The Future of Patient Payments in Healthcare

Posted on Wed, Nov 26, 2014 @ 08:00 AM

MMessick Author: Mark Messick,

While on vacation recently, I had a moment to reflect on my benefit elections for the upcoming year.  For the last several years, we’ve chosen to elect a high deductible plan and put money into an HSA each pay period.  It has helped us control costs, but we’ve also been lucky.  Lucky that we’ve had no major medical issues or expenses that would have depleted the HSA and left us with a big bill.  It got me wondering what I would do if the bill was bigger than what I could immediately pay.  I’d probably ask the healthcare provider or the billing/collections company if I could make payments.  And if I could have this problem – so could others, and what about all the people who don’t have an FSA or HSA to turn to?  And even if they did, what’s the likelihood the bill is larger than what they have saved in one of those accounts?  What about all the people who actually want to pay their bill, but need a flexible way to do it?

HealthcareHaving worked in this sector for a while, I have access to more information than most.  I know, for example, that this growing problem of a patient’s ability to pay their bills is the number one obstacle for most healthcare providers.  I’ve heard them say it out loud.  There are entire conferences and tradeshows dedicated to the issue and finding ways to solve it.  I attended one this summer and was shocked to hear large, national healthcare systems distressed about how to deal with it.  Like most people, I thought it was a problem for the smaller providers who want to provide care but couldn’t financially bear the weight of extended payment terms.  I also know that when patients don’t understand what they owe, they don’t pay.  And when the bill is too large and a payment plan doesn’t exist, they don’t pay. 

The accelerating cost of health care and the growth of higher deductible plans have made this very issue worse.  In fact, in the last ten years, the patient responsibility portion has grown more than 150%1.  As a result, the industry has seen a proliferation of technology solutions designed around helping providers collect more money faster.  These platforms enable providers to more efficiently offer payment methods to take care of the bill.  Electronic statements and portals for electronic payments have been emerging while other solutions have created easy-to-understand paper statements.  Many are already helping to make a significant impact on the bottom line.  Unfortunately, that only solves part of the problem.  Because what happens to the provider’s cash flow when the patient chooses “payment plan” as the payment option, or needs extended terms.  They wait for months and years for the actual bill to be paid in full. 

This is where financial institutions can and should step in.  Healthcare providers are tired of being the “bank” for their patients.  In the past, most financing has come in the form of guaranteed issue.  That means that an individual must be underwritten for both income and credit score.  Unfortunately in today’s economic climate, very few applicants actually get approved in that model.  But now there is a new model that enables the FI to leverage the payment stream and have the provider guarantee the payment.  The platform works in conjunction with other services already offered so that the provider gets access to cash flow, the patient gets terms they can live with, and the provider gets a reduced workload. 

1Health cost increases in 2013 were lowest in decade: Aon Hewitt. October 17, 2013. Insurance Journal. At

Tags: healthcare financing, healthcare market

5 Tips to Increase Your Mobile Banking Adoption

Posted on Wed, Nov 19, 2014 @ 08:00 AM

Lauren_Gleim_Headshot_50x50 Author: Lauren Gleim, 

With Thanksgiving one week away, it’s that time of year we share our appreciation for those around us. Your friends and family will gather together to share in holiday traditions, maybe watch some football and feast on delicious food. Since I am such a sentimental gal, I’d like to share my appreciation by helping you with a little mobile marketing.

Here are 5 tips to help you increase your institution’s mobile banking adoption:

  1. Provide a mobile banking app rich with features that will simplify life for your customers. Of course I like an app that I am able to check my account balances. However, if I can pay my bills, transfer money, send P2P payments, and make check deposits with that same app, even better! I just came back from a 5 day trip to Mexico, and while I was in the Charlotte airport I realized I needed to pay our Verizon bill. Luckily, I was able to access my account and pay my bill directly from my mobile banking app in about a minute. One less thing to worry about while on vacation.
  2. Get your employees engaged with your app. Your first line of communication with your customers is your staff. Use this opportunity and engage your employees with your mobile banking app. Train them and encourage them to use it. Your employees can promote the benefits and ease of use when they call or visit your branch. For your customers who prefer a little more hand-holding, your employees can be your best advocate to raise awareness of your mobile banking app, to walk them through how to use the app, and to reassure them of any security concerns.

