In an era where technology upends business models overnight, the never-ending quest to foresee opportunity has put the credit union industry on a vigilant watch over mobile person-to-person payments, which is the technology that allows people to transfer funds from their accounts or credit cards to another individual's account via a smartphone app.

The increasing consumer acceptance of online banking, mobile banking and e-commerce have paved the way for big growth in mobile P2P payments. The market will be worth about $4 billion by 2017, according to the “U.S. Mobile Payments Forecast 2013 to 2017 report” from Forrester Research.

That's why the people trying to stay ahead of the mobile P2P space, such as Amanda Smith, emerging products manager at payments processor CO-OP Financial Services in Rancho Cucamonga, Calif., have a lot on their plate.

“P2P is definitely one of those things that we think is going to get some more lift,” Smith explained. “It's something that the credit unions should be more engaged in than they have been traditionally.”

CU Times spoke with several experts about where mobile P2P is headed and what credit unions can do to stay ahead of the curve. Here are five things they said are on the horizon.

Bigger Bucks

Since it first hit the scene in the late 1990s, P2P has largely been all about moving small amounts of money around.

“A lot of people said this is for splitting the dinner check or paying the babysitter,” Steve Shaw, vice president of strategic marketing for digital channels and e-payments at Fiserv, said.

The Brookfield, Wis.-based company operates the P2P platform PopMoney, which is used at about 2,300 financial institutions. But PopMoney's transaction sizes have been increasing and that means credit unions will need to reposition their mobile P2P offerings in ways that reminds members that the service is for more than just settling up at lunch, Shaw said. Members now use it for an increasing array of things, including paying rent, splitting shared expenses among roommates and sending money to college students, he added.

“We thought it'd be 20 bucks here or 30 bucks here; we're seeing $400 here, $500 here, $800 here going through the system today,” Shaw noticed.

Fee Packaging

Credit unions are very busy finding ways to integrate existing mobile P2P platforms with their existing credit union platforms.

“Building your own P2P service, you'd have to try to interface with all these different institutions to ride the rails to do debits and credits,” Shaw said.

But that means credit unions have to pay for P2P, typically on a per-transaction basis, and those costs are hard to pass on to consumers who are tired of being nickeled and dimed by financial institutions. Strategic fee structures are now crucial for credit unions investing in P2P.

“Some of them use it as a tool and a resource, charge nothing for it, and use it to try to grab attention in the marketplace,” Joe Woods, vice president of sales and relationship management at point-of-sale network CU24 in Tallahassee, Fla., said.

Credit unions that don't have monthly checking account fees tend to charge per transaction. “$1 is pretty average for our solution right now,” Woods said.

A larger, more strategic realignment of credit union offerings may be warranted, too, according to Rob Rubin, managing director of advisory firm Novantas in New York.

“You sort of organize maybe the products more around lifestyles or life stages,” he explained. “The account that's organized for students includes mobile P2P and includes all of those sort of digital capabilities and that definitely doesn't include paper statements, and that definitely doesn't include free checks.”

Rubin added, “Maybe the checking account to the senior person doesn't include access to 50,000 ATMs, because they don't need them. That costs money, too. So, maybe there's sort of a rationalization around organizing products to be more needs-based.”

Life in Real-Time

Those lifestyle needs are also why speed will also be an increasingly influential factor for credit unions in the mobile P2P space. Many platforms settle transactions within two or three business days, but the next wave is all about real-time settlement, according to some experts. And, that presents a revenue-generation opportunity for credit unions that place a premium on speed.

For instance, more than 90% of the transactions on CU24's Pocket2Pocket platform, which rolled out in February 2014 and is used by nearly 60 credit unions, are real-time transactions, according to Woods.

“That's one of our competitive advantages over the likes of PopMoney, PayPal, some of the other ones out there. Most of those are primarily ACH at this point,” he said.

“You'll see an uptick because of the real-time component,” Smith said. “Right now, offering that service to their customers is a cost to [credit unions]. Some credit unions charge their members for the service or charge for next-day payments. So, something in real-time, there might be an opportunity there to get some interchange income, but noninterest income, fee income.”

“I don't see it being a real money maker,” she cautioned. The real gains, she said, will be from giving members another way to interact with their accounts.

Midlife Crisis

Though about 15% to 16% of consumers under age 40 said they use mobile P2P, that number fell to 11.1% for those 40 to 49 and just 6.8% for those 50 and older, according to “Research Brief: Bank Shopper Snapshot Survey Vol. 10: Mobile Payments Tracker II,” 2014 report from the Filene Research Institute.

Credit unions must now decide whether they should focus on marketing to millennials, who seem to be a natural fit for P2P, or focus on engaging the over-40 crowd, which is bigger and has more money.

“Credit unions actually serve older demographics,” Kim Cromer, CU24 vice president of project management, said. “We want to help the credit unions get the younger membership. This is a great tool to help with that.”

“Go young,” Rubin advised. “Mobile P2P works when you have roommates. Mobile P2P works when you're going out to dinner with a bunch of friends. I think the lifestyle that we're talking about associates with a younger generation.”

Sending mom money via mobile P2P, Rubin said, “She wouldn't know what to do with it.”

Shaw said he sees the future of P2P a little differently.

“Yes, there are young kids that are sending money off, but there's also parents that are sending money to their kids off at college or family gifts,” he noted.

Smith agreed that mobile P2P is not just for millennial credit union members.

“Oddly enough, my experience personally is that I think it's not always the hardest thing to get those that are over 35 to adopt the technology,” Smith added. “You know, the very first person that started texting me was my dad,” she chuckled.

The Technology Connection

The growth in mobile P2P may be the tipping point that turns technology, rather than people, into the primary draw for some members. That, in turn, means a radical change in the value proposition for credit unions.

Many credit unions, Rubin explained, “Want to talk about coming in and 'we're so nice and friendly, and we're going to help you set yourself up.' But what that does over time is the person thinks that this credit union is really good while I'm here, but they're still associating because of the people connection. They're associating the institution itself with the physical location of where they are.”

If the member moves, Rubin said, it's usually goodbye.

“You don't want them to close the account when they graduate; they don't need to,” he continued. “A real marketing effort to a younger generation not as much about the branch-oriented services or the people services but rather the mobile capabilities, so that when they move or grow up, they don't think that they need to replace.”

Though only 12% of online consumers said they used mobile P2P in the last 30 days, according to that Filene mobile payments survey, the experts all agreed that mobile P2P is moving at light speed and is only going to demand more space.

“The pace is just amazing to me,” Smith said. “Just when I think it's gone as fast as it can possibly go, it just keeps going.”

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