By Bill Magana
Financial fraud costs U.S. merchants about $190 billion every year, while consumers lost another $4.8 billion annually, according to Forbes. Whether you’re a small business or a private consumer — or both — the risk of bank-related fraud is enormous. Unfortunately, the channels for this type of theft are multifaceted and ever-evolving. But new technology and banking innovations are making it tougher for criminals to commit this fraud and all while improving the banking experience for consumers. Here are some banking and money-related innovations expected to improve the consumer experience. Some are already yielding changes, while others are still a few years from being implemented.
EMV cards — which stands for Europay, MasterCard and Visa — is a chip-based collaboration to deliver next-generation security on all credit and debit cards. EMV cards use a chip instead of a magnetic stripe to process bank account and payment information. The chips are more secure because each transaction is uniquely encoded, meaning the same information can’t be used twice. Even if a thief were able to steal the information from one transaction, it couldn’t be used to forge another purchase.
EMVs are widely used in Europe and other parts of the world, but they haven’t caught on in the United States yet — mostly because U.S. consumers haven’t recognized the benefits — but it’s only a matter of time before EMVs become prevalent in America. A number of major banks are already offering EMVs, including Chase, U.S. Bank and Wells Fargo.
The move to digital currency has already set roots, but it is far from exploding in popularity. Digital currency will take several forms and methods of processing. For one, mobile wallets and mobile payment processors will allow consumers to use their smartphones to make purchases. Mobile devices will essentially come to replace debit, credit and ATM cards, according to the U.S. News & World Report. A number of digital currency solutions are currently working to capitalize on this growing market, including Google Wallet, PayPal Here and Amazon Payments.
Even when retrieving physical cash from an ATM, mobile devices can replace the actual card swipe by using unique codes to communicate with an ATM and withdraw money. Mobile payments can be processed in some limited situations, but it’s likely to be a few years before most retailers and merchants start accommodating digital currency.
Today’s sophisticated ATM thief isn’t coming up behind you and demanding your money. This criminal is taking a much more techie approach: placing subtle overlays over the keypad and card reader at the ATM. Most consumers can’t even tell that these plastic coverings have been placed over the ATM, but these inconspicuous covers can steal huge sums of money by recording card info and PIN numbers.
The overlays still allow for the ATM to read a card and record the PIN number, which is what makes these so effective: According to LifeLock, overlay theft at the ATM results in $1 billion in losses every year. New mobile solutions utilizing near-field communications (NFC) are eliminating the risk of overlays, but the technology is slow to catch on. In the meantime, the best thing consumers can do is invest in an EMV card and enlist identity theft protection services to catch this fraud when it strikes. And if they approach an ATM with suspicious paneling or a key panel that appears to be loose, they might want to contact the bank directly or use a different machine.
It might sound like science fiction, but three-dimensional video banking may become reality sooner than you’d think. According to The Financial Brand, the technology is already being tested in at Woodforest National Bank in Woodlands, Texas, and MidUSA Credit Union in Ohio, and it’s unlike anything ever seen in a bank. With this type of banking, consumers interact directly with a 3-D, virtual representation of a real-life bank representative.
Such a system would allow banks to consolidate their bank tellers into large locations, reducing the number they need to staff bank branches while also cutting out the risk of a bank robbery. But depending on how testing goes, it could be years before this technology hits the mainstream — if ever.