  3. Cross-promote your services. Your institution has internet banking. Use this to your advantage. Encourage usage by displaying a banner ad within internet banking about how easy it is to use your mobile banking app. Add a demo on how to add a payee or pay a person. If you send a monthly newsletter to your customers, add a section about how secure it is to use your mobile banking app.

  4. Use social media to your advantage and reach a wider audience.  Whether you are trying to gain younger customers or retain your older ones, many customers use social media, including Facebook, Twitter, LinkedIn, or Instagram.  Share a demo or a FAQ page about your mobile banking app. Let your customers know they can check their account on Black Friday right from their phone.

  5. Utilize push notifications. Have you ever downloaded an app, but then never used it because you weren’t sure about all of the features? This is where push notifications can be useful. Highlight your P2P functionality. With winter approaching, you can send a little message about snow delays or when your branch is closed. Remember there are numerous avenues to reach your customers. Make use of them.

Happy customers, leads to customer retention. Remind them why they bank with you and increase your mobile banking adoption while you’re at it.

Need ideas for marketing your mobile banking app? Our iPay Resource Center offers FREE mobile banking marketing materials. Share your app and show how your customers can use it.

Tags: Mobile Banking, mobile marketing

End of Support - Don’t Take an Unnecessary Risk

Posted on Wed, Nov 12, 2014 @ 08:54 AM

chrissutherland_50x50 Author: Chris Sutherland,

Halloween is over but some financial institution (FI) and IT departments are making a choice to push a scary situation to the limit.  A little over a year ago, we talked in a blog about “How long is too long?” for holding onto that legacy Windows Server 2003R2. Support for this server expires in roughly 200 days.  In September, ProfitStars’ Gladiator Security team produced a report from our server monitoring system showing that 309 of our clients still have at least one Windows Server 2003 Operating System.    

So what are the ramifications of still depending upon 2003 on your systems? It means that on July 14, 2015 there will be no more support for this operating system, no automatic fixes, no security updates and no online or phone technical support.  You will no longer receive patching or security updates that help protect your systems from harmful viruses, spyware or other malware that can lead to liability and potential stealing of personal and corporate information.

So what is your plan?  Are you an FI / IT department still holding onto the past?  While there are many things to consider in updating to the latest operating systems, such as application compatibility and migration of data, now is the right time to properly position yourself with today’s technology. Time and Windows Server 2003R2 wait for no man or woman.

Tags: Network Systems

Faster Payments Brought to You by the Me Generation

Posted on Wed, Nov 05, 2014 @ 08:27 AM

Tammy_Wilson Author: Tammy Wilson,

Pull up any payments related trade publication and try to wrap your head around all that is going on in the industry today, and it will quickly overwhelm.  While it is an exciting time to be in the payments arena, it is a challenge every day to identify initiatives with staying power from those that quickly become passé.  Those of us that have been around a while know that money movement has not historically been a terribly exciting or innovative place.  It was a necessary function with an emphasis on reliability and security.

Then something changed. 

It’s possible that the payments industry was just stagnant for so long that it was due for a period of crazy innovation.  Maybe, but I think it is far more likely that the maturing Millennials who think so very differently than prior generations about everything, including banking and payments, are dragging us Gen Xers and Boomers along into a new future where we are torn between cliché statements like, “What was wrong with the simple, easy to understand, old way?” and the admission that all this new stuff is pretty cool.

When you look around the world, payments everywhere are changing.  Several other countries have already migrated to a “faster payments” model.  There is much the U.S. should learn from the trials and successes of others. As a follower, we can mimic what worked and learn from what didn’t.  Right now, the Federal Reserve Banks are working on an extensive study regarding ways to improve the domestic payment system, and that study includes a review of these global initiatives.  It is an interesting project because the traditional U.S. banking system is perceived as terribly slow to adopt innovation. 

