Credit unions can enlist their members in the payments revolution. A new service from Fiserv, called SpotPay, along with similar services such as Square are expanding the universe of payments that can be settled on credit or debit cards.
But the big differences between SpotPay and others is that credit unions can offer SpotPay to their members from a co-branded format and can share in the interchange income.
“I think, in effect, we are seeing a revolution in what is meant in the term ‘merchant’,” explained David Keenan, general manager of network services for Fiserv, when explaining how revolutionary the new service is in the payments space. “Now, with SpotPay, your babysitter can take debit card payments at the end of the night.”
SpotPay and similar services are moving card payments away from the point of sale machine and into the hands of ordinary people who either might have only been paid in cash before or not gotten the work at all.
“The costs of taking card payments used to be an effective barrier to running your own business,” Keenan said. Merchant payment services used to cost hundreds of dollars and require minimum transaction volumes. There used to be a significant investment in hardware. “But all SpotPay requires is a mobile phone and a card reader, and the card reader comes free when you sign up,” Keenan added. “It seems like everybody these days has a smartphone.”
Much like Square, SpotPay uses a mobile phone-based technology and a card reader to allow users to accept payment. Where Spotpay differs, Keenan maintained, is in durability of hardware and overall cost. For example, where users have widely complained that Square’s card reader sometimes requires several swipes to capture card data, SpotPay’s card reader is both more reliable and, even more important, secure than Square’s, Keenan claimed. He said that SpotPay’s card reader encrypts card data within the reader so no raw card data is ever sent to the app, where it could be intercepted and stolen.
However, this claim could not be verified as Square claimed its reader also encrypts data from the moment the card is swiped, and a company spokesman said Square is always looking for ways to improve its hardware.
SpotPay has a flat fee of $8.95 per month and charges only 1.99% for each swipe.
“I think credit unions have begun to look at small business members a bit differently,” Keenan said. “We decided to begin offering this service when it became clear that credit unions were at risk of seeing members go to other providers, other financial institutions or processors seeking these services.”
Keenan said Fiserv began offering SpotPay to credit unions in the fourth quarter of 2012. While he would not reveal an exact number of credit unions that have started to use the service, he said hundreds had already done so with more actively planning to add it.
“This is something that we are really thrilled to be able to offer to our members,” said Theresa Schutts, vice president of operations at the 2,000-member $19 million School District 3 Federal Credit Union. The Colorado Springs, Colo., credit union had been seeking a cost effective way to offer its small business members some way of merchant processing, she explained.
“In our continuing efforts to provide you with innovative new solutions that you need for your small business, we are now able to offer our business membership an alternative to your current credit and/or debit acceptance processor,” the credit union wrote in a letter to members introducing the service. “The payments industry is abuzz about SpotPay, a secure mobile payment solution that enables you to accept your customer’s credit cards and check payments anywhere, anytime.”
Businesses that had already contacted the credit union about the service included two small pet stores in the area, craft makers, trade professionals who do personal work on weekends, landscapers and small catering firms. Only a very few, she said, actually had storefronts. She estimated that 50 members had already contacted the credit union to express an interest in the service, but she acknowledged that did not mean all would sign up.
Norb Adrian, chief systems officer for the 126,000-member $1.2 billion Centra Credit Union reported similar enthusiasm, noting the Columbus, Ind.-based credit union had members who had begun asking for the service.
“They had seen advertisements on media here for Square and so were asking us when we were going to have something similar available,” Adrian said, explaining that the credit union had offered a merchant processing service prior to starting with SpotPay but that it had never really focused on it. Small business services were not previously a focus for the credit union. After adding small business deposits, adding small business merchant processing was a clear next step.
While both Schutts and Adrian said the credit union looked forward to earning some additional money from SpotPay, neither of them considered the income the service’s biggest draw. Rather each said it was the ability to offer members another resource from the credit union that most attracted them, along with the ease of use. For example, SpotPay does the credit checks on the member opening an account with the service as well as handling account set up. And when a member has a problem with the reader or the app, it is SpotPay who gets the call, not the credit union.
“This is about the easiest way we could offer merchant processing,” Schutts said.