Interest and noninterest income have been primary sources ofcredit union revenue. However, highly publicized, aggressive movesby Apple Pay and other tech firms into mobile payments have createda new threat to that business model that's hard for credit unionsto ignore.

It's even harder for them to conquer.

That's because in order to join this emerging frontier of mobilepayments, credit unions basically have to do one of two things:Sign up with a third-party provider like Apple Pay or create theirown mobile payments technology.

In either case, there's a potentially huge source of revenue atstake — advertising — and it could wildly change how credit unionsdo business.

This intersection of Main Street and Madison Avenue was thenatural result of the payment channel's shift to self-service thatbegan with the advent of the ATM and is now squarely in mobile,according to Richard Crone of Crone Consulting, an independentadvisory firm that helps credit unions and banks create mobilepayment strategies. In fewer than 18 months, more than half of allservice interactions with members will be via mobile, andmillennials in particular have become very willing to ditch afinancial institution for one with better mobile-paymentcapabilities, he said.

But many credit unions are in Paul Parrish's shoes. Parrish, whois chief operating officer at the $751 million One Nevada CU in LasVegas, said he went to trade shows looking for answers on what todo about mobile payments. One Nevada has about 76,000 members; italso has a mobile payments app in the pilot phase, Parrishsaid.

“We'd be sitting around the room with a lot of very smart peoplein the industry and basically coming away with everybody looking ateach other saying, 'Well, I got nothin',” he said.

That stuck feeling is why so many credit unions have littlechoice but to let Apple, Google, Samsung or other third partieshave their mobile payments business, even though there is a priceto pay, according to the experts.

The first is financial.

“They give up a pound of flesh directly to Apple — 15 basispoints on every credit transaction, a half a cent on every debit,plus paying Visa or MasterCard tokenization fees, accepting tierone support, and giving up the user interface and the upside thatcomes from the ads and offerings,” Crone explained. “It's worthabout $300 per active wallet user per year. That is a bigcost.”

The second is opportunity cost.

“They'll tell the member, 'You know, go ahead and load up thatapplication or Google Wallet, but just make sure you're putting ourcredit card in there and our debit card in there, and we're goingto be good to go and everybody's going to be happy.'” Parrish said.“The next thing you know, what they're doing is accommodating thesethird parties that start peppering your members with ads and offersthat they don't have any control over or that the credit unionsdon't have any control over. The next thing you know they'll begetting hit by Quicken Loans and Capital One and, you know, a wholeconga line of competitive or competing products. That's just notthe direction we want to go.”

But that is indeed the direction many credit unions go, simplybecause they can't possibly assemble the capital and talent ittakes to create mobile payment technology that rivals Google orApple in use or adoption.

Read more: Services like CU Wallet put competitivepressure on fees from Apple Pay …

That problem has become an opportunity for One Nevada and othercredit unions involved with CU Wallet, a CUSO working with morethan 100 credit unions to launch a mobile payments platform.

Founder Paul Fiore said the venture launched its first versionabout four months ago and is still piloting the technology.

Options like CU Wallet or even MCX's new CurrentC network couldput competitive pressure on the fees Apple Pay and other mobilepayment providers charge.

But that appears to be a secondary benefit. The real win is toregain control over the data users generate — because it's worth afortune.

Mobile payment apps usually have advertising space that can besold on a cost-per-thousand, cost-per-click or cost-per-acquisitionbasis, and the potential annual advertising revenue from one memberwith an active mobile wallet is more than $316 per year, Cronesaid.

“To put that in perspective, the average credit union generatesonly about $150 in gross revenue on a checking account. Most ofthat comes from overdraft fees,” he said.

“Instead of fighting over the $0.30 they can make frominterchange on paying my monthly bill on ACH versus credit card,they could get a $1,000 from a solar company as a lead generationjust to identify all the people who live in Southern Californiathat own a home whose energy bills are over $500 a month,” Fioreadded as an example.

“What we're able to do with mobile is use that data to make oursale of data the most valuable in the marketplace, which will bringin tons of money to the credit unions and will actually be themodel in the long run that credit unions can rely on for revenue,for the member's benefit,” Mark Berman, principal and cofounder ofBaltimore-based Horsetail Technologies said. “If you add thegeo-location to the financial picture, plus the search, you havesomebody whose wallet is very ripe for a purchase. That has themost value in the marketplace of all.” Typically members must optin to receive offers, he said.

Credit unions are in a more trusted position than most financialinstitutions and mobile-payment providers when it comes to customerrelationships, and that can be an advantage among advertisers.

“You're kind of eschewing the task, which is keep my money in abig fat safe, and instead make my life easier, make it better, giveme value, make me a better consumer and do it from a platform thatI already trust and have trusted, and my parents trusted and mygrandparents trusted,” Berman added.

He who enrolls, controls — so don't let a love-hate relationshipwith the digital world become an excuse for analysis paralysis, theexperts warned.

“Every credit union needs to get involved, even if it's going tohurt their revenue model in the short run. You're not going to bethere if you can't offer this stuff in the long run. You've got totake Apple Pay, even if Apple Pay isn't the final winner, andGoogle Pay and some other one. You have to be sort of mixing it up,because otherwise, you're going to be left on the side,” Bermansaid. “The world of paying for things and authenticating yourselfis going to be really dramatically different 10 years from now. Fora credit union or a bank or anyone else to stay on the sidelines,that's the death knell.”