Apple Pay has completely changed the conversation around mobile payments, and credit unions better keep an eye on … PayPal. Oh, and Android users still outnumber iPhone devotees.
There’s also a deep connection between millennials and boomers that credit unions can leverage. Something about children turning to their parents for financial guidance. Who knew?
And about half of all Americans are living paycheck to paycheck, not saving, not planning for retirement, and they present opportunity for credit unions to serve through mobile channels. Plus, don’t shut down the plastic.
Those were some things learned Monday at day two of the Money 20/20 conference at the very crowded Aria convention center in Las Vegas. To wit:
Apple Pay Saves The Day?
Apple Pay may have saved the day for near-field communications and provided a boost to any other payment channel it touches. “That announcement (in October) changed the whole conversation,” says Greg Weed, director of card research for Phoenix Marketing. “It made concerns about security into an end benefit.”
By using both tokenization technology and its vast influence, Apple should be able to allay consumer fears that have hampered NFC use at the point-of-sale while at the same time building public perception of its safety.
Credit unions have been the great majority of early signees for the new Apple Pay service, but not everyone at the conference thinks it’s all hunky dory. Paul O’Malley, vice president of e-commerce at TDECU ($2.3B, Lake Jackson, TX) sees drawbacks in both Apple Pay and its presumed fiercest competitor, the Merchant Customer Exchange’s CurrentC, backed by Wal-Mart and other retail heavyweights.
Apple Pay will live off transaction fees as it piggybacks on the debit-based interchange system. “We have to do it, though. You lose if you do and you lose if you don’t,” O’Malley says. CurrentC, meanwhile, bypasses interchange by riding the ACH rail, but O’Malley says it has its own drawbacks, especially its reliance on QR codes. “That’s clunky and five years ago,” he says.
Speaker after speaker at Money 20/20 rolled out statistics and demographics as proof that mobile will soon reign supreme. But there’s been a seismic shift in the past 20 years from cash and checks to debit and credit and that will have a lasting impact.
“Old habits die hard. We may think mobile will kill plastic, but what about times and places when mobile won’t work? There still needs to be a way to pay. Plastic and mobile complement each other,” says Steve Montross, CEO of the CPI Card Group. “I don’t see cards going away for some time to come.”
And mobile payments as a whole have to overcome the infrastructure that grew up around batch processing in general before it can maximize its real-time potential, observed one breakout session speaker, Leslie Hand, a vice president at IDC Retail Insights.
Opportunity Amid Struggle
The Center for Financial Services Innovation used its bully pulpit on Monday to roll out its 2015 Consumer Financial Health Study. Foundation-funded and based on a survey of 7,000 individuals, its conclusions were sobering.
Forty-three percent of the respondents struggle to keep up with monthly bills. And 25% say they worry about it all the time. Only 35% say they can go more than six months without a paycheck; 22% say they don’t even know. And 27% say they have less than $1,000 in retirement funds, not counting pensions and Social Security, and almost half of that group was over age 65.
“Without the resources and mental bandwidth to plan for the long term, consumers will continue to face significant challenges down the road,” says CFSI President/CEO Jennifer Tescher.
“Financial stability has become vastly more important than moving up the income ladder,” she adds, noting that 46% of the respondents also say they expect their situation to improve in the next few years. And 63% indicate they tend to be loyal to their financial institutions.
So there’s the upside.
Great opportunity exists to serve this group, who spend $89 billion a year on financial services fees, Tescher says. Here are some ways: 1) digital payment apps that include saving small amounts of money at a time; 2) using new abilities to parse data to expand the ability to lend (She didn’t mention it, but the new FICO scoring system comes to mind); 3) use apps to enable better spending decisions in the moment, including when not to buy.
Sound like something that credit unions can get behind? You can download the whole report here.
Millennials And Mom
Tescher described this group as ALICE, for “Asset-Limited, Income-Constrained, Engaged.” Many are under 30 and the idea that millennials are a particularly engaged group was another repeated theme on Monday.
They engage with each other, and they engage with their parents, their major source of financial advice and behavior modeling. They almost all have smartphones, they embrace new digital channels, and they’re not alone.
“Opportunities exist to deepen digital engagement with all age groups … 50 is the new 20,” says Teresa Epperson, a managing director with AlixPartners.
Epperson, by the way, says PayPal was right behind banks in her company’s findings about who millennials trust with their personal financial information, 49% to 57%. Others reported similar findings about PayPal’s dominant role in payments and note that it’s not dependent on any particular payment channel.
“Watch PayPal,” says Weed at Phoenix Marketing.
Check out the rest of our coverage from Money 20/20:
· Money 20/20 Buzz Speaks To Opportunity For Credit Unions
· Disruptors Do Vegas For Money 20/20