Undeniably, our financial system playground is much different than other countries, so there are justifications for our lag.  However, the Millennials are creating disruption with their demand for better, faster, cooler options.  As a result, we are beginning to see new plays in the payments space that seem designed to satisfy the desire for solutions that better fit their life.  As elusive as significant improvements in traditional channels have been to this point, the Me Generation with their smartphones and disdain for the status quo, will likely win the battle to have it their way.

The U.S. payment system’s attempts to evolve seem a bit like Sisyphus pushing his boulder up the mountain, and just when it seems like we are gaining ground, breaches or new regulatory guidelines send us crashing back to the bottom of the hill. Still, it feels like change is inevitable.  We know it can happen.  Consider Check 21.  While image exchanges floated around for a while on a limited scale, a single point of disruption on 9/11, and the resulting standstill of check settlement around the country, made us look at things differently.    While it was painful, it proved that we CAN make meaningful, effective improvements to our payments systems.

So maybe the thing to do now is to identify the right next steps.  Do we take those familiar but aged check and ACH rails and polish ‘em up so we can stop moving like a steam engine and step up to a high speed solution?    Or, are those old rails better left in the dust in favor of promising, but untried revolutionary paths?  There are several groups entertaining solutions. With the help of outside consultants, the Reserve Banks’ Faster Payments study is considering the options. They have outlined five desired outcomes1:

  • Ubiquitous, Faster Electronic Solution
  • Enhanced Payments Safety and Security
  • Improvements in Cross-Border Payments
  • Improved Efficiency
  • Strategic Industry Engagement

Relying heavily on industry engagement, the central banks are trying to determine which route seems the most viable and establish their strategic road map forward.  From evolving the ACH network for expedited funds movement, considering expanded use of the debit card network, to building a completely new infrastructure, the alternatives are on the table.  Additionally, both The Clearing House and NACHA are working on multi-year initiatives to provide faster payment alternatives.  The Clearing House is talking about plans for a real-time solution, while NACHA revisits the Expedited Processing and Settlement topic for Same Day ACH.

It is a challenging task because the ROI is questionable, and the other global initiatives for faster payments have admittedly been strategic decisions not financial ones.  But consider the risk if we sit here and watch outside industry innovate their way right past us.  And innovate they will in order to satisfy the immense demands of the Me Generation.  We should be thankful that the latest Apple Pay solution does not disintermediate the traditional payment channels, but instead innovates on top of them.  The next time, we may not be so lucky. 



Tags: payments processing

¿Dónde está Waldo?

Posted on Wed, Oct 29, 2014 @ 08:20 AM

Jason Schwabline Author: Jason Schwabline,

Like looking for Waldo in a crowded scene, everyone in the financial industry is searching for the ultimate branch of the future.

But are we looking too close to ourselves?  Hoping that it miraculously appears right in front of us?  Well I am not a psychic, but I have seen the branch of the future. It is live. In action. In regular daily use. With branches that welcome community members to lounge out for the day.  To interact with either technology or humans, whichever meets their comfort level. Where can you see this perfect branch of the future?  This special place is none other than Chile. 

Branches in Chile have embraced self-service for years.  Kiosks start processes that are finished in other areas.  Retail experiences cross demographic lines and economic boundaries.  People from all walks of life pay bills and handle a multitude of other financial matters in assisted self-service models.  New branches are built as full on experiences—long curving counters, bright colors in some, others with a more Zen-like peaceful experience.  Walls are low and inviting, but pockets of privacy are still provided.  The best thing about all of this? These are not prototypes. These are not experiments. These are the branches of the future and they are established, alive, and well.

