Listen: How embedded banking can reduce fraud

Adoption of embedded banking by both businesses and customers is on the rise, and it is helping to reduce the risk of payment fraud along the way. For consumers, tokenizing user credentials for their protection is a benefit; meanwhile, businesses gain security by using integrated systems to accept payments safely, Bennie Pennington, vice president of embedded banking and integrated payments at $190 billion KeyBank , tells Bank Automation News in this episode of “The Buzz” podcast. Replacing a user’s card number with a randomized 16-digit number ensures that it is encrypted at every point in the process, Pennington said. The Cleveland -based KeyBank “has a full API developer portal that software companies and businesses can use to connect to us,” Pennington said. The portal allows them “to process a payment, accept a payment, and use tokenization and encryption in each of those methods,” he said. Listen as Pennington discusses growing areas of financial services industry fraud on this episode of “The Buzz,” and why embedded banking makes for effective fraud mitigation, thereby increasing client retention. Subscribe to The Buzz Podcast on iTunes , Spotify , Google podcasts , or download the episode . The following is a transcript generated by AI technology that has been lightly edited but still contains errors. Brian Stone 0:03 Hello, and welcome to The Buzz, a Bank Automation News podcast. My name is Brian Stone, I'm the Associate Editor at Bank Automation News. Joining me today is Bennie Pennington, Vice President of Embedded Banking and Integrated Payments products at KeyBank. Bennie discusses how embedded banking can assist with preventing fraud from both the consumer and business perspectives, how governmental regulation may affect open banking, and what areas of fraud are growing within the financial services industry.Bennie Pennington 0:31 Fraud is a rampant problem in banking for both consumers and businesses. It rears its head in a couple of different ways. First, there's the common credit card fraud, that happens when a consumer gets their debit card or credit card credentials stolen or skimmed, you know, or they're copied somewhere, and then someone else that is not that authorized user wants to go take those and make a payment somewhere else to, to to buy some goods. There's ways to prevent that by of course, keeping your card secure. But making sure any place that you were using your card or you know spending or you know, making a payment, making sure that it's in a on a secure website, for example, you can always see the lock icon at the top left of the screen. Most of the time that'll insulate you are making sure if you go inside a business and you're giving them your card information that they're not writing it down on a sheet of paper or typing it into a spreadsheet, that is some kind of secure software that it's being housed in, in that software is encrypted. The there's a few other types of fraud as well, there's, you know, for businesses, this is more common with phishing, scams and account takeover. So this is you know, someone at a business gets an email that says, hey, this is urgent, you know, this is your boss sent me the routing an account number urgently because I needed to make a payment, or I needed to fund something. And you know, the the the scammer might, you know, use words and increase urgency or try to, you know, emulate someone else. And then someone unknowingly gives over some secure payment credentials to you know, an unknown third party or an untrusted source, then there's also the phishing scams, where someone can get an email that says, you know, hey, click here for, you know, to open this important attachment, and it's really, you know, it's really a virus or something that's then going to try to skim information on their computer, you know, try to read a password or something that's going to get them access, such as to some other system. So the ways to, to prevent all of that are with a lot of vigilance. And, you know, a lot of businesses and consumers now are having to go through, you know, basic trainings and, you know, updates on what are the common scams are out there, what are the types of fraud are out there and how to prevent them. In banking, it's no different, it's important to keep your credential secure, it's important to work with a bank that, you know, sends out notifications about different types of things that are prominent in the industry. KeyBank does that consistently, when we noticed, there's a lot of prominent scams that are going on, or things that are common, or that might be compromising our clients, we send out as much proactive notification to our teams as possible about you know, the types of messages we might send, what not to click on, when not to give your password out, things like that. So the fraud is only going to continue, or attempts at fraud are only going to continue. But there's things consumers and businesses can do along with their bank to prevent it as often as possible. Brian Stone 3:34 Can you talk a little bit about how embedded banking can help businesses reduce the risk of fraud? Bennie Pennington 3:41 Sure. So embedded banking to us is integrating payments via software along with Treasury services. And the way that it reduces fraud is two ways. There's one on the consumer side, so you know, a regular person like you are, and we've got our credit card and debit card. And then there's also the side of the businesses that we shop at. So first, on the side of the consumer and the cardholder, it's let's start off with making sure your credentials are as secure as possible in all the places that you store them. So things like digital wallets, like Apple Pay and Google Wallet. And the digital apps where you store your banking credentials. We work