There's a frightening reality facing today's credit unions – they may no longer be integral to the movement of money. Emerging payments technologies from companies like Verizon, Apple, Google and others threaten the very makeup of the payments ecosystem.
Backed by strong brand recognition and plenty of resources, these powerhouse providers are working overtime to control every aspect of the consumer purchase experience. Couple this threat with what appears to be an imminent decline in debit interchange income, and it's no wonder credit unions are nervous about the future of payments as a profit center.
What's driving the change?
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This morphing of the money-moving world is caused by several factors, most notably the smartphone. Developers are moving at a rapid pace to bring new payment applications to market. Why? They are responding to the demands of two very motivated groups – merchants looking to reduce their costs, and the next generation of consumers, who are drawn to making purchases in non-traditional ways, such as via smartphone or through a social network.
How can CUs play a role?
This vast market opportunity demands that credit unions find ways to keep their position in the marketplace. How will credit unions maintain their foothold in everyday financial transactions, even while new technologies threaten to oust them?
The solution is found in the notorious adage, if you can't beat 'em, join 'em. By partnering with emerging payments providers, credit unions stay in the middle of the consumer-to-merchant transaction. In addition, the partnership opens new doors to markets like small business, peer-to-peer/person-to-person (P2P), mobile and social payments.
Can we generate revenue?
While very real possibilities for profit-making from alternative payments solutions exist, credit unions should consider linking up with these technologies for the first-to-market benefit they bring. As more consumers move down the spectrum (from merely "interested in" to "dependent on" mobile and online payments), many will follow the lead of their trusted credit union.
Unless, of course, their credit union isn't leading. Being at the center of your members' payments is essential, as is staying relevant to the younger generations.
Incorporating alternative payments into your product mix is a viable way to do both.
The communities consumers identify with are no longer simply where they live or work. Whereas a member of the past may have chosen his credit union because it was just outside the plant floor, today's members are looking for more than proximity. They're looking for relevance.
Supporting your members as they tap new technologies to improve their lives helps them see your credit union not only for where it is or what it offers, but for where it's going in the future.
Brian Day is Dwolla product leader for The Members Group (TMG)in Des Moines, Iowa. He can be reached at [email protected].
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