Branch Concept

Chilean bankers long ago embraced the concept of community and providing “customer’s choice” service to all demographics. In doing so, every product and service decision was based on fitting into that concept. What works best: Tellers or universal associates?  Self-service or full-service?  Person or machine? Utility or destination? These are questions now posed daily within our industry.  We are embarking on an exciting time in the transformation of a branch.  In the domestic U.S. there are ongoing proof of concepts for solutions seeking that special mix, a harmony so to speak…of a full-service and self-service environment.  The drivers are many: for some FI’s it comes down to cost reduction while for others it’s to stay relevant and attract the much sought after millennials. The model is truly at play as in the financial services space we recognize that a branch has tremendous, on-going value.  It is a place of safety.  Not safety in the sense of protecting oneself, but instead a place solidifying the presence and legitimacy of the financial institution. Branches provide, in a sense, the foundational roots for a relationship of services between a consumer and their financial partner. Creating a destination isn’t just about the machines or people it contains, but a retail experience—with a bar that has been raised globally by technology companies such as in the Apple Store. 

Perhaps it is time to recognize that “Waldo” is right in front of us—to catch up to our Chilean friends and embrace the branch concept of community and service offerings based on the customer’s choice. What is your opinion?


Tags: branch banking, branch experience

The Financial Institution Website: Where Community Meets Cyber Crime?

Posted on Wed, Oct 22, 2014 @ 08:06 AM

Jenny Roland-Vlach Author: Jenny Roland-Vlach,

I have developed a bit of a habit over the years in my role as a Compliance Analyst: I like to regularly check out my FI client’s website.  I have found that it gives me a great visual representation of what that institution is all about. This helps me understand the FI’s products/services, business culture, and face to the community. I also like to check for staff pictures on the chance that I can put a face with a name for the particular employee that I am working with on IT regulatory compliance and risk management efforts.

During my reviews of financial institution websites, I have noticed a certain propensity that does give me reason for concern, though. With the increase in spear phishing attacks and concern in accessing systems and data, I have often observed biographical information that could potentially be used to stage spear phishing attacks to access systems and data for harm against the institution. Information that I believe is being shared in an effort to better establish connections with the FI’s customer base. Detailed biographical information is a veritable gold mine for cyber criminals. By visiting a financial institution’s website they can begin to glean the information they need to build a phishing attack, perhaps as an email from the President’s college alumni association or the favorite charity of the Chief Technology Officer. The more detailed information that an institution provides about their staff, the more ammunition cyber criminals have to use against the FI. Often times FI management educates employees about sharing too much on social media sites, such as Facebook, but forgets about the FI’s website as a source of personal information.

Now may be a good time to step back and re-evaluate the level of detail provided. Be cognizant of how the detail could be utilized in a spear phishing attack. For example, an FI President has a Master’s degree in Finance, but do not list the college; or, the Chief Technology Officer is active in numerous community charities, but do not include specific names. Another idea is to introduce common spear phishing scenarios in your employee information security training. Providing specific examples of how a cyber attacker may use biographical information in an email will help employees identify potential red flags in a spear phishing email, and to understand the need to qualify all emails before opening and clicking on links. Hosting a formal Social Engineering Assessment may also provide a good indication of your employees’ awareness of these types of schemes.

Metadata from MS Word and PDF documents and forms are another source of information on your website that could provide details that are ideal for launching a social engineering attack. Metadata is the supporting detail for these types of documents. Financial institutions often post rate sheets or forms to their website in either a Word or PDF format that reveals the user who created it and what version of the program it was created in. If this information is not removed (scrubbed) from the document prior to being posted on the website, it has the potential to be used against the financial institution. While visiting the website of a community FI, a cyber criminal that discovers a document that has not been scrubbed of metadata will now have at least two critical pieces of information to assist in their schemes. Just by knowing the version of the program the document was created in, a criminal can then determine the vulnerabilities known for that particular program. The criminal can then create an attack based on those vulnerabilities and target this attack toward the employee who created the document. One simple step to scrub metadata from these types of documents will go a long way in preventing this scenario.

