February Payments Newsletter

From my February newsletter, so you could see what it’s normally about: my posts, thoughts about other posts I have read, my take on interesting industry bits, and other perspectives. If anyone wants to be included in the distribution – email me at cherian(.)abraham(at)experian(.)com.

What it is -> A quick read and meant to be useful.
What it is not -> Not meant to make you buy stuff, not meant to use your email for other things.

Tim Cook has a cogent explanation of why building a backdoor (in this case, a firmware that degrades the device security to allow endless pin entry attempts by the law enforcement to gain access to the device, without triggering a data wipe) will not be in the public interest. Any attempt to build a backdoor will be an irreversible step towards weakened system security not just for the iOS ecosystem – but for banking and financial systems that has come to rely on TouchID and other security subsystems inherent in iOS devices. Unintentionally or not, we are at risk of poisoning the well. Link

When a phone is no longer just a phone, the threshold rises in maintaining operational security – and it rises dramatically when a phone is a payment instrument or an identity arbiter. Apple customers found out the hard way when their devices were bricked after a 3rd party servicing as the devices failed revalidation of the TouchID sensor and the security subsystem. Link

Large merchants I have spoke to this past year, all seem to be worried disproportionately about loyalty fraud as EMV begins to push fraud elsewhere in the system. Brian Krebs writes on how this is coming true, in one case for Kohls: http://krebsonsecurity.com/2016/02/fraudsters-tap-kohls-cash-for-cold-cash/ On a separate note, Kansas City Fed put out a detailed Chargeback report here: Link

As the breathless enthusiasm around Machine Learning bubbles over in to fueling wild and improbable (and actually dangerous) assumptions around the immediacy of Artificial Intelligence, the voices of sensible pragmatists like Jaron Lanier often get drowned. Link

Fraud detection seems to be another area where the abundance of data has attracted Machine Learning as an approach to detect the deviation from the norm. Deviation from the norm however isn’t predicative of fraudulent behavior, it proves that there is an anomaly – finding malice however is entirely different.

Bruce Schneier argues that the internet of things shall create the worlds biggest robot. The billions of sensors, actuators and algorithms will be a loosely held manifestation of a world-sized robot. The internet, according to Schneier now senses, thinks and acts. Link

Echoing the need to provide more cost effective forms of payment processing to clients, Stripe adds ACH support, partnering with a fellow startup “Plaid” to reduce funds availability risk in the “Can’t believe its 2015 and we still don’t have a real-time payments framework” US payments system. Meanwhile, to demonstrate that we can let go of the old, while still keeping some old habits (especially Fees on NSF funds) the Fed Faster Payments initiative has released its “Effectiveness criteria” that is worth a glance. Link

What remains to be seen is if the Faster Payments Initiative produces a clearer and more cost effective value proposition for merchants, than ClearXChange – which has underwhelmed since beginning, and now continues to do so under EWS.

Interesting Industry stuff:

SoFi drops FICO, plans to start a dating service. Wish I were kidding.

A quarter of people with cell phones, won’t make a single call on them this week.

Venmo is doing $1B in payments each month, which is over a 10x increase from 2 years ago.

In other news:

I spoke to Reporter Sarah Gill on Emerging Payments at the Bancorp Finetics Studio, at Money2020. Link

I did a Real-time Fraud detection blab with IBM and my good friend Dave Birch. Broken up in to three separate segments, you can find the first one here: Link

The first draft of the Princeton Bitcoin Book is now available: Link

Here are a few payments blogs and twitter feeds worth a follow: Link

Board of Advisors at SimplyTapp - creators of Host Card Emulation driving democratization and open access to NFC in Android. Mobile Commerce & Payments Lead at Experian Global Consulting, serving Experian's clients in Banking, Retail, Consumer Credit & Payments. A strategic adviser w/ over 17 years of international Tech & Business Strategy consulting, advising firms in banking, retail & asset mgmt that seek clarity & insight in to the myriad business models around payments, fraud & commerce. Founded DROP Labs, a mobile payments/commerce strategy & advisory practice. Tweets here. I'm on LinkedIn here.
Cherian Abraham
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