Competitive disruptors make it essential to build—and brand—your offerings.
Mobile payments are on the minds of many—and there’s certainly no shortage of choices. While adoption rates have lagged expectations so far, Business Insider expects U.S. in-store mobile payments to increase steadily at a 40 percent compound annual growth rate to hit $128 billion by 2021—and mobile P2P to rise to $336 billion.
With competitors from virtually every sector, there’s no time to waste in evaluating and building value in your mobile payments whether a branded mobile banking app, tokenized card or digital wallet.
The Four Pillars of Mobile Payments
According to Steve Shaw, VP/strategic marketing/electronic payments for Fiserv, a CUES Supplier member in Brookfield, Wis., understanding how your members think—and their preferences in how they move their money—will help CUs succeed in the mobile payments space. As outlined in the 2018 Fiserv white paper, Building the Four Pillars of Mobile Payments, Shaw sees these trends as most impactful:
1. Paying other people (such as through Venmo, Square Cash, Popmoney and Zelle). P2P options, a cornerstone for mobile payments, offer an easy way to pay friends or family and are a must-have in today’s social environment, explains Shaw. The need for fast payments between individuals has also triggered intense competition for CUs. Providers like Venmo are hitting their stride, and Zelle, already a major influence, is increasing its sphere with a common network and directory interchangeable across many financial institutions. “The network’s goal is to reduce friction for a better user experience, no matter where the consumer banks,” he says.
2. Paying merchants or retailers (such as digital wallets, stored cards, prepaid cards, and online transactions). Here, members make point-of-sale mobile payments or pay through retailer websites or mobile apps. Payments can be made via a digital wallet or through connected Apple, Samsung or Google/Android devices. While adoption rates have lagged in comparison to industry expectations, digital wallet usage is on the increase. Fiserv notes an 8 percent adoption rate by mobile banking users in 2014, rising to 15 percent in 2016. Retailer apps, such as Starbucks and Walmart, are showing moderate success.
3. Paying billers (ebills, mobile bill-pay apps). With mobile bill-pay used by 65 percent of mobile bankers, Shaw says it’s essential for CUs to offer this product. “It meets the on-the-go convenience craved by today’s consumer and offers increased functionality, such as alerts and due date reminders.” Members want to use their phones to pay quickly without having to go online.
4. Paying self (moving money between accounts). Perhaps the most neglected pillar, mobile transfers give members control over their cash and a way to manage their money. It includes mobile check deposit, another requisite for a CU’s mobile offerings. (Fiserv research shows that 39 percent of mobile banking users have deposited a check via their smartphone.)
“Misperceptions in the mobile payments space often stem from a misplaced focus on competition or the device—rather than understanding what your member wants,” reiterates Shaw. “Think of mobile payments holistically; envision your members’ needs and how you can make your credit union the hub for their financial life.”
Building Value in Today’s Payments Space
Jeremiah Lotz, VP/product management for CUES Supplier member PSCU, St. Petersburg, Fla., stresses that CUs must stay vigilant when building value in the mobile payments space. “Rival offerings from traditional banks and fintech innovators have made it critical for CUs to leverage their payment options and mobile experiences as a differentiator,” says Lotz.
“While point-of-sale payments made with a device haven’t shifted dramatically (and have yet to reach 1 percent of the total number transactions PSCU processes), online (card-not-present) transactions have increased across all demographics.” For PSCU members, card not present represents approximately 15 percent of debit and 25 percent of credit transactions.
Tokenization (the process of substituting a sensitive data element with a non-sensitive equivalent) has opened the door to a plethora of payment options, such as Apple Pay or Samsung Pay, continues Lotz. “But the real work is making your card the preferred choice. By leveraging programs such as cash back, travel rewards and competitive interest rates, your member will see your card as the most attractive option. Also assist your members so their credit or debit cards are properly supported and eligible for the various digital wallets and promote the use of your cards in the wallets available.”
Real-time payments are another must-have as members continue to raise their money movement expectations. For P2P transactions and bill-pay, it will be the new norm—not the usual three days currently offered by services, adds Lotz. “The consumer is smart. They know there are faster ways to move their money. And in today’s environment, it’s about instant gratification and immediate access to their money.”
Taking that idea further, digital issuance will become commonplace. Members will be unwilling to wait seven days for a physical card. Similarly, consumers will look for cash access using their mobile devices at an ATM, rather than their debit cards.
“There will be no waiting for a mailed card after an account is opened,” offers Lotz. “Cards will be issued digitally, provisioned immediately via a member’s smartphone. As current members’ cards expire, replacement cards will