EMV chip card

Reflections on 2016 in financial services

The year-end holidays are upon us – a time for nostalgia and reflecting on the year gone by. For financial institutions (FIs), it’s an opportunity to reassess some of the biggest recent developments in the industry and look ahead to what the coming year could bring.

From the gradual adjustment to EMV chip card technology in the US to the ongoing growth of fintechs and challenger banks, 2016 has been a big year for the financial services sector.

Getting onboard with EMV

EMV chip technology for credit and debit cards was rolled out in the US in October 2015. For many card issuers and merchants, 2016 has been a year of transition. The rollout came with a fraud liability shift that transferred liability for fraud onto the party – either the issuing FI or the merchant – that has not adopted EMV technology.

According to Mastercard, there has been “significant progress” made since last year’s EMV launch. Its figures showed US retailers that had completed their EMV adoption, or were close to doing so, experienced a 54 per cent drop in counterfeit fraud costs when comparing April 2016 with a year earlier.

A LexisNexis report issued in June 2016 showed that most issuers thought EMV would combat point-of-sale fraud, but could raise the risk of card-not-present fraud losses.

Unpredictability in payments

We’ve been hearing for some time that cash and checks are on the way out, to be replaced by cards, contactless payments, mobile wallets and other exciting innovations.

However, the reality seems to be that most consumers are far from ready to say goodbye to tried-and-tested payment methods. In February this year, the Guardian reported that German consumers were strongly opposing plans to place a limit on cash transactions. Meanwhile, in Indonesia, many consumers moved back to cash after the government launched a plan to tackle tax evasion by tracking all credit card transactions.

The UK and Australia have both launched new banknotes this year, with security additions and other features that are unique to physical currency.

As far as checks are concerned, a recent report from payment systems firm VocaLink showed that 87 per cent of US millennials had used this payment method in the previous three months. So it seems that traditional ways of completing transactions have plenty of life left in them.

Further growth for fintechs and challenger banks

It’s been an exciting year for fintechs and challenger banks, which are playing an increasingly important role in the global financial system. These emerging, innovative businesses could be seen as a threat to established FIs, but they could also offer exciting opportunities for collaboration.

Germany’s Number 26 this year gained full approval to operate across Europe, while app-only bank Mondo received its license in the UK, joining the likes of Atom Bank and Starling in the country’s thriving challenger bank sector.

Mondo chief executive Tom Blomfield said: “This is how the banking market changes – not with 800-page reviews from public bodies like the Competition and Markets Authority, but with technology bringing new ideas to the table. We’re creating something that will completely revolutionize the way people think about their money.”

In the fintech market, one of the most notable trends of 2016 has been an increase in worldwide competition. KPMG’s latest Fintech 100 report highlighted the emergence of “exciting fintech players” in countries including India, Israel, Portugal and the Philippines.

Will 2017 be the year of blockchain?

Looking ahead to the coming year, one concept that looks set to expand its influence across financial services is blockchain – the distributed-ledger system that has enabled innovations like Bitcoin.

According to the World Economic Forum, blockchain has the potential to “profoundly alter” the way banks do business. The body predicted that this technology will become “the beating heart of the global financial system”.

However, there are some questions to answer and challenges to overcome first. Does the technology raise some unique security concerns, for example, and how attractive will it be to established FIs still reliant on legacy systems?

Keep a close eye on developments in 2017 – it could well be a decisive year for blockchain.

Written by Glenn Tom

Glenn Tom is NCR’s Senior Director of Global Solutions Marketing. In this position, he is responsible for leading global marketing efforts for all of the division’s consumer- and FI-facing solutions, including digital banking, branch, ATM hardware and software, channel management, payments & transaction processing and enterprise fraud & security. Prior to joining NCR and Digital Insight in 2008, Glenn previously held marketing and general management positions at Intuit, Morgan Stanley, Citibank and American Express. Glenn has a BA in Liberal Arts from Claremont McKenna College, a BS in Industrial Engineering from USC and an MBA from The Wharton School, University of Pennsylvania.

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