The Case for One-Time Passcodes: Is Your Digital Wallet Offering Maximized?

June 29, 2020 Co-op Solutions

Spurred by health concerns and the rapid shift from brick-and-mortar to online shopping, digital wallet usage has surged in the time of COVID-19.

As of May, the payment card portfolios of CO-OP’s client credit unions saw a sharp decline in year-over-year card present transactions of roughly 35%, while card not present (CNP) transactions actually grew by 15%. Moreover, according to a live poll conducted at CO-OP’s THINK20 Virtual conference in May, 70% of attendees expect this increased use of digital payments to continue long after COVID-19.

To address this dramatic shift in consumer behavior, now is the time to activate your digital wallet strategy to provide the additional layer of convenience and security for in-person and online purchases. To maximize this opportunity, deploying a one-time passcode as a step-up security measure will help you achieve convenience, speed and security while keeping your credit or debit card at the top of your members’ digital wallets.


A Layered Approach to Security

The use of a one-time passcode during the initial “provisioning” stage (e.g., when your member adds your payment card to their digital wallet) is an important step in the fight against fraud. The process is similar to the use of a one-time PIN or passcode for multi-factor authentication when logging into online banking and guides the member through one of three possible paths:

  1. Green path: If the issuing credit union recognizes the new card as legitimate, the member will be allowed to add it into their digital wallet immediately through a streamlined process, without requiring a one-time passcode.
  2. Yellow path: If the credit union recognizes the card as legitimate, but identifies certain higher-risk factors, the issuer will send a one-time passcode to the member’s email or via a text message to the phone number on file. The member will then need to enter the one-time passcode into the digital wallet before the card can be activated.
  3. Red path: A third path is activated when the issuer detects any sort of suspicious activity or red flags on the account. For example, the card may have been reported as lost or stolen. In such limited cases, the member will not be allowed to add the card to their digital wallet without first calling the credit union’s contact center to verify their identity.

Ultimately, the credit union specifies the parameters for approving the provisioning of a new card into its members’ digital wallets. The more stringent the requirements, the less opportunity for fraud. However, it also increases the likelihood for false positives and reduces the convenience factor for members.

Together with the use of tokenization at the point of purchase (in-person or online), one-time passcode provisioning provides multiple layers of security to protect the member and your credit union from fraud.


Avoid Dropping to Bottom-of-Wallet with One-Time Passcode

First, getting members to add their cards to their Digital Wallet is imperative. Deploying a one-time passcode provides your members with additional security and encourages them to add your card to their digital wallet, especially during these uncertain times.

“If I was a consumer with two credit cards – one offered digital wallet and other did not, I’m going to use the card from the financial institution that offered digital wallet to purchase groceries or order take-outs online in this environment,” says Nish Modi, SVP, Group Owner, Integrate Products at CO-OP. “Providing the convenience, safety and security of Digital Wallets ensures that your members prefer using their credit union card to make purchases in those everyday lifestyle moments.”

Second, and just as importantly, reducing the incidents of false positive authorization declines is essential to maintaining top-of-wallet status in members’ digital wallets.

“Statistics show that once a card can’t be used for a purchase for whatever reason, such as getting flagged or denied because a false positive, then the cardholder will drop the card to the bottom of their wallet and never use it again,” Modi adds. “From a credit union’s perspective, providing the convenience and safety of enabling their cards in Digital Wallets, along with the security layer provided by one-time passcode helps ensure the member’s trust and that the card stays on top of their members’ digital wallets.”

To preserve your Primary Financial Relationship with your members, it’s critical to get your debit and credit cards into your members’ digital wallets and ensure they stay there.


CO-OP includes one-time passcode provisioning as a standard feature with all our Digital Wallets offerings. Get started today!

The original article The Case for One-Time Passcodes: Is Your Digital Wallet Offering Maximized? can be found on Insight Vault.

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