Websites continue to be a vital part of every community FI’s online presence. We only need to look to the news reports of the past couple of years to see the multitude of spear phishing and DDoS attacks targeting FIs to realize that cyber criminals understand this criticality all too well. In your efforts to prepare for potential attacks against your website and against your online banking systems, be sure not to overlook the type of information illustrated above. Detail gleaned from biographies and metadata from documents may provide cyber criminals with enough information to help them create an attack that could have impact on your institution. Use this as an opportunity to further address your risk and compliance efforts for online services. A review of your website today could save your FI a lot trouble down the road.


Tags: website content, cybersecurity, phishing campaigns

Building Collaborative Software

Posted on Wed, Oct 15, 2014 @ 08:08 AM

Eric Wilson Headshot 50x50 Author: Eric Wilson,

All the recent attention and emphasis on data has reinforced the saying, “Knowledge is power.” Thanks to major breakthroughs in advanced data tools and cloud computing, many organizations are compiling, storing and interpreting huge amounts of information. That’s a trend that is certain to keep going. 

Now that data foundations are starting to form, financial institutions have a golden opportunity to find innovative uses for all this information.  But to leverage data effectively, they will need systems ready to collaborate in ways that will let them capitalize on it. 

“It is not the quantity of data that is revolutionary. The big data revolution is that now we can do something with the data.”

No matter how much information our systems collect, data only becomes valuable if we can turn it into action. However, defining who the “we” in that sentence is raising some interesting questions. It also sheds some light on where the next big opportunities for innovation are.   

Automated tools use sophisticated algorithms to identify important data trends or anomalies, but they often leave it to people—an FI’s customers or staff—to interpret the results and apply their insights in the form of manual action. Asking humans to evaluate and be the “doers” every time there are actionable opportunities may be short sighted. 

If banks and credit unions really want to take advantage of the data revolution, they must look for tools that collaborate with data sources, other systems and end users so that systems can turn insights directly into action. Computers love doing repeatable, routine processes.  People don’t.  And people will gladly allow (and pay for) systems that automatically do things to make their lives simpler and easier.   

In short, financial institutions need to begin looking for collaborative systems.

Next generation products should collaborate with data sources

Innovative solutions like Hadoop that work directly with unstructured data, or the new SQL version that provides in-memory performance improvements to increase the speed at which data can be retrieved are opening up a door for people and systems to leverage data in unimaginable ways. 

And then there’s cloud computing.  A major strength of bringing data to the cloud is that it can be easily shared across platforms.  Most products and systems have their own set of databases.  Putting that data in the cloud allows for information to be mutually accessible at an enterprise or product suite level. 

Many organizations are implementing business intelligence programs that are beginning to realize data’s huge potential. With accessible data, good business intelligence, and the ability to retrieve information quickly, systems (as well as people) will be well positioned to effectively collaborate with a wider variety of information.     

Next generation products should collaborate with other systems

In some scenarios, it’s natural for people to be the entity that interprets the results of data analysis and takes action in response to it. If, for instance, the goal of data analysis is to help a shopper decide which item to pull off the shelf and put in their shopping cart, it makes perfect sense for a person to interpret the data and grab the merchandise.

In other scenarios, however, it may be more logical for systems to collaborate with one another in order to act on their own.  If a data analysis engine determines that the risk factors for a particular client became substantially higher, wouldn’t it be simpler if the analysis engine simply triggered appropriate actions to occur and worked collaboratively with the other systems involved to make the changes automatically? 

Three important words financial institutions should become more familiar with is Service Oriented Architecture.

If we want products to collaborate to accomplish tasks (an area from which the next wave of innovation will come), systems will need to become services (i.e. collaboration gateways) to make requests to each other and inform them of completed functions.  Ask software architects, and they will tell you how powerful this can be. Banks and credit unions could benefit by moving toward service based infrastructure so their systems are capable of collaborating with each other.

Next generation products should collaborate with users

People want to be equipped with information, but they also want information to be presented in ways that are useful and intuitive.  Systems should be supported by user interfaces that present information effectively and assist the users with taking action at the right time, in the most optimal way. 

