Mobile banking and payments are becoming a mature component of the banking landscape, with surveys showing nearly 50% of smartphone owners having engaged in mobile banking in the past 12 months.
Once used primarily for balance inquiries, mobile banking now encompasses an ever-growing variety of financial transactions. Members now have the ability to make direct person-to-person payments and conveniently accessing all their accounts in a single portal, including accounts at different participating credit unions.
This expanded use and functionality of mobile devices for banking presents credit unions with challenges to keep up with consumer demands, particularly for greater individual control of mobile services. It also presents them with opportunities to enhance their net income, through reduced fraud and increased transaction volume.
One emerging solution that puts the member in the driver's seat is mobile card control and alert technology. Consumers today need and want to be more vigilant than ever to protect their card usage and data. And credit unions will have services that differentiate them from competitors so that members reach for their cards first.
The technology is not yet available inside or outside the credit union movement, but it will be by early next year. It protects the cardholder as well as the credit union when a card is used in a way that's inconsistent with the user-identified parameters. Controls can be set by the cardholder so that specific types of transactions are immediately denied and the cardholder is alerted about any potentially fraudulent use.
Control and alerts technology also enables credit unions to introduce advanced new card payment programs that will be attractive to some key target audiences, like affluent cardholders, high-volume users and young, first-time card members. These consumers place a high value on mobile banking tools that promote self-service and empowerment through useful, timely and accessible data.
Once they know about the value of card control and alert technology, members will not only be attracted to credit union card programs, they will be willing to pay a premium for their substantive advantages.
A 2011 user survey by Javelin Strategy and Research found this technology can reduce per-member support costs. It costs a financial institution $19/year less to service members who regularly receive mobile alerts and an additional $9.22/year is saved through interactive alerting.
The study further estimates that this technology can reduce fraud expense by up to 50%. This is because card controls available to the cardholder enable them to prevent fraud before it happens. They also have the ability to see possibly fraudulent card transactions in real time and take immediate action to deny them.
Finally, facing the possibility of an additional hit to debit interchange revenue, the new technology provides a way forward by making up for declining margins with more volume brought on by affinity.
How exactly do the controls work? Controls can be set in any number of ways:
Location. The cardholder specifies a geographic regional where the card can be used, with transactions denied when used outside the parameters. So if they never travel abroad, they can set their card to not work there. The cardholder could also set up a “follow-me” travel itinerary to reduce fraud and service denials.
Transaction. Again, the cardholder, parent or business specifies allowed transaction types, such as in-store, online, recurring or ATM cash withdrawals. Other types of transactions, such as card-not-present, can be denied in real-time if the cardholder has selected this control. They can also set a limit on the amount of transaction and then turn that same parameter off when they're standing in line to pay for a flat-screen television, for example.
Merchant. Merchant categories can be limited to gas, hotel, travel, restaurants groceries and electronics—whatever the cardholder mandates. A specific merchant can also be authorized for a single transaction if the cardholder has concerns.
Dependent. Businesses can set controls per employee based on their location and corporate rank, while parents can set controls for themselves or their kids.
On/Off.The cardholder, be it a parent or business administrator, simply turns the card on or off, with transactions denied if the card is off.
Caroline Willard is an executive vice president at CO-OP Financial Services.
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