this resistance."