You Can’t Win the Mobile Payments Game If You Don’t Play: Letter to the Editor
No one knows which mobile payment technology will ultimately win or how long it will take for mass adoption among merchants, but we do know for certain that credit unions find themselves at an inflection point in the payments industry, and they are not alone. Massive technology companies including Google, Paypal, Amazon and Apple, who have little interest in the highly-regulated banking industry, recognize being first to enroll mobile wallet customers provides them a marketing platform opportunity that will be far more lucrative than interchange.
These powerful new competitors have created urgency around an organized mobile wallet credit union initiative; even the largest credit unions lack the leverage to succeed alone.
Only by working together will credit unions successfully reduce third party control over the infrastructure deployed and in the process reduce costs, increase net new revenue streams, solidify the trusted banking relationship and create a better experience for members.
Pursuing a cloud-based mobile payment solution provides credit unions a unique opportunity to avoid the volatility currently impacting the market, while remaining agnostic to any particular technology, and not be forced to commit significant resources to a single solution that would leave them in an all-or-nothing position. Today, a mobile payment platform that leverages a QR code solution is universally the least common denominator for existing mobile devices and merchant point of sale systems, but this solution can be future-proofed by leveraging a cloud-based common platform that can also use any access technology, be it bar codes, NFC, HCE, BLE, ultrasonic, etc.
The collective, collaborative power of the credit union industry, combined with a common cloud-based mobile payment platform, positions credit unions for future success by making adapting to whatever may come much more feasible than it would be for a credit union on its own.
As Merchant Customer Exchange retailers pilot and prepare to roll out individual mobile payment programs, and with Subway restaurants having just recently launched nationwide mobile payment acceptance (a very real example of a cloud-based common platform), Starbucks is often touted as the tangible success story by mobile payment proponents. Arguably, Starbucks is an overly specific use case with its very loyal shoppers, who buy the same product from the same merchant on a daily basis, and use the mobile wallet at least partly for the rewards.
If one conclusion can be drawn, however, from the nearly 20%of Starbuck’s in-store sales currently paid for with the mobile app, it’s that consumers will be ready for and demanding a mobile payment app long before there is ubiquity among merchants. In fact, a Latitude Research study as early as December 2012 indicated that “80%of consumers would be interested in a mobile wallet.”
The development, integration and execution of a mobile wallet solution takes time, and in order to be prepared when your customers are ready for it, you must begin now, despite the industry’s fluid landscape. In 2011, credit unions heard from thousands of disappointed members as they reacted to TV commercials from Chase Bank advertising Remote Deposit Capture and asked their credit union, "Why don't we have this?" Mobile remote deposit capture is the number one mobile banking feature cited for switching financial institutions. Alix Partners reports that 52% of millennials are willing to switch financial institutions for mobile payment capability now.
The NCUA reports that the average natural age per credit union member account is more than 50 years old. Given these facts, credit unions need to be working aggressively now to attract and retain younger milliennials in order to prosper as a viable financial services provider in the future.
Once merchant adoption becomes mainstream, it will be too late for the credit union to react and again, they will be far behind on a major industry trend. But this time, the competitor will not be a bank and the consequences to the credit union industry could be far more dire.