How Secure is Virtual Currency?

Unregulated Providers Raise Risks for Processors, Banks
How Secure is Virtual Currency?
Mike Urban
U.S. banking institutions need to develop payments strategies to deal with virtual currencies, such as Bitcoin, even if the security risks are not yet fully understood, says Fiserv's Mike Urban.

Urban, who serves as director of financial crime portfolio management for the core payments and banking services provider, says banking institutions first have to figure out how they want to accept virtual currencies and possibly integrate them into their offerings.

"This is a very new area, particularly around Bitcoin," Urban says. Banking institutions must determine values for virtual currencies, which is challenging because their value is fluid.

And fluidity in value suggests that transactions involving virtual currencies will have to be settled like foreign-exchange transactions, he says - raising even more questions around money-laundering risks.

In this second part of a two-part interview about the evolution of the U.S. payments infrastructure, Fiserv's Urban and Stephanie Fuoco discuss the impact virtual currencies could have on plans for U.S. migration to EMV for debit. They also review fraud liability challenges card issuers and processors could face for the next several years.

"As unregulated as virtual currencies are, and as regulated as the financial institutions are, how will the regulators allow institutions to use virtual currencies?" asks Fuoco, who oversees card fraud at Fiserv. "These are the things we don't know."

But waiting for regulators to provide guidance about how to handle virtual currencies is not advisable, Urban says. Institutions need to act now, he stresses.

EMV Migration

Fuoco and Urban say virtual currencies won't directly impact the debit migration in the U.S. to technology that complies with the Europay, MasterCard, Visa standard. But because virtual currencies and EMV both impact how debit transactions will be routed, they should be reviewed in tandem. Both will dramatically change the way payments are reviewed, approved and processed.

During this interview, Urban and Fuoco also discuss:

  • Why the EMV migration will be slow until Visa and MasterCard start demanding card and point-of-sale conversion;
  • The role core processors like Fiserv are playing in helping banking institutions jump-start their EMV rollouts;
  • How fraud liability shift dates related to EMV migration will impact issuers, merchants and the networks.

In part one, Urban and Fuoco discuss how fraud will migrate from payments cards to other areas, such as check and first-party fraud, as well as why banking institutions should not lean too heavily on mobile when it comes to their EMV rollouts.

Urban, who has more than 18 years of experience in financial crime management, analyzes financial crime issues and trends for Fiserv.

Fuoco is senior sales support consultant for card services at Fiserv, where she leads a team responsible for integrated payment fraud service offerings.

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