Hello, I am Nicole with Information Security Media Group and I'm joined by Toby MacFarlane who is Head of Approvals and Fraud at CMSPI. Toby, welcome. I need you to be here. So, I'm interested really, the reason I reached out to you the other day for this conversation is we are in the midst of a pandemic and it's having serious repercussions in every aspect of our lives.
But one is really how we pay for things and there's been some interesting announcements even today. I mean, one is that the Russian Central Bank is effectively taking notes out of circulation for 14 days to, I guess, literally money launder and sort of sterilize that the cash before it goes in or make sure it's virus free. And then you have some of the card networks announcing that they're lifting the limits for contactless transactions in Europe so that pin isn't required for a much higher threshold. So maybe talk to me about where you see from kind of, again, the physical perspective in terms of retailers and going to ATMs at the point of sales or what kind of an impact are you anticipating through COVID-19, sort of longer term with that?
Yeah, absolutely. And I think the contactless limit being raised, it's going to be interesting to see what fact that has because obviously the football installs is drastically reduced to any rate in recent time. So it remains to be seen. What sort of effect that will have?
I actually personally expect that that limit won't go back down as well, once we come out of this crisis. So obviously that's a great result for the card schemes and for anyone who has a stake in card transactions. It's going to really be up to a government level really to ensure that access to cash really stays following the crisis. In terms of ATM volumes, we've already seen some statistics whereby there's been a 25% reduction in certain countries and ATM volumes and again, COVID-19 is going to have a very large effect on cash usage generally around the globe and it's going to accelerate a lot of the move towards cards obviously, especially in the US as well when obviously contactless in the US for example is much earlier stages than it is in other countries but this could accelerate that progression as well.
So I'm kind of wondering if people think actively avoiding ATMs just because of the divorce concerns and I guess simultaneously cash as well. Yeah, I would say that's definitely a contribute factor obviously. Less football in retail schools means less football that's obviously where the majority of ATMs are and obviously means less football to those ATMs as well and I think that's just really not had a lot of good practice especially in recent times with it being a major transmitter of the disease as well so I think those will combine definitely later that and I'd like to see further reductions in cash levels as well going forward. Yeah, that's interesting.
I mean it's the other dynamic here, I mean there's been a lot of instances of maybe a push to eradicate cash in a lot of environments and cashless laws for counter-argument being well that is in some respects cutting out people who may be unbanked or unbanked in terms of those people who are likely to be paid in cash and pay with cash. I mean do you think this is again maybe a dynamic that's going to push for greater contactless or card penetration amongst the unbanked and unbanked populations? Yeah, well I mean ultimately there's a reason why those people are unbanked and have access to the right facilities in a lot of cases so as I said it's going to be able to sort of government and trade associations to really work to ensure that cash still stays available for those people. Obviously in general we're going to see a further push towards cards and contactless with we're already seeing that coming through in our data as well so it's going to be what cash obviously will still stay essential to those people so it's going to be up to those governments and those lobby groups to actually make sure that cash stays available because it's going to be still essential for the years to come.
I mean pivoting a little bit and we've been talking obviously about sort of the physical world and the physical impact there. We're now in an environment where you know that there's probably the largest remote workforce that the planet's ever seen so you know people are clearly skyrocketing in terms of ordering physical and digital goods online and we can expect a frost spike with that but are there any specific fraud schemes that you're anticipating based around COVID-19? So you're right we've already seen data that we're analyzing that has been a significant shift in retail payments towards e-commerce already so some of our merchants have sort of seen four times the traffic on a daily basis that they would have seen previously now obviously that opens up additional opportunities for fraudsters obviously there's sort of a more to go out there's a bigger park to play with and more chance of those fraudsters being able to slip through the net for online transactions also for some areas of changing as well so obviously now you've got a lot of people sort of buying products for many family members who are more vulnerable and obviously there could be issues there with the fraud rules if the address of the purchaser doesn't actually address the delivery address for example to the sort of low approval rates and ultimately because you know it's something that the fraudsters can take advantage of because that's often how they'll try and get through. Also obviously people are transacting higher amounts as well so higher average transaction values as we know generally lead to lower approval rates so merchants need to be really proactive in sort of managing that and there will be merchants who already do the majority of their business online will already settle very well to deal with this whilst the high street retailers who can start with the majority of their business in store may not be sold very well but we've seen this big spike and fraudsters may well target those more vulnerable merchants.
I suppose it's tempting as well maybe if you're an online merchant that you know in terms of getting that traffic and removing you know a cart of animal you might remove some of the checks and balances like a dress verification or CVV or whatever you know is that something you're anticipating as well. Yes so it is worrying really and as you say merchants have seen overall with their sales they're decreasing obviously because they haven't just shut stores so the temptation will be there for the merchants to lower their fraud rules or so yeah as you say it eliminates some of those checks and balances which I would not advise that as a good degree without sort of proper justification for that and it's much too early now to see any meaningful data as to whether you know to lower your fraud rules because of this new environment we're seeing now so without proper analysis and proposals benchmarking information and merchants aren't unable to sort of make decisions for the best interest of their business at the moment. Just revisit that four times traffic figure you mentioned is that being four times the online traffic since this virus outbreak are you indexing it to say the start of the year? Yeah so we're seeing obviously data from a lot of our clients data and transaction level data and obviously this is combined to certain sectors and so we're seeing obviously online grocery has obviously had a huge spike over the past week and that's compared to the comparable data from the year.
We are seeing that a lot of passion retailers and department stores are also having speculative transactions online as well so it's a drastic migration towards the online space. That's interesting is that you know it's so as you say sort of online clothing stores do you think that's what it's like people can't actually go to the stores because that's sort of again you know I guess sort of comfort shopping people are doing a retail therapy as well as they're stuck inside. Yeah I think that's absolutely the case I think obviously people are you know they're compared to their homes they're probably a little bit bored so they're going out to restaurants they can't spend the money going out to the equal activities so therefore they're as you say come for buying with additional things that don't need online and say it's not just actual number of transactions that's increased and it's the actual average value of those transactions as well as the people that buy more online. Yeah interesting.
So I mean in terms of your customer base Toby I mean what would be maybe your three recommendations for retailers that are out there and you know this is a you know clearly you know uncharted territory for them what would you recommend for them in terms of minimizing their fraud exposure. So the one thing you should already have in place is tools to monitor fraud and approval rates and not only just monitor them but make sure you can benchmark your approval rates effectively as well and obviously that's the idea of access to a lot of data across the industry and you want you want to know so say if you say you see a spike in fraud for example you want to know if that's sort of a general industry trend or is that something that's specific to your business right it is something to your business and you can action that off the back end and one thing I would say as well and a piece of advice is to make sure you're engaged with your suppliers as well and that's not sort of contracted suppliers like PSPs and merchant acquirers it's issuing bank partners as well because they will be changes on their end on in terms of their way access transactions right to deal with this and therefore you need to have that information so you can adjust your rules on the on the merchant and obviously we're seeing customers who normally shop in store but now shop in online and that's a completely different experience as we know and so that opens up opportunities for merchants as well and so they could be incremental customers opportunities to sell with additional items as we've already seen ATDs are increasing online and so merchants can ensure their online payment experience and infrastructure is set up to handle that and then we could see certain merchants sort of taking market share off of not optimized merchants so there is there is opportunity out there in this crisis sort of additional market share for those optimized merchants. That was Toby MacFarlane head of approvals and fraud at CMSPI and for inflation security media group. I'm Nick Holland.