The Farmer’s Almanac Of Mobility

Credit unions have an opportunity to plant new payment strategy seeds and watch them grow.




Credit union decision makers gazing out from their proverbial front porches today should like what they see. Before them stretches a lush and expansive payments landscape teeming with the fertile seeds of opportunity. And industry watchers say the almanac calls for another bumper crop of growth through 2013.

Credit union performance in 1Q 2013, as reported by Callahan & Associates, continues to build on the positive momentum of 2012:

  • Credit unions originated $80.5 billion in loans in the first three months of 2013, 14.5% more than the same period in 2012.
  • Outstanding loan balances grew 5.4% — a 20% higher clip than year-end 2012.
  • Nearly 3 million additional checking accounts were opened in the past 12 months.

CUNA projects further good news in 2013, as capital ratios will approach 11.5% — a level unattained since 2006 — and the record membership growth in 2012 demonstrates consumers’ preference for local credit union brands. However, many of these new credit union members arrive with the expectation that they can perform transactions on the go, from anywhere and at any time. This means mobile capability must be considered a staple crop for all credit unions moving forward.

Despite the advent of new mobile capabilities, card-based payments still play a dominant role on the payments circuit with Visa and MasterCard credit, debit, and prepaid cards generating $2.9 trillion in purchase volume through traditional means. However, in this changing ecosystem, credit unions must all be aware of the dynamic pressure exerted by mobile methods of personal communication and information access, which is now impacting consumer financial interactions.

Consider this – according to ComScore, 129 million Americans have a smart phone, 30% participate in mobile commerce, and 24% say they use their phone for making payments. Additionally, results of a recent PayPal survey revealed that 83% of respondents across five countries indicated a desire not to carry a physical wallet at all. Because today’s consumers are clearly comfortable with conducting their financial life through their mobile devices, the question must be asked:

“How relevant is your credit union in this new mobile payments landscape?”

The key to success moving forward is to actively participate in the mobile payments game with products that are meaningful (i.e., relevant) to membership, while also staying true to traditional payments solutions that consumers still value.

While new methods of commerce will be invented, no existing option will ever be fully eliminated. Credit unions still deal with cash and checks every day, and somewhere in the world, people are still bartering with cattle. The challenge for credit unions is to learn how to capitalize on the multiple opportunities presented by the continually shifting trends of consumer payments behavior.

Here are three strategies that can help credit unions manage this evolving ecosystem.

#1: Engage Members In New Ways

Consumers have enthusiastically embraced online banking for its convenience and accessibility around the clock. Demand for the ability to pay bills while still in your pajamas probably never surfaced in a focus group ten years ago, but it is now a base expectation (bunny slippers are optional).

So what happens when credit unions focus on “The 24/7 Channel” for products and services? Take for example one credit union which recently shifted its investment focus from the brick-and-mortar channel to online. In just one year, online subscribers jumped by 28%, mobile logins quintupled, and the number of users registered for remote deposit capture more than doubled.

Just like cash and checks, brick-and-mortar is not going away any time soon, but investing in new payments channels is the key to higher levels of future mobile engagement with members.

And remember that engagement is more than just access. Success in the mobile channel is based on creating a new dialog with your members – a two-way street for both marketing messages and feedback.

#2: Upgrade Your Credit Card Program

Credit cards offer the highest return of any credit union product, yet only 15% of members have a credit union credit card in their wallet, according to Callahan & Associates. So what can credit unions do to address this troubling statistic? Here are three ideas:

Focus On Rewards: According to PSCU’s research, the average monthly spend on rewards cards is almost double that of non-rewards cards: $890 versus $465. Rewards are a proven way to improve acquisition and move your card product up in the wallet, so take advantage of both credit-union sponsored rewards and the growing number of merchant-funded programs.

Upgrade Technology: EMV card usage is an emerging opportunity because of the fraud liability shift announced by Visa and MasterCard for 2015. Since EMV is the standard already used abroad, you should start this process now if you have a membership comprised of foreign-based military personnel, affluent globetrotters, or international business travelers. Then, migrate your program over time so you are ready for the shift in 2015.

