Year-round residents in Florida and some other warm weather destinations have mixed emotions when snowbirds, including many Canadians, return.
On the one hand, traffic increases and lines in stores are longer. At the same time, the money those snowbirds spend is very welcome, especially since the part-timers don’t require schools and some other services.
From the Canadian snowbirds’ perspective, it becomes a question of how to transfer money from their accounts in Toronto or Calgary to the U.S. It’s a perfect example of the need for international payments, according to hyperWALLET in Vancouver.
Two hundred credit unions are now using the hyperWALLET payment system. While the company has clients throughout the world, so far all the credit unions are located in Canada, according to the company.
Lisa Shields, president/CEO of hyperWALLET, said efficiency and cost have spurred the growth of payment systems.
“What is driving innovation and interest in payments is the fact that the industry is so terribly inefficient and so ripe for improvement,” Shields said.
As proof, Shields noted that motivation drove Europe to implement a single payment clearing area. The European Union estimated cross-border payments were costing 3% of European gross domestic product, she added.
“If you think about that, it’s kind of outrageous that payments should cost so much. So, from the big picture, that’s what is driving innovation,” Shields said.
From the viewpoint of individual credit unions considering payment options, Shields said the primary incentive is to provide members with products and services that can compete with the big banks and still differentiate the credit union way of doing business.
But, unless you have a highly localized payment offering, it’s tough to launch an innovation, she said. When it comes to new technology, credit unions have learned economy of scale is difficult to achieve, Shields explained. So on a product basis, credit unions are often content to be followers rather than leaders. They’re concerned that if they get too far ahead they may become bleeders not leaders.
“Trying to be an island in payments doesn’t really make a lot of sense,” Shields said. “Credit unions add value for their members in things like mobile alerts, text alerts or local text banking. I’ve seen things like that really work.”
As for those snowbirds and cross-border payments, Shield said she thinks there are opportunities for U.S. credit unions to participate in cross-border payments for the benefit of their members.
“I think it’s an overlooked opportunity for credit unions, because those snowbirds are using the services either of other financial institutions or independent money transfer organizations.”
Some credit unions could do a little bit of work, without a big investment, and differentiate their payment offerings to match the demographics of their members, she suggested.
Every month, a Canadian snowbird may move a relatively small amount from a pension or payroll in Canada to the U.S. Wire transfers can be very expensive. Shields believes there are definitely opportunities for niche products such as cross-border payments.
A significant trend Shields sees is increasing regulation and enhanced obligation for due diligence and transaction monitoring. She also sees mobile phones changing the payment picture.
“Today, it doesn’t matter what payment instrument I use at my local coffee shop. I can pay with my Visa card. I can pay with a non-network- branded card. I can pay with cash. The mobile phone is all about all the applications it enables and less about the payment instrument itself. It’s less burdened by regulatory oversight,” Shields said.
Looking ahead at payments, Shields sees the growth of hybrid networks that don’t depend on a single instrument to create a cohesive payment experience. In effect, payments will use the technology of a router that can switch a card transaction into a mobile transaction or a cash transaction into an electronic transaction. She sees robust, global, electronic payment links.
“You don’t have to look too far away from your own credit union – whether that be in Florida or Kansas – and there are going to be sources of innovation right in your own back yard,” Shields said.
“That’s probably the best place for you to go to be able to customize a product that really can differentiate your credit union.”