Mar 22, 2006

ATM fraud and other big things in the payments universe

“Beware of the tyranny of making Small Changes to Small Things. Rather, make Big Changes to Big Things.” (Roger Enrico, former Chairman, PepsiCo, quoted on Tom Peters’ blog)

The current massive ATM fraud scandal could cost US banks $1 billion, which is a third of the estimated $3 billion of card fraud losses last year. To put those figures in perspective, here are a few other "big things" in the world of payments. US market figures are used as an example, but the proportions will be similar in many countries.

ATM/debit card fraud: $3 billion
Card advertising and marketing: $6 billion
Merchant losses due to returns fraud: $16 billion
Bank revenue threatened by interchange litigation: $30 billion

Everybody already knows how chip technology can make a big change to that first big thing, card fraud. The vast majority of the payment industry’s EMV chip efforts are concentrated here. In comparison, very little effort is focused on using EMV to create innovative new payment card features that help fight problems like retail return fraud, ineffective advertising, and threats to banks' interchange revenues. I’m much more interested in using chip technology to make big changes to those other big, humungous things.

We can already see changes to advertising and marketing, with some of our customers recruiting up to twice as many new cardholders as expected for essentially the same advertising and marketing budgets. There is a similar theme behind Chase’s Blink ad, which should help Chase quickly achieve their objective of improving their brand awareness. In fact, Chase’s investment in contactless should pay off in the first year, thanks to the ads, simply by improving their brand image and awareness.

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