Here are some attributes modern users expect:

Accessibility - Users demand products they can access from their device (whatever that may be) in ways that are usable in the context of that device’s capabilities.  HTML5 and native application technology have provided the tools for this expectation to become a reality. 

A desire to stay informed – Good data is a start.  Interpreting that data and providing systematic alerts, notifications, and recommendations for action are becoming essential parts of an engaging experience users will want to return to. 

Usability - Users crave applications with a rich, clean interface to get information and take action.  It sounds like common sense--and it is--but users will adopt only the products that meet their needs, so systems must continuously strive to modernize how they interact with those who use them.  

Systems that have these traits are much more likely to foster strong user involvement and participation.

It’s all about collaboration! 

For the most part, today’s systems are silos with their own databases that interact very little with the outside world. In the next few years, that model will give way to one where individual software products more fully leverage the world’s ubiquitous connectivity to work together with external data sources and systems.

Creating a collaborative world between systems will provide unique opportunities to move beyond computing and begin literally doing more.  And we, the people, will be the prime beneficiaries of this collaboration.


Tags: Big data, Cloud computing

Lockbox…If not you, then who?

Posted on Wed, Oct 08, 2014 @ 08:44 AM

Rob Hudecek Author: Rob Hudecek,

During my initial training as a student pilot, there was one maxim from my flight instructor that has stood out above all: “If you are not doing something, you are doing something wrong.”  Inaction can often lead to undesirable results (including, as a pilot in training, not being able to use the airplane again).

It is easy to visualize how this same phrase can be used for business with consequences revealed in loss of current market share, missed opportunities, or worse.  From property managers to healthcare providers to utility companies, modern merchants are continually looking for ways to conscientiously adapt to cost control and increased utilization of their staff for core business practices.  When offered, most merchants are all too eager to offload their labor intensive payment processing to willing institutions better suited to automate the process. Some such industries include:

  • Government
  • Mortgage Companies
  • Insurance Companies
  • Tax Offices
  • School Districts
  • Non-Profit  Organizations
  • Grocery Stores
  • Newspapers / Subscriptions
  • Churches
  • Waste & Disposal

With over eighty percent of mid-sized companies still processing their remittance payments in-house (Aite Group, 2012)1, the landscape is set perfectly for lockbox service offerings.  In a recent survey, forty-three percent of all institutions surveyed expect an increase in retail lockbox processing through 2016, and sixty-eight percent expect an increase for wholesale processing (Aite Group, 2014)2.  This increase has given way not only to increased revenues for those who already offer lockbox services to their customer base, but has also led to non-payment add-on processing  as well, including: 

  • Order Form Processing
  • Voter Registration
  • Surveys
  • Enrollment Forms
  • Permit License Renewals
  • Change of Address
  • Legal Correspondence
  • Extended Warrantee
  • Systems Integration & File Translation
  • Electronic Remittance Processing

John F. Kennedy once said: “There are risks and costs to action, but they are far less than the long range risks of comfortable inaction.” 

If you are not offering lockbox services through your financial institution today, there may not be a better time to consider the opportunity.



(1)    Aite Group - Payables and Receivables at Midsize Companies: The Not-So-Forgotten Middle, 2012

(2)    Aite Group - Lockbox in North America: The Facts and Figures of an Exaggerated Demise, 2014


Tags: payments processing, lockbox services, remittance processing

Apple Pay! Now What?

Posted on Wed, Oct 01, 2014 @ 03:24 PM

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Author: Lee Wetherington, Director of Strategic Insight,

In the beginning (of September), mobile payments were without form, chaos covered the face of the deep, and the spirit of Steve Jobs hovered over Cupertino, California.

Tim Cook said, “Let there be bigger screens,” and there was the iPhone 6. “No, even bigger screens,” he said, and there was the iPhone 6 Plus. “Wait, how about a tiny screen on your wrist?” and there was the Apple Watch.

“One more thing,” he said, and there was Apple Pay. And Bono did sing, and the people did rejoice.

