Competition and consolidation are heating up in the #interbank #blockchain space. #Chain, a startup that raised more than $ 40 million from the likes of Fiserv and Citigroup, has been acquired by #Lightyear.io, a company that works on the #Stellar interbank blockchain, the companies announced today. Chain and Lightyear will combine to form a company called Interstellar. […]
Bank Innovation
2017 was a monumental year for data breaches. Some 1,500 data breaches exposed the records of nearly 179 million Americans, affecting approximately 55 percent of the total US population.1 The increase in consumer data available to fraudsters is driving bank fraud losses higher every year, propelling the shift from counterfeit cards to identity theft and synthetic identity fraud. To combat these trends, financial institutions must look to more advanced tools and technologies to keep up with—and get ahead of—increasingly sophisticated fraud attacks.
Until recently, fraudsters’ primary focus was on obtaining the card data needed to produce counterfeit cards. Since the US rollout of EMV chip #technology, however, counterfeit fraud is falling fast. In fact, credit card issuers reported a 60 percent decline in counterfeit card losses between 2014 and 2016, according to the Nilson Report’s most recent data.2 Now that the proverbial low-hanging fruit of counterfeit card fraud is effectively guarded, fraudsters are moving on to new areas. They have found a ripe opportunity in identity theft and new account fraud. They’re no longer looking just for card data to steal; they’re looking for personal information they can use to create new fake accounts.
“Synthetic identity theft” has emerged as a major driver of #payments fraud in the US. These are cases where criminals weave together real and fictitious information to create new, digital-only identities, and then use them to open new accounts of all types. This form of new account “theft” is attractive to fraudsters because it allows them to obtain control of the account, cultivate high credit limits and bypass account alerts—all to facilitate high-dollar transactions with low risk of detection. A recent Accenture survey indicated that losses on fraudulent credit card applications can be up to 4.0 bps of card sales volume3—and that that loss rate is increasing. On top of the identified fraud losses, synthetic identity fraud may also be hiding in a financial institution’s credit loss line item, with up to 20 percent of credit losses attributable to synthetic identity fraud, according to 2017 Auriemma research.4
The government is taking some steps to help, enacting the Economic Growth, Regulatory Relief and Consumer Protection Act in spring 2018. The Act will allow financial institutions to validate social security numbers in near real-time with an electronic signature, rather than the current paper-based process, which can take weeks. The law also brings with it complex technical requirements, however, and has no official implementation start date or deadlines, leaving financial institutions to fend for themselves for the foreseeable future.
Addressing synthetic identity theft will require financial institutions to develop more rigorous tools and processes for compiling and validating customer data at the time of account opening. Financial institutions should validate each data point provided by a new applicant, using both internal and external sources. These data points should include not just the traditional name, address and phone number, but also less-obvious information, such as the use of the same address, phone, email or even IP address by others. Chances are, a criminal will attempt fraud at the same bank multiple times, so capturing data through all contact channels can be highly valuable for use in identifying fraudulent applications later.
Artificial intelligence engines and Machine Learning will likely play important roles in synthesizing the enormous pool of data, and the first step for financial institutions will be working to collect the data in a usable form. The task is daunting, but so is the future loss potential. Fraudsters continue to evolve their technologies and techniques, and if financial institutions want to keep up, then they must do the same.
1Identity Theft Resource Center, 2017 Annual Data Breach Year-End Review
2Nilson Report October 2017 – Issue 1118
3Accenture Card Fraud Study, July 2017
4Auriemma Consulting Group, Synthetic Identity Fraud Cost Lenders $ 6 Billion in 2016
I invite you to join me at Money20/20, where I will be moderating a panel called Fraud Whack-a-Mole: Securing Payments in a Post-EMV World, Monday, October 22 from 1:00 pm – 1:40 pm.
Casey Merolla, Senior Manager, Payments
The post Chasing ever-shifting payments fraud appeared first on Accenture Banking Blog.
