Recent changes in the payments industry have shifted routing control to the merchant community, affecting not only financial institution revenue, but also expanding the opportunity for new players to become much more prevalent in the market.
Many emerging payment solution providers are successfully meeting the demands of consumers and small businesses by offering advanced options for real-time payments as well as anytime, anywhere funds access. Despite being non-financial institutions, such businesses now compete directly with traditional card providers at the point-of-sale as they seek to offer merchants new and alternative routing options.
Merchants themselves fully understand the value of catering to customer preferences. If these non-traditional payment options help businesses better generate incremental sales and reduce overall payments costs, they could potentially displace traditional card payments and shrink credit union net revenue even further. To safeguard and grow debit and credit market share among consumers and small businesses, credit unions must become part of the new payments market by enabling mobile payments access to member accounts.
Immediate payment demands by consumers and small businesses are fueled by the capabilities of mobile and digital technologies. Online and mobile channels are expanding the payments world like never before and it was the non-traditional players who first embraced these technologies. As a result, in this ultra-competitive payments space, non-financial institution providers are impacting the pace and direction of payments and — like all consumers — credit union members are responding to these value-add solutions.
The market opportunity is significant considering that 52% of households in the United States own a Smartphone, according to the 2012 Fiserv Consumer Trends Survey, and nearly one in five consumers currently own a tablet. This abundance of new technology means consumers and small businesses can easily download apps and turn their phones into point-of-sale terminals or store their debit and credit cards in mobile wallets for easy and convenient payments access.
The payments world will evolve even further through personal payments network transactions.
Personal payment networks support payments through the use of common and public information – i.e., sharing only an email address or mobile phone number instead of a physical or virtual card number in order to complete a transaction. These networks can quickly displace traditional plastic card usage because of their ease of use and enhanced benefits for both payees and payers. Consumers’ increasing needs for immediacy and real-time payments capabilities mean that mobile devices will be the preferred method for moving money through a personal payments network.
TO COMPETE, CREDIT UNIONS MUST ESTABLISH THEMSELVES AT THE CENTER OF THEIR MEMBERS' PERSONAL PAYMENT NETWORKS
Considering the new payments environment, credit unions must, at a minimum, become mobile payments participants. They should, to the greatest extent possible, deliver solutions focused on real-time enablement — such as card payments and check deposits with immediate funds access — to truly prevent significant transaction loss.
This opportunity for credit unions is real and achievable today. The recent Fiserv Consumer Trends Survey reported that 40% of mobile phone users said they would trust their financial institution to handle mobile payments.
The overall customer relationship is of utmost importance and credit unions have an extended advantage here because of the well-deserved reputation of trust they have with their members. Credit unions should fully leverage this advantage to retain the loyalty of existing members and attract new ones — which will be important for future growth in the changing environment.
But credit unions should also be taking advantage of the latest technology by adopting new, cooperative-branded channels and solutions that will benefit their members. Since credit union cards may not always necessarily be the preferred method of payment, this evolution will help cooperatives remain visible and top-of-mind in the communities they serve.
Despite the increasing competition from non-traditional players in this space, credit unions are in a good position to capture a significant share of the growing mobile payments market — if they can deliver credit union branded solutions.
Carol Specogna is Vice President of Accel™, the Debit Payments Network from Fiserv. Carol was drawn to Accel in 2010 because of the payments industry changes and the opportunities to expand the network through new product offerings to compete with non-traditional players. Carol graduated with an MBA from Case Western Reserve University, a Bachelor of Commerce degree in Finance from the University of British Columbia and in 2011, just for fun, completed a Graduate Certificate in Applied Statistics through Penn State University. You can reach Carol at firstname.lastname@example.org or 425-698-6847.
Fiserv offers several solutions to help you establish a mobile presence, including SpotPay™, a bundled mobile payments solution for small businesses that can be branded as a product offered by your credit union. SpotPay helps your small business members by enabling card acceptance with additional capabilities coming soon such as real-time check deposits, invoicing, cash flow management, with Accel™ providing real-time enablement for many of these features and functions. Carrying your credit union brand on the product means that every day your small business members will open the application and see your brand, a daily reinforcement that your credit union is relevant in the mobile payments space.
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