For more than a generation, plastic cards have been the de facto on-ramp to the payments highway. With the widespread adoption of smartphones and other mobile devices, how will the use of plastic cards change?
The payments industry is in a period of dramatic change, with innovation and experimentation surrounding mobile technology and products at the forefront. Over time, the mobile channel will likely become the new payments on-ramp, providing safe, secure and real-time access to debit, credit and prepaid accounts. The threat to credit unions is that nontraditional competitors, including technology giants, telecom companies and startups, are well-positioned to attract members’ mobile payments now. To keep payments in-house, credit unions must innovate to remain relevant and keep credit union brands at the top of the mobile wallet.
Card payments innovation is happening at breakneck speed. Consumers are downloading payments apps and loading card account information securely on their phones to facilitate card payments. Near field communications technology that enables consumers to use payment information stored on mobile phones instead of plastic cards is becoming more prevalent. At the same time, mobile payment solutions like SpotPay are extending the life of plastic cards by dramatically expanding the places where card payments can be accepted.
To keep pace and facilitate the use of credit union branded cards on the phone or in hand, credit unions should partner with financial service providers who seamlessly bridge yesterday’s card-dominated environment with tomorrow’s mobile-based environment for both payee and payer applications. These integrated networks will best position credit unions to strengthen their member relationships as innovations unfold.
Using integrated networks, credit unions can create a branded mobile payments hub to enable members to make payments on their own terms across all channels and in all situations. The ultimate vision is that each member will then customize use of that hub to manage a personalized array of payer/payee relationships for bill payment, social payments between individuals, and point-of-sale payments that support debit, credit and prepaid accounts.
The mobile payments hub empowers members to pay and get paid far beyond the capabilities of plastic cards, given the powerful attributes of mobile devices. Members will have card payment data from their credit union safely and securely accessible from their phone to facilitate transactions anytime, anywhere. While on the go, credit union members will also be able to track credit union loyalty rewards points earned and spent at the point of sale without requiring an in-hand plastic card. These capabilities make commerce and member relationships more dynamic.
The mobile payments hub provides superior interoperability to not just make payments, but to also accept funds from others. Mobile networks, through Internet access, GPS recognition and NFC capabilities, enable dynamic customer experiences that redefine interactions between merchants and patrons. The industry is already seeing the first wave of such solutions, including SpotPay, that enable merchants to use their smart phones as on-the-go POS terminals. Merchants use these devices to swipe credit, debit and prepaid cards with their mobile device to accept payments. This capability is especially important for those businesses outside traditional retail storefronts–taxi drivers, landscapers, retailers at farmer’s markets and other venues. By providing card reader technology to small business and merchant members, credit unions will facilitate member cash flow, protect DDA relationships and strengthen member bonds. Beyond card acceptance, though, SpotPay positions payees to accept social payments and even checks anytime, anywhere and in real-time.
Watch for mobile solutions to redefine the shopping experience, from supporting self-service ordering and check-out to purchase aggregation that increases buying power. In these solutions, concluding the transaction (payment) will be embedded and authenticated without the need for hackable transmission of private payment credentials. By enabling mobile solutions for members today through integrated networks, credit unions will remain the preferred funding source of choice for members’ payments.
Members overwhelmingly trust their credit union to handle their mobile financial activities. Fiserv research indicates consumers prefer to utilize mobile payments from their primary financial institution, as opposed to a third party. Nine out of ten consumers surveyed say they trust the security and privacy offered by their financial institution and 85% want to manage their money in one location–their financial institution. Credit unions who take the lead in developing branded mobile networks will be rewarded.
Credit unions must be able to support payments tendered from debit, credit and prepaid card accounts accessed through mobile phones and also be able to process transactions from mobile card readers. Providing these capabilities will put credit unions on the path to becoming the mobile payments hubs for their members. By embracing mobile networks sooner rather than later, credit unions will be able to provide a dynamic payments experience that will safeguard their markets and prevent member payments from defecting elsewhere.
Dave Keenan is general manager of network solutions at Fiserv.
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