8 highlights from Card Forum 2019

SourceMedia's annual Card Forum is a place where the payments industry's key decision-makers gather to share their research and expertise.

This year's event, held May 21-23 in New Orleans, was no exception. Top executives from banks, card brands, credit unions, fintechs and more weighed in on the major issues and innovations for the payments industry.

Inside the Apple Card
The Apple Card takes a more aggressively digital approach to credit card relationships than most other products on the market — but the technology behind it isn’t exclusive to Apple.

Following about 18 months of secretive development with Apple and Goldman Sachs, Mastercard is ready to bring the same offering to other issuers. Its platform carries over many of the features that Apple Card users will get, according to Chris Reid, Mastercard’s executive vice president of cyber intelligence and data services for North America.

“This is digital first. This is, all card details are only available in the digital environment,” Reid said. “Yes it comes with a physical card if you want it — if the consumer wants it — but in that physical card, it’s not going to carry the 16 digit PAN, it’s not going to carry the CVC, it doesn’t need to carry the customer service number or the expiry date.”

Any bank that wants to launch a card on this platform can do so in six months, he said.
Netflix and the future of digital payment security
At first blush, Netflix may seem to have a fairly simple payment process: Collect a card number once, and keep charging it every month until the customer cancels. But even this process can be demanding.

Security is one of the biggest variables for Netflix. Its subscriptions are card-not-present transactions, but due to their nature — same customer, same purchase, same price, year after year — these payments are arguably more secure than most card-present transactions.

And yet Netflix still wants stronger security of the kind that the card brands are developing with Secure Remote Commerce (SRC), a.k.a. the universal “buy button.

From the issuer’s perspective, every Netflix payment is treated as no less risky than the one before it, according to Joshua Karoly, Netflix’s director of payments.

“A lot of times you get apprehension about that transaction, even though we’ve billed this customer so far for five years straight,” Karoly said. “They’re still going through the same rules that the transaction would go through for the first time.”

SRC is designed for guest checkouts online, handling the enrollment one time through a card issuer’s app. After clicking the SRC button at a merchant, the consumer can optionally choose to create an account with that merchant.
Visa's chief economist warns of disintermediation
Fintechs that offer installment loans are having a major impact on credit card lending — and many card issuers are ill equipped to compete.

The clearest audience for those products, which allow consumers to shift some of their credit card balances to a fixed, unsecured loan at a lower rate, are the subprime cardholders who pay high interest rates on their credit cards. But these fintechs are reaching a far bigger segment of the population with their marketing, causing an impact felt across the credit score spectrum.

In 2010, fintechs held only about 1% of unsecured installment debt in the U.S., according to Visa analysis of anonymized personal loan data from TransUnion. But that number rocketed to 36% by 2017, and is estimated to have reached nearly 40% today, according to Wayne Best, Visa’s chief economist.

To card issuers this looks like people are paying off their balances, a trend which could normally be attributed to a healthier economy. Best disagrees.

“A lot of this is coming from the disintermediation that we see,” Best said during his keynote presentation on Tuesday. In all, 5% of what would have been outstanding credit card balances have been consolidated on personal loans.
Justin Zeidman, head of credit card products at Navy Federal Credit Union.
Follow the fintechs
For Justin Zeidman, head of credit card products at Navy Federal Credit Union, fintechs are a bellwether.

“It’s interesting how fintechs have a tendency to kind of nip at the edges of your business,” Zeidman said. “You see a lot of fintechs come in, and they’re content to nip at one part of one product or one cohort … It says to us, this is something that we need to defend, or this is a cohort that we need to learn how to serve differently.”
Debra Tenenbaum, chief people officer at Yapstone.
The Most Influential Women in Payments
Most women who reach the executive level in the payments industry didn’t get there alone. Finding the right mentor, developing a voice and taking positive lessons from negative experiences often are keys to success.

There’s an art to gaining visibility within organizations, said several of PaymentsSource's Most Influential Women in Payments honorees.

"Early in my career I felt I was sharing ideas that weren’t being heard, and other people were getting credit for some of these ideas in these meetings,” said Debra Tenenbaum, chief people officer at Yapstone.

Some lessons were jolting, like the time two male colleagues literally slammed a door on Tenenbaum.

“I thought I was doing great with credibility and everything in my first head of human resources job, and I traveled to New York with the CEO and a co-founder. When we got there, as the three of us walked out of the airport, talking business and stuff, we got to the taxi, and—this is the defining moment—the two men got in the taxi and shut the door and drove off,” Tenenbaum said.

Watching them drive away while she stood alone with her suitcase, Tenenbaum fumed with anger, but she learned an important lesson.

“This was my takeaway, that I held on to for the next 20 years: No one can drive off with my power. I decided I’d show with my actions and the results I get in my job that I’m as valuable as anyone else at the table,” Tenenbaum said.
Lou Anne Alexander, group president of payments at Early Warning
Gender gap in fintech
There's a gender gap in hiring women into technology positions in payments, said Lou Anne Alexander, group president of payments at Early Warning, which operates the bank-driven P2P network called Zelle.

"Of the 11 executives who helped bring Zelle to the marketplace, seven were women. But we're a technology company, so once you get down below that, it's very male-oriented, so we do have challenges recruiting women into some of the more technical positions," Alexander said.

During the hiring process, curiosity may be the most important quality to look for when hiring women in payments technology, said Julie Pukas, head of commercial product integration and merchant solutions at TD Bank.

It's also an important quality to carry over into management, she said.

"Hire curiosity, and be curious," Pukas said. "I think if your team sees you're endlessly curious, it will catch on, because we don't know where we're going to be in five years."
Larry Santucci, senior research fellow for the consumer finance institute at the Federal Reserve Bank of Philadelphia.
Thin-file consumers can be a safe bet
Secured credit cards — which are generally issued to consumers with poor or thin credit history — are finding an audience among consumers with good credit habits.

Issuers have an opportunity to graduate those consumers to a standard card once they have demonstrated good behavior — and a sizeable number of those cardholders do, according to Larry Santucci, senior research fellow for the consumer finance institute at the Federal Reserve Bank of Philadelphia.

"Twenty-five percent of them are considered superprime once they have demonstrated some credit performance," Santucci said.

Graduating these consumers to a regular credit account simply means releasing the security deposit, he said.

As a result, "a lot of the issuers are reporting these cards not as secured cards but as regular credit cards," Santucci said.
Berke Baydu, director, market product management for cyber and intelligence solutions at Mastercard.
Small towns are key for contactless
Large U.S. financial institutions converting their credit and debit portfolios to contactless technology this summer are betting that transit agencies like New York shifting to open-loop NFC will help drive mass adoption.

But for thousands of card issuers serving consumers in small towns and rural areas, mass transit isn’t a factor. In these regions, contactless adoption will depend on having a concentration of local merchants supporting tap-to-pay.

One example of this phenomenon is in Bangor, Maine, where a local savings bank committed to contactless cards two years ago, far ahead of its peers.

The 54-branch Bangor Savings Bank rolled out contactless Mastercard-branded debit cards in June of 2017 in an area where several outlets of major fast-food and drug store chains were already NFC-enabled.

At Mastercard headquarters, a surge in contactless debit card volume suddenly showed up on the card network’s radar.

“The bank in Bangor just started issuing contactless cards and with no significant marketing, people began using it because of the greater convenience,” said Berke Baydu, director, market product management for cyber and intelligence solutions at Mastercard.