Target The Affluent: Speaking of globetrotters – affluent consumers represent huge opportunities for credit unions. According to MasterCard, these individuals spend 2.6 times more, conduct twice as many transactions, and average a 17% higher ticket size than other demographics. Other significant benefits with affluent payments products include interchange income levels even greater than interest income and delinquency levels that are well below the non-affluent market. To sum it up, these individuals represent lower risk and higher revenue.

#3: Move Boldly With Strategies To Meet Members’ Mobile Expectations

Mobile technology enables transactions, alerts, banking, wallets, coupons, and payments in a single and very portable device. By 2020, PSCU estimates that 60% of U.S. consumers will be banking, shopping, and paying using mobile technology. The move to mobile is igniting innovation and creating a whole new group of ambitious Mobile Financial Services (MFS) providers, such as Google, PayPal, Visa, MasterCard, Apple, and Amazon. If the mark of a healthy industry is a rush of new entrants, then credit unions are perched on top of a gusher. The key to reaping maximum benefit will be maintaining the power of your brand and fully owning that relationship with your member.

MFS providers are looking at the full range of consumers’ transactional experiences to offer value-added services such as location-based offers, gifts, alerts, and rewards. To avoid disintermediation and maintain a firm grip on all the elements in the payments chain, credit unions need to craft and execute against two bold strategies.

Let Them Know You Are In The Game – Partner With The Wallets

Today’s payments innovations can test even the strongest loyalties between consumers and financial institutions. Mobility moves at the speed of “Wow Now” and credit unions need to grab the attention of their members before other mobile services providers swoop in to sway their allegiances.

A smart, low-risk strategy is to build partnerships with recognized leaders and innovators in the MFS environment. Google Wallet, Visa, MasterCard MasterPass and others are already available directly to consumers. These options draw early adopters who are attracted by the promise and convenience of those respective wallet technologies. Establishing a connection between these MFS services and your local credit union brand now is key to mitigating the potential for disintermediation down the road.

This approach benefits credit unions with priceless insights and experience in a dynamically-evolving environment, while at the same time sending the message to members and the community that you are committed to meeting their expectations in the long-term. Plus, credit union CFOs will be pleased to learn that aligning with the leading mobile and digital wallet service providers actually helps protect the current interchange revenue stream.

Capture Consumer Attention With Targeted Value-Added Services

The longer-term and most impactful competitive challenge on the mobility front comes from the value-added services that surround members’ payments and transactional experiences. The rewards, coupons, location-based offers and other analytically driven services that add tangible zip to peoples’ lives are the ingredients that MFS providers are counting on to whet the appetite of consumers. Now, it is the credit union industry's turn to add spice to the tried and true recipes that members know and trust. Keep them feasting right there at your harvest table.

To accomplish this feat, partner with a credit union-centric organization that offers you a one-stop mobile financial services experience and can fully integrate your payments programs through analytics and one to one marketing driven by deeper consumer insights. This approach opens up additional revenue generation opportunities for the credit union, and most importantly, eliminates any reason for members to evaluate alternatives.

As every farmer knows, timing is everything. Credit unions have a unique opportunity to dramatically increase credit card revenue, attract new members, and build loyalty with an engaging mobile payments offering. To be successful, credit unions must deploy a blend of new mobile technologies and analytically driven payments programs that will meet and exceed the needs of current and future members, while maintaining the traditional products and superior service levels that distinguish the industry.

At the end of the day, while rocking back in that chair on your front porch, you can expect satisfaction. The bounty of the harvest will be well worth the investment.

Fredda McDonald leads the Credit Union Experience division of PSCU, which includes national sales, account management, marketing, and strategic portfolio consulting. Fredda has been instrumental in helping to lead a transformation of focus for the company under a strategy called MōPRO (Member Owner Payments Revenue Optimization). This strategy represents a tangible way that PSCU is helping credit unions outperform the market through innovation, engagement and growth in payments.

About PSCU:

Mobile changes everything. PSCU offers payment programs, analytic insights and mobile solutions, including digital wallets, to help keep credit unions at the leading edge of the consumer movement to mobility. Our relationships with industry giants like Google, Visa and MasterCard help credit unions gain secure entry and a long-term foothold in a market that will be critical to their continued growth and relevance. For more information about our game-changing payments solutions and strategies, please contact us at or call 888-918-7351.



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