Montreal--Call it a not-so-fun fact: card issuers, including credit unions, have had to reissue more cards as a result of data breaches than there are people in the U.S.

That fact, shared by MasterCard General Counsel and Chief Franchise Officer Tim Murphy, elicited a combination of groans and rueful chuckles from the crowd at NAFCU’s annual meeting Thursday.

“I know, it’s not really funny,” Murphy said. But it highlights the importance of data security—and the efforts to recoup the costs of those breaches, which brought Murphy to a difficult moment: MasterCard’s attempts at a settlement for the Target breach.

“Our hope was to speed things along by getting everyone on board with a settlement,” he told the audience. But when credit unions and other issuers largely panned the settlement and refused to sign off on it due to its paltry size, “we’re going back to the drawing board. That settlement was based on the formulas that were already in place. Going forward, we will rethink and revamp the formulas we use…We know we lost a lot of trust and that we will have to work to regain your trust. We recognize we have work to do.”

As credit unions are still smarting from a host of big-box retailer breaches, the key, Murphy said, is building and maintaining trust. “The breaches have made a serious dent in consumer trust. Only two in 10 consumers trust their institutions to protect their data,” he said.

But the main thrust of Murphy’s message was encouraging credit unions to make sure they have a consumer payments in strategy in place. He urged credit unions to talk with whichever credit card network, CUSO and/or card processor they work with to help them design that strategy, which should include two primary aspects:

  • Optimization—working to convert more expensive payments, such as checks, to cheaper forms of payments. “Not only will this save you money, but it will also mean better service to your members,” he suggested.
  • Engagement—making sure the credit union stays engaged with how consumers want to make payments. “On average, a person has 4.5 connected devices—that’s where they are; that’s where they want to do business,” he said, noting that in his small household of four, there are at least 12 connected devices, which is actually below average.

Payments through those connected devices—be it through Apple Pay, Android Pay or other mobile wallets still to come—are something credit unions cannot afford to ignore. And there was one big fear related to mobile payments that Murphy sought to allay: “Apple Pay is not about apple getting into banking—it’s about selling more iPhones,” he said. “Yes, Apple is big enough to do what they want to do, but they have chosen to work with credit unions and banks because they recognize that banking is a highly regulated space, and the recognize they don’t want to be in this highly regulated space.”
As credit unions move forward with Apple Pay and other mobile wallets, Murphy offered four things consumers want:

  • See the card art on the phone. Credit unions should want this, too, as it ensures that their brand doesn’t get entirely subsumed by the mobile wallet’s brand.
  • A smooth payment experience.
  • Touch ID -- the fingerprint authentication used by Apple Pay. “This really resonates with consumers and merchants,” he added.
  • Validation -- “It’s hugely important to the consumer that they have had interaction with the financial institution that issued the card they are integrating with the mobile wallet,” he said. “They want validation from you. They trust and value you more than the mobile wallet provider.”


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