That Apple’s “September Event” was a media spectacle of biblical proportions goes without saying.

For community financial institutions, however, the biggest news wasn’t the new iPhones nor the Apple Watch. It was Apple Pay—Apple’s foray into mobile NFC tokenized payments at the point of sale.

So What?

Apple has broken the chicken-or-egg stasis of mobile payments in the U.S. The mobile payment technology wars are over for now. NFC wins. Both mobile phone and POS terminal manufacturers have a compelling reason to integrate NFC into all of their devices from here on.

And though the impact of Apple Pay will continue to be the subject of a lot of speculation, community financial institutions already have some good news to celebrate and some wildcards to worry about.

The Good News

First, mobile reinforces issuers’ card franchises. While big-box merchants are still trying to bypass the card networks altogether with mobile checkout apps like MCX’s CurrentC, Apple Pay’s reliance on card credentials secures the future of card payments in the U.S.—even when no physical card is present.

Second, Apple is not going after issuers’ payments data. Unlike Google Wallet and PayPal, Apple Pay isn’t staging transactions to disintermediate issuers and remove their visibility into the final merchant of record.

Eddy Cue, Apple’s Senior Vice President of Internet Software and Services, was emphatic: “Apple is not in the business of gathering your data. With Apple Pay, Apple doesn’t know what you bought, where you bought it, or how much you paid for it.” That information, he said, “is between the consumer, the merchant, and the bank.”

Apple Pay’s tokenization of card data reduces fraud risk and issuer liability. Apple worked with the card brands and the 11 largest card issuers in the U.S. to replace card account numbers with device tokens, dramatically reducing the risk of merchant card data breaches, counterfeit card fraud, and resulting issuer liability. Smaller issuers will also have to enroll in tokenization in order to participate in Apple Pay.

The Wildcards

While tokenization in the U.S. will dramatically reduce card-not-present fraud rates, it ain’t free. In addition to one-time fees for enrollment, onboarding, and token provisioning, the card networks will also charge issuers ongoing monthly fees for token maintenance and management.

Moreover, Apple will collect a $.005 fee for each Apple Pay debit-card transaction and 15 basis points for each Apple Pay credit-card transaction. The wildcard is whether lower fraud rates and fewer losses with Apple Pay will offset issuers’ new tokenization costs and lower interchange fee income (due to Apple’s transaction fees).

Other wildcards:

  • When will Apple open enrollment to all issuers, and is there a material disadvantage to enrolling later? Probably not.
  • When will card brands, processors and debit networks all be ready to fully support the tokenization enrollment and onboarding required for Apple Pay? Probably by or before end of the year.
  • Will consumers use your card to fund Apple Pay transactions? What will persuade a consumer to make your card “top of wallet” in the iPhone 6 Passbook? To be determined.
  • Will customers defect if you don’t enable Apple Pay? No.

Since only 2.5% of existing U.S. POS terminals are NFC enabled, Apple Pay won’t command a significant footprint in payments anytime soon.

Even as merchants deploy more EMV/NFC-capable POS terminals in the ramp up to the EMV fraud-liability shift next October, merchants must still turn on NFC and agree to accept Apple Pay—something MCX members, WalMart and BestBuy, say they don’t plan to do.

What Now?

Right now, issuers have plenty of time to decide whether and when to participate in Apple Pay. Most analysts don’t expect Apple Pay to achieve meaningful volumes for at least 2-3 years. 

But something bigger and much more urgent haunts the interim: Apple Pay will ultimately reduce issuers to commodity providers of passive funding sources. In short, Apple controls Apple Pay. 

So, to remain relevant long term, smaller issuers must prioritize putting their own mobile apps at the center of purchase decisions by leveraging the best piece of data issuers have: the balance. 

Banking and shopping are converging. Consumers want to know whether they have the money to buy the things they want. The sooner issuers awaken to the power of their data (and the indispensable context it provides), the better off they will be…no matter what Apple does next.


