Walgreens talks retail payment technology on White House cybersecurity summit panel
SAN FRANCISCO — Deputy Secretary Sarah Bloom Raskin, U.S. Department of Treasury, on Friday discussed next-generation retail payment technologies designed to protect the convenience and sense of trust consumers hold for what has become an increasingly digital marketplace with several industry leaders across the omnichannel supply chain at the White House Summit on Cybersecurity and Consumer Protection
. Representing brick-and-click retailers was Alex Gourlay, president of Walgreens, who was joined on the panel by Richard Davis, chairman and CEO, U.S. Bank; Mike George, CEO and president, QVC; Charles Scharf, CEO Visa; and Dan Schulman, president and CEO, PayPal.
"If you think through the volume and monetary value of what we're talking about in the retail sector, it's actually pretty mindblowing how much transfers through our nation's payment systems on a daily basis," Raskin said. "If you look at what the 12 federal reserve banks have published in terms of the transactions that have been flowing through their systems, the number is 4 trillion in dollars per day. To put it in context, that is almost 25% of our country's annual GDP. And this is just a floor; we know the number to be much greater."
Couple that sheer volume of transactions with the multitude of payment options a customer has today, and you have a complicated system that provides a "wide and diverse number of entry points for bad actors," Raskin said.
"We're all paying for what's happening as bad actors come in and basically take goods and services and money from us individually and collectively," Gourlay said. "So as you reduce fraud, again I'll go back to the example in Europe where fraud has been reduced by something like 40% since the adoption of Chip and PIN, it means that the consumers pay less and the banks pay less as well in terms of interchange fees to the merchants."
"Depending on what stat you believe, somewhere between 500 million and 1 billion identities were compromised last year. And so, people come into your system with real credentials … they just stole them," noted Dan Schulman, president and CEO, PayPal. "What we need to do is really kind of sophisticated fraud detection through risk and data analytics," he said. "The average American company gets hit with about 7 million intrusion attemps per year. What you are really trying to do is create this defense and then authentication around credentials."
"[What] Walgreens has done in this area of offline is to continue to innovate, to join the offline and the online … to make sure that everything we invest in is securing the most important thing for us, which is our customer's details," Gourlay said. "We are built on trust, absolutely built on trust. Therefore, we've got to make sure that we do our very best to invest properly and stay ahead of the game for the customer. The customer is moving toward more convenience. … We are working hard with many partners both inside and outside the business to make sure we make it as easy and convenient as possible to do business with Walgreens."
There are two payment technologies that have evolved to help maintain convenient and trusted access to commerce for consumers while at the same time thwarting those bad actors: Chip and PIN and tokenization. Chip and PIN is a brand name adopted by the banking industries in the United Kingdom and Ireland for the EMV smart card payment system for credit, debit and ATM cards. "Chip" refers to a computer chip embedded in the smartcard, and "PIN" refers to a personal identification number that the customer must supply. Tokenization when applied to data security is the process of substituting a sensitive data element with a non-sensitive equivalent, referred to as a token, that has no extrinsic or exploitable meaning or value.
"The most important thing for Walgreens, even today, is the fact that we are 8,200 retail pharmacies dispensing 800,000 prescriptions annually on behalf of Americans," Gourlay said. "So what we tried to do really is to make sure that we integrate the physical environment with the digital environment," he said. "Three years ago, we completely leveraged all of our point-of-sale as we entered this new environment … which means we are completely enabled both online and offline for Chip and PIN. The other thing that we've done, again, connecting the online with the offline, is the work with Apple Pay," Gourlay said, which brings tokenization to Walgreens transactions.
Since the introduction of Apple Pay in October, the number of transactions conducted by mobile phone has increased four-fold, Gourlay said.
"I've never known a time where the innovation is so strong in this area. We've spoken already about a generation that's already there, Chip and PIN, a generation that's been trialed for 15 years, the tokens, and new generations, for example biometrics through the eye being able to treat people individually," Gourlay said. "So the opportunity to really invest properly and to give our customers individually and collectively a fantastic experience of speed and real personalization has never been greater," he added. "The truth of it is if we move to other new mobile systems like tokens and … biometrics, the whole experience can be very secure, very different and very personal for people which is what I think customers want."