This story was delivered to BI Intelligence "Payments Briefing" subscribers. To learn more and subscribe, please click here.Beginning this spring, Wells Fargo plans to introduce a new mobile transaction plan that will allow customers to withdraw cash from all of the banks 13,000 ATMs without using their debit card, according to CNN Money and Fortune.The bank reportedly plans to introduce a new feature in its app that will give customers an eight-digit code, which they then would enter into the machine alongside their PIN in order to access cash. Wells Fargo isnt the only bank experimenting with cardless ATMsboth Bank of America and JPMorgan are as wellbut such a move would make it the first to convert its entire fleet.The move would bring clear benefits to the bank:It might see uptick in mobile banking usage. Wells Fargo has a massive digital banking user base, counting 18.8 million users. These customers tend to be relatively engaged with digital banking tools, accessing these services five times per month on average, according to the Fed. Though some have questioned the utility of the service, saying that its no better than swiping a card, it could be more popular than the mobile wallet-based model that other banks have explored, because banking apps have more users than wallets, and therefore might be a more convenient access option.It could help increase digital engagement. Though it continues to add users, Wells Fargo, like other major banks, is seeing slowing mobile banking growth. The firm needs to keep adding digital users and robust services, though, because digital is a key driver of customer interactions for the bank. Building out additional mobile banking offerings could help with that.And that in turn could help the bank, which is trying to recover following last years scandal. Since the scandal, Wells Fargo has seen a sharp downturn in a few areas, including new accounts. Adding digital tools could help attract tech-savvy younger users. And these tools are proven to decrease attrition and increase engagement with banking products and services, which could help the bank rebuild. But the move could present a major safety downside. Krebs on Security found that as banks have begun enabling cardless ATMs, fraud reports are rising. Thats because, for example, if firms can skim a users card number or PIN, theres no reason they wouldnt be able to take other information inputted, like the code that Wells Fargo could provide or a banking app password. That adds to existing risk, because the number of compromised ATMs in the US is on the rise, and reports of fraud could be enough to discourage consumers from using the technology.That means that, as Wells Fargo and peers look to enable cardless or contactless ATMs, they must be particularly attuned to security risks and finding solutions, like biometric authentication or additional access limitations, in order to protect their users.Fraud cost U.S. retailers approximately $32 billion in 2014, up from $23 billion just one year earlier.To solve the card fraud problem across in-store, online, and mobile payments, payment companies and merchants are implementing new payment protocols that could finally help mitigate fraud.John Heggestuen, senior research analyst for BI Intelligence, Business Insider's premium research service, has compiled a detailed report on payment security that looks at how the dynamics of fraud are shifting across in-store and online channels and explains the top new types of security that are gaining traction across each of these channels, including on Apple Pay.Here are some of the key takeaways from the report:EMV cards are being rolled out with an embedded microchip for added security. The microchip carries out real-time risk assessments on a person's card purchase activity based on the card user's profile. The chip also generates dynamic cryptograms when the card is inserted into a payment terminal. Because these cryptograms change with every purchase, it makes it difficult for fraudsters to make counterfeit cards that can be used for in-store transactions.To bolster security throughout the payments chain encryption of payments data is being widely implemented. Encryption degrades valuable data by using an algorithm to translate card numbers into new values. This makes it difficult for fraudsters to harvest the payments data for use in future transactions.Point-to-point encryption is the most tightly defined form of payments encryption. In this scheme, sensitive payment data is encrypted from the point of capture at the payments terminal all the way through to the gateway or acquirer. This makes it much more difficult for fraudsters to harvest usable data from transactions in stores and online.Tokenization increases the security of transactions made online and in stores. Tokenization schemes assign a random value to payment data, making it effectively impossible for hackers to access the sensitive data from the token itself. Tokens are often "multiuse," meaning merchants don't have to force consumers to re-enter their payment details. Apple Pay uses an emerging form of tokenization.3D Secure is an imperfect answer to user authentication online. One difficulty in fighting online fraud is that it is hard to tell whether the person using card data is actually the cardholder. 3D Secure adds a level of user authentication by requiring the customer to enter a passcode or biometric data in addition to payment data to complete a transaction online. Merchants who implement 3D Secure risk higher shopping-cart abandonment.In full, the report:Assesses the fraud cost to US retailers and how that fraud is expected to shift in coming yearsProvides 5 high-level explanations of the top payment security protocolsIncludes 7 infographics illustrating what the transaction flow looks like when each type of security is implemented.Analyzes the strengths and weakness of each payment security protocol and the reasons why particular protocols are being put in place at different types of merchants.To get your copy of this invaluable guide, choose one of these options:Subscribe toan ALL-ACCESS Membership with BI Intelligence and gain immediate access to this report AND over 100 other expertly researched deep-dive reports, subscriptions to all of our daily newsletters, and much more. >> START A MEMBERSHIPPurchase the report and download it immediately from our research store. >> BUY THE REPORTThe choice is yours. But however you decide to acquire this report, youve given yourself a powerful advantage in your understanding of payments security.Join the conversation about this story
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