Fifteen credit unions are betting the time is rightfor a credit union centric digital wallet. That's why they threwtheir weight behind startup CU Wallet, the brainchild of PaulFiore, founder of Digital Insight, and Kirk Drake, CEO of theHagerstown, Md.-based CUSO Ongoing Operations.

The move was announced in a Sept. 23 press conference andelaborated upon in follow-up interviews with the principals.Details remain vague, but officials say the driving force behindCU Wallet is a belief that credit unions need to jump on thedigital wallet trend before competitors like PayPal and GoogleWallet grab credit union members for themselves.

“CU Wallet provides credit unions the opportunity to not onlystay competitive, but to potentially leap ahead of other financialinstitutions,” said Dennis Pierce, CEO of $1.8 billion, Lenexa,Kan.-based CommunityAmerica Credit Union, one of the 15 backers ofCU Wallet. “We've seen significant mobile adoption atCommunityAmerica, and we believe mobile wallet adoption is in thenear future.”

Mary Monahan,  executive vice president and researchdirector of mobile with Javelin Strategy + Research, said herresearch indicates that “consumers trust their financialinstitutions with their money and their preference is that this iswhere they will also get their digital wallet.”

Monahan, who stressed at the time of the interview she had noknowledge of CU Wallet, said early adopting consumers already aremaking their digital wallet choices and that financial institutionswaiting to offer the payment channel run a real risk of being leftbehind.

Carlisle & Gallagher Consulting Group's Peter Olynick, a payments expert based in Charlotte, N.C.,agreed.

 “CG believes that half of today's smartphone userswill be using those devices to make routine purchases within thenext three to five years. As such, we believe most financialinstitutions should be actively working to partner/develop asolution for their customers,” he said.

Next Page: One Nevada

Paul Parrish, chief financial officer at the $697 million OneNevada Credit Union based in Las Vegas, said the other factorsetting the stage for CU Wallet is the continued erosion ininterchange income. He said revenues generated via transactionsinside a credit union owned mobile wallet may well help replacethose dwindling interchange monies, a primary reason he said OneNevada is supporting the initiative. 

“Currently available e-wallets aren't in One Nevada's bestinterest,” Parrish said during a Sept. 23 press call. “The bestexample is Google Wallet. You'd think Google Wallet is harmless.But the problem is the impact on member loyalty. Google hasinserted itself between us and the merchant.”

That division, Parrish said, could lead to long-term membererosion.

Futurist Jared Nichols, a strategy consultant and principal ofthe Boone, N.C.-based Jared Nichols Group, pointed to anotheradvantage that would accrue to credit unions if they had their ownwallet.

“Credit unions, like other financial institutions, realize thattheir future is dependent on deep insight into their current andfuture customers. The digital wallet allows them to bypass thirdparty data miners,” he said.

Drake, too, hit the theme that wallets may generate substantialdata that will lead to better member insights and possibly alsoprofits. Drake supported that by pointing to other players— notablyGoogle—are deep into finding value in mobile wallet transactiondata. If they can do it, he said, so can credit unions.

Fiore, in an interview, said he envisions a short road to marketfor CU Wallet.

“We should be live in credit unions by Q1 2014,” hesaid. 

That is because the CU Wallet game plan is to license existingwallet technology. By using proven tools, CU Wallet will be able togo active with considerable speed, he said.

Also part of the plan is forming a CUSO to own the CU Walletproducts, Drake said in an interview.  

“There will be a subscription agreement where participatingcredit unions sign operating agreements,” he said.

The 15 credit unions already announced would be enough tosupport a CUSO, he said, adding that the group has confidence morecredit unions will sign up.

Other credit unions that have involved themselves in CU Walletare the $747 million Quorum Credit Union in Purchase, N.Y.; the$2.29 billion Affinity Federal Credit Union in Basking Ridge, N.J.;the $979 million Workers' Credit Union in Fitchburg, Mass.; the$1.45 billion Arizona State Credit Union  in Phoenix; $1.6billion University Federal Credit Union in Austin, Texas; the $3.2billion Kinecta Federal Credit Union in Manhattan Beach, Calif.;the $1.8 billion Washington State Employees Credit Union inOlympia, Wash.; the $2.5 billion Northwest Federal Credit Union inHerndon, Va.; the $3.5 billion DFCU Financial in Dearborn, Mich.;the $398 million City & County Credit Union in St. Paul, Minn.;the $870 million TwinStar Federal Credit Union in Lacey, Wash.;and, the $5 billion Digital Federal Credit Union in Marlborough,Mass.