#JPMorgan #Chase is on a roll with its digital hiring and currently has #more #than 2,000 #open positions. The bank is looking for a senior digital #fintech expert to join its Digital Strategy, Innovation and Partnerships team, as it continues to recruit talent as part of its effort to revamp its #technology team. Last week, Adam K, […]
Bank Innovation
#Faster #payments and remittance services have had record-breaking amounts of investment this year. A #Fintech Global report, published this week, found that global investment in payments and remittance companies has reached a historic high. For the first half of the year alone there has been $ 17.5 #billion #invested, which trumps the $ 12.3 billion investment for […]
Bank Innovation
US consumers are showing an increased preference for credit cards. Banks reported robust growth in purchase volume over the past quarter, along with solid growth in receivables and benign loss rates. Read more about the key themes and notable happenings below.
Transactions
Citibank completed $ 1.5B acquisition of L.L. Bean credit card portfolio from Barclays; Synchrony and PayPal finalized transfer of $ 7.6B in receivables; Signet Jewelers closed last phase of credit outsourcing, selling its non-prime portfolio to CarVal Investors and Castlelake.
New Partnerships
Alliance Data and IKEA introduced new co-brand offering 5 percent rewards on IKEA purchases; American Express announced new partnership with Amazon to offer a small business co-brand credit card; Wells Fargo launched no-fee Wells Fargo Propel American Express card.
Partnership Developments
In July, Walmart announced its intent to partner with Capital One and end its Synchrony relationship; Citibank renewed its card partnership with Sears, paying $ 425 million up front in a highly customized structure; Alliance Data and Victoria’s Secret renewed their PLCC partnership.
New Products/Features
American Express launched its no-fee, 1.5 percent cash back Cash Magnet card; Citi and American Airlines introduced new no-fee AAdvantage MileUp card, offering 2 miles per dollar; Chase and Hyatt introduced $ 95 annual fee World of Hyatt Card; Chase and Marriott introduced $ 95 fee Marriott Rewards Premier Plus card; Chase and Southwest Airlines introduced $ 149 annual fee Southwest Airlines Priority Card; Synchrony and Belk will introduce a co-brand credit card.
Mobile & Tech
Chase announces a partnership with Tock, a high-end dining program.
Stay tuned for next quarter’s report on US consumer credit card trends.
1 Total receivables for non-retail issuers at end of 2Q18. 2 Total purchase volume of non-retail issuers in 2Q18. 3 After-tax ROA excludes Wells Fargo, Chase, Bank of America and US Bank, which do not report credit-specific income. 4 YoY = Year-over-year change versus 2Q17. 5 QoQ = Quarter-over-quarter change versus 1Q18. Note: Purchase Volume is reported volume for the quarter (it is not annualized or TTM)
1 Chase no longer discloses an ROA measure directly attributable to Card Services. 2 Citigroup: Purchase volume includes cash advances. Citigroup data includes Citi-Branded Cards and Citi Retail Services. 3 Capital One: US card business, small business, installment loans only. Purchase volume excludes cash advances. 4 Bank of America: Receivables, purchase volume and net loss rates are for US consumer cards. 5 Discover: includes US domestic receivables and purchase volumes only. Restated: ROA reflective of Direct Banking segment (credit card represents ~80% of loans) and implied US Cards tax rate of ~22%. ROA denominator estimated from total loans ended figures. 6 American Express: Changed reporting method as of 2Q18. All figures except ROA are for US Consumer segment; Amex has stopped reporting net income attributable to US consumer segment. ROA is estimated based on US receivables comprising 88% of Global Consumer segment and 22% US effective tax rate. 7 US Bank: Net Income attributable to Payments Services totaled $ 361M as of 2Q18, compared to $ 282M in 2Q17; Payments Services includes revenue from consumer credit cards, as well as commercial revenue and other sources. 8 A/R and PV for Retail Card unit only. 9 Loss rates and ROA include all of SYF’s business lines (i.e., Retail Card, Payment Solutions, and CareCredit). Retail Card accounts for about 70% of total receivables. 10 Average Receivables.
Paul Sammer, Manager, Payments
The post Q2 2018: US credit card issuer snapshot appeared first on Accenture Banking Blog.