Tags: payments processing, data privacy

The Continuing Evolution of Your IT Infrastructure

Posted on Fri, Sep 26, 2014 @ 11:16 AM

RKline Author: Ray Kline,

I started my career in banking IT and operations in the late 80s. Over that time I’ve seen a quantum change in IT infrastructure and computing in general. One of my first jobs in IT was numbering punch cards as a proctor in my college’s mainframe operations department. In that job, the biggest fear you had was dropping your box of program cards that may not be numbered already. One of the most significant changes since those days is the shift in IT processing and infrastructure from In-house to outsourcing (now called cloud computing). This change started with core processing in the 90s, then progressed to item processing, and has now moved to the Windows environment. Jack Henry & Associates has been at the forefront of this shift starting with its Broadway & Seymour acquisition, which marked the start of our OutLink Processing Services division that we know today.

There are two main hurdles that have to be overcome for a robust cloud computing model: communications and a centralized, shared processing platform. Both are imperative for the cloud to be accepted as a viable option. Core processing was a natural fit because it historically has had low bandwidth requirements. Shared computing is actually how core systems have always been designed using mini-computing platforms such as the IBM Power 7 (iSeries) and RISC UNIX processors. Users access a central platform with a “dumb” terminal. Thus, all of the processing happens on the central platform and not locally on the workstation. In this case, data and applications do not traverse the WAN, but instead the only thing sent over the WAN is the screen display of the data.

Windows, on the other hand, started out as a client/server processing model which was historically much more bandwidth intensive. In this case, a full client PC logs into a server remotely, but the majority of the processing occurs on the local client. In this model, the data and application traverse the WAN back and forth to the PC client. The client PC then takes that data and processes it locally. This is also referred to as a thick-client processing model and just by the nature of its architecture requires much more bandwidth – especially in the case of item or document imaging applications. However, with the advent of server virtualization and thin-client technology, we are now able to provide a shared centralized Windows computing platform with a predictable, relatively low bandwidth footprint. This first started out with software as a service (SaaS) solutions such as, where a single application is provided.

The modern IT environment is moving one step further to infrastructure as a service (IaaS) where most, if not all of a financial institution’s Windows servers are provided in a cloud environment. This can include domain controllers, application servers, email servers, SQL Servers, etc. As we continue to define the many benefits associated with this type of delivery model, our customers are starting to see the benefits of moving the Windows server infrastructure into the cloud. In fact, this is almost the same conversation we’ve been having for several years now with our customers concerning core and item processing. In this arena, outsourcing or cloud is now accepted as the best way to implement those systems. Twenty years ago this was definitely not the case, with most customers running their core systems in-house. If you need to think of it differently, think of companies in the early 1900s converting from generating their own power to using an electric utility.

Many financial institutions find it challenging to keep pace with the latest technology, regulatory compliance, and customer service demands. If you decide to shop for an IaaS provider, look for one that enables you to seamlessly move Windows and Linux-based IT infrastructures to a private cloud as an on demand service, leveraging its many benefits. This will move you away from the in-house revolving-door hardware model and significantly reduce the risk associated with internal IT regulatory compliance and disaster avoidance. 

There are many benefits to an IaaS model, including:

  • Helps FIs keep up with and manage technological advancements, regulatory compliance directives, and customer service demands. 
  • Allows your FI to stop chasing hardware and frees internal IT resources to focus on more strategic initiatives. 
  • Delivers infrastructure resources as a fully outsourced on-demand service. 
  • Provides extended expertise beyond your own IT staff. 
  • Piggybacks on the success of your existing outsourcing/cloud initiatives, e.g., core or item processing. 
  • Enhances business recovery by mitigating the impact of any local disaster. 
  • Controls costs, since you typically only pay for what you use.
  • Offers greater security because your IT infrastructure is presumably being managed by an organization with vast experience.

Maybe you shouldn't keep your head in the clouds, but you may want to consider keeping your IT infrastructure there.

Tags: Cloud computing, Outsourcing, SaaS, IaaS

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