with all of those vendors to make sure they use the latest security, the latest encryption and tokenization methods so that when you do load your card into those avenues and into those wallets, that most of the time it should your actual 16 digit card number should be replaced with a token, basically a dummy 16 digit card number. And then if something were to happen with your phone, or even where you go to pay, you know, the card number that's given to them is a dummy card number and not your real card number. And that way, if something does happen at that point of sale, that it's not your real information that's being used, it's dummy information that really can't be frauded or you know, no further damage can be done. So that's a way that We can make sure that the consumers are insulated as much as possible. On the business side, what embedded making tries to do is then work directly with those businesses where all of us shop, your local hair salon, the local pizza, pace, pizza, place, the yoga studio, etc, to make sure they've got the most secure software and the most modern technology to accept payments in a seamless and secure way. So we are working with those partners and software companies to make sure that they've got integrated systems to process your card in with the software. This helps avoid things like people writing your card number down on a sheet of paper or typing it into a spreadsheet, and then they have to copy it over into some other software that orders the pizza, right? If we can embed the payment acceptance directly into the software that the pizza shop uses, then it reduces the chance of that transference of the card data from one system to another that can you know, in that process of making that seamless, we can help reduce fraud. The other thing that we're doing is enabling those software companies to connect directly to us insecure methods. So we've got a full API developer portal that software companies and businesses can use to connect to us that will allow them to process a payment accepted payment, and use tokenization and encryption in each of those methods. Essentially, what that means is, again, replacing your full card number with the 16 digit dummy number and make sure it's encrypted. As it goes from the card machine to the you know, to the software itself as it goes to visa and back making sure that it's encrypted every point of the process. So we try to provide that technology to the businesses so that they can keep their system secure, and to the consumers so that even the numbers that they're giving out are encrypted and tokenized. Brian Stone 6:48 So one other thing I wanted to ask about with embedded banking, I know you touched on it a little bit in your answer, are there other additional ways it can help banks with client retention? Bennie Pennington 6:58 We are a we are a commercial bank, or we we have a great niche with serving commercial clients and business clients. And we think it's important that they have the tools that they need to be able to keep the customers that they have. And we think embedded banking really does that. One of the ways it does that is by making the software that they provide the to enable payments as secure and seamless as possible. So we want to make it so that when you are going to the hair salon, and you're scheduling your next appointment, and let's say you have to prepay an amount that they say, Well, hey, it's $25, you want us to go ahead and put that on the card on file. And we've provided them a digital way to keep your card on file, encrypted and tokenized. And as soon as they hit that they button that they want to charge that card again, that it can happen instantaneously, and give them a new payment update. And that it's deeply embedded in their software. So they can text you or email you right away. It making it a seamless experience. What that does for the business is making it so that you as the customer or the cardholder, have a fun in digital and modern experience with them that you're much more likely to go back to that business than someone that has a clunky process or that doesn't can't keep your card on file or can't keep it securely. So giving them tools to digitally embed payment in the software that they use every day makes it more likely that they are going to keep repeat business coming back into their locations. Brian Stone 8:26 So there is obviously legislation being introduced from the government side of things. As far as you know, open banking CFPB comes to mind. How do these sorts of regulatory crackdowns impact banks and fintech mergers and acquisitions this year, Bennie Pennington 8:44 from a bank and from a product perspective, in one, we do want to we embrace regulation that speaks about making sure consumers and businesses have access to their information, and that they can share that information with trusted sources, insecure manners. So a lot of the open banking initiatives are designed so that consumers can have their banking details shared with other software programs, you might have a budgeting app on your phone, or you might have an investment app or an investment website that you work with. And you want your data about your balance history and your transaction history to be able to be simply shared securely with those other platforms. And so the good news is, in most of these cases, we're already working on technology to do that. And having regulation makes it simple for us to be able to do it in a uniform manner with a lot of other banks and a lot of other fintechs. Brian Stone 9:42 You've been listening to the buzz, a bank automation news podcast, please follow us on Twitter and LinkedIn. And as a reminder, you can rate this podcast on your platform of choice, be sure to visit us at Bank automation news.com

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