#Goldman Sachs CFO Martin Chavez said a report that stated the bank was closing or delaying its #cryptocurrency trading desk was “#fake #news.” This information appeared on Bank Innovation and across business media yesterday. Chavez told the audience at TechCrunch Disrupt yesterday (video here) that desk or no desk, Goldman will continue its exploration of […]
Bank Innovation
There are advantages to both sides for #banks to partner with #mortgage solutions, but one of the U.S.’s largest digital mortgage companies told Bank Innovation why they aren’t #partnering with banks. #LendingHome, which has originated $ 3 billion in loans since 2014, says there need not be a rush for digital mortgage servicers to partner with […]
Bank Innovation
#Goldman #Sachs is reportedly dropping #plans for a #cryptocurrency #trading #desk. The news, which broke late yesterday, sent #crypto prices further down, but in this bear market, you’d be excused for not noticing. The news, though dismissed or even spun into a good thing by crypto enthusiasts, can hardly be taken as a positive sign […]
Bank Innovation
Everything we know about collections is about to be challenged and reinvented. The magnitude of the shift can be observed through three key lenses: strategy, analytics and operations, as shown in Figure 1.
Unlike prior evolutions, the new age of collections is not being ushered in by economic downturn, runaway lending or regulatory fluctuation. It is being beckoned, primarily, by two phenomena: digital revolution and Millennials.
Digital revolution
At present, collections managers listen in on live or recorded collections calls to assess whether agents are performing adequately and inform potential corrective action. Such manual call monitoring practices are prohibitively time-consuming at scale. In practice, this means some 90+ percent of calls go unmonitored, leaving management largely in the dark as to their customers’ experience.
Growing ever-cheaper and faster, voice transcription #technology could monitor and collect data from every inbound or outbound customer call, for example. Detection of certain keywords, such as “bankruptcy” or “illness”, and customer tone could drive tailored treatment strategies in real time.
Millennials
The number of Millennials in the US will soon pass that of the Baby Boomers, becoming our largest generation. This group of young adults is dramatically different than their predecessors:
Moreover, it is critical to understand that Millennials are not only our customers, but our collectors as well. Having collectors who may be equally as unreceptive to conducting cold calls as customers are to answering them will require lenders to define new tactics to effectively collect in this new age.
Consider a hypothetical queue of delinquent customers whose accounts are two cycles past due. In the old-world order, an adaptive control strategy may have looked something like the scenario in Figure 2.
Note that in the old-world order, past-due customers with similar data profiles and dollars-at-risk are treated the same.
In the “New”, the collection strategy builds upon what we have learned over the years—and augments the treatment in real-time based on sentiment, keyword recognition and additional information as shown in Figure 3.
Under the potential new-age strategy, the treatment approach is tailored by incorporating sentiment, keywords and other alternative data. Barry, for example, is not assigned to an auto-dialing queue as his keyword indicator is “bankruptcy”, which suggests a different approach (a top reason people give for filing bankruptcy is to “stop the numerous collections calls”). Instead, Barry may be most responsive to push notifications or texting, given his activity on social media. For Jill, more traditional methods may be effective considering her concerned nature and lack of social media activity.
The new-age approach greatly expands on the collections strategy design to include advanced machine learning beyond that of the traditional champion-challenger testing capabilities in the adaptive control decision engine. Not only will there be dramatically more treatments, but the results will be captured more rapidly using intracycle behaviors and payments. We also imagine the use of real-time sentiment and word recognition to inform the collections approach and negotiations with the delinquent customer.
To remain competitive, debt collectors will need to understand the implications of today’s changes for their business, develop a plan to adapt and dedicate the resources required to execute successfully. Accenture is leading the industry into this exciting new era, bringing to bear our experience in advanced Machine Learning, Robotics and deep understanding of the collections and behavior sciences.
I invite you to learn more about the data imperative and its potential.
Dan Kreis, Industry Senior Principal, Payments
The post Delinquent debt collections in the &8220;New&8221; appeared first on Accenture Banking Blog.
Since its February #launch, #PurePoint #Financial, a hybrid physical/online #neobank owned by Mitsubishi UFJ Financial Group, or more specifically MUFG Union Bank N.A., has gained 30,000 accounts, with $ 5 billion in deposits, and plans to build a #mobile app. The app will have full banking functionality but have built-in solutions around checking, payments, PFM and offer […]
Bank Innovation
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