Although new cases of COVID-19 continue to surface, states across the nation are enacting plans to reopen the economy. However, the "new normal" for many businesses, including financial institutions, is still being defined. Financial executives, and the industry as a whole, are evaluating business strategies and redefining operations, as they grapple with an ever-shifting landscape due to the coronavirus pandemic.
And, coincidentally, innovation is at the center, aiding financial institutions as they navigate the changes.
Read on for this month's top headlines.
Industry Shifts, Innovations, and Opportunities
Card Networks Continue FinTech Acquisitions
The line between traditional credit and debit card companies and FinTechs has continued to blur as MasterCard recently announced new acquisitions.
As reported by Brian Riley for Payments Journal, Mastercard's new acquisition of technology firm Finicity for $825 million, "gives Mastercard more tools that help banks speed up credit decisions or improve account verification processes, using Finicity technology that lets companies share consumers' financial data."
He also points to Mastercard's efforts last year to diversify away from traditional card payments with the $3.2 billion purchase, its largest acquisition yet, of a platform owned by Nets that enabled the company to dive deeper into account-to-account payments.
This trend plays out in other card networks as well. For example, Visa announced earlier this year that it is also diversifying with its $5.3 billion deal for Plaid, a data aggregator that connects popular apps, including Venmo, to customers' data earlier this year.
The two organizations are paving the way for other companies to follow suit.
PYMNTS.com released a new report on June 29, "How a Global Pandemic Created a Digital-First Customer in Twelve Weeks." The report covers the pandemic's effects on consumers from its start, including rapidly shifting consumers' habits toward digitization as the pandemic spread.
According to the report:
"By late May, consumer digitization preference began emerging most clearly in the data, with consumers reporting an increased likelihood of shopping with merchants that have taken the pandemic period to upgrade and enhance their digital features. Some 33.8 percent of consumers say they are "very" or "extremely" likely to consider digital offerings when deciding where to shop, while another 55.3 percent are "somewhat" or "slightly" likely to take merchants' digital capabilities into consideration."
The report identified four distinct consumer profiles in response to the pandemic:
- Social Shifters: Consumers who have made retail purchases but are likely to return to brick-and-mortar stores in the future.
- Safety Shifters: Consumers who have embraced digital channels out of concern for their safety.
- Convenience Shifters: Consumers who have put a premium on convenience and speed and choose merchants based on their digital capabilities.
- Office Shifters: Consumers working remotely who want to go outdoors and work in office environments.
The report concludes:
"Consumers may have leapt the great digital divide in the last 12 weeks, which isn't to say they are ready to sign on for fully virtualized lives. But fully digitally moderated lives? That doesn't seem so much like a remote possibility as a reasonable prediction, as consumers emerge for quarantine ready to do things digitally and are looking for firms that are wired to help them do so."
Click here to download the free report.
Risk and Fraud Innovation
The Federal Reserve announced recently it has published the FraudClassifierSM model, which according to the release, includes a set of tools and materials to help provide a consistent way to classify and better understand the magnitude of fraudulent activity and how it occurs across the payments industry. The model was developed by the Fraud Definitions Work Group, which was comprised of Federal Reserve and payments industry fraud experts.
"The FraudClassifier model can help address the industrywide challenge of inconsistent classifications for fraud involving ACH, wire, or check payments," Jim Cunha, secure payments strategy leader and senior vice president at the Federal Reserve Bank of Boston, said in the release. "The FraudClassifier model enables payments stakeholders to classify fraud in a simple and similar manner. It can be applied across an organization to help ensure greater internal consistency in fraud classification, more robust information, and better fraud tracking."
The Work Group also developed an industry adoption roadmap, which outlines a strategy and potential steps to encourage voluntary, industrywide adoption.
Visit FedPaymentsImprovement.org to learn more and to sign up to access educational resources and support tools. Or sign up for the webinar taking place on July 15 at 1 p.m. Eastern.
Nacha reported it recently met with representatives from Treasury, IRS, Fiscal Services, and the ACH Operators to discuss lessons learned from the recent Economic Impact Payments (EIPs) distributed to U.S. citizens to boost the economy due to the COVID-19 pandemic. The meeting focus was to learn from the first round and prepare for a second round of stimulus payments if Congress approves the legislation. According to Nacha, "Topics included identifying the payments, availability of payments and better communications with financial institutions, banking trades and among all the participants responsible for these payments."
NEACH is closely monitoring this situation and will provide updates as they become available.
ACH Contact Registry
Nacha's ACH Contact Registry rule went into effect July 1, 2020. According to Nacha staffer Michael W. Kahn:
"The Nacha Rule that created the Registry covers not only ACH operations, but also fraud and risk management at financial institutions. For each area, financial institutions are required to enter either primary and secondary contacts, or a department contact. Those email addresses and phone numbers need to be monitored during normal business hours."
"Questions come up daily, regardless of where people are working from," Debbie Barr, Nacha senior director, ACH Network Rules Process & Communications, told Kahn. "Getting those questions answered can be challenging even in the best of times. In fact, more than 90 percent of those who responded to Nacha's request for comment said finding the right contact can be anywhere from medium to very difficult."
The ACH Contact Registry is housed in Nacha's secure Risk Management Portal.
ACH Contact Registry Rule Webinar
And speaking of questions, NEACH is hosting a webinar Wednesday, July 8, from 2:00 PM – 3:30 PM to discuss the benefits, explain the requirements, and answer your questions about the new rule and portal.
You will leave the session with a better understanding of how to navigate the portal, the information you can expect to find, and the requirements around entering and maintaining your information.
I, along with Sandy Ortins, senior vice president of NEACH operations, and Elyssa Morgan, director of membership services, will show you how to make the most of this new resource.
ODFI-Commercial Originator's Analytic Tool Survey
NEACH is also currently in the beginning stages of developing a tool that will give ODFIs the ability to gain insight into their Commercial Originators' activities, security practices, and overall risk profile. Specifically, the tool will assist with periodic reviews of Commercial Originators to go beyond creditworthiness to provide a full profile of the client/member.
To ensure this product meets your unique needs, we are asking ODFI members to complete this brief survey. Demographic data will remain confidential and be used only to help gauge survey participation.
Click the link below to complete the survey.
Market Research - Commercial Originator's Analytics Tool - Survey
Cybersecurity Threats and Innovation Opportunities
On a different note, cybersecurity continues to be a hot topic and a pervasive issue. Check out this month's cybersecurity alerts and updates on Pacing Payments.
Along with the nation's most recent alerts, the extensive list also includes several COVID-19-related alerts. Dixon urges readers to consider how their organization might be impacted by these cyber threats and what steps they can take to protect themselves and their customers and members.
Visit NEACH's Members Corner for this and future updates.
NEACH Supporting You
As always, NEACH is here to help. Our payments hotline is available to answer your questions on these or other topics. Call the Payments Hotline at 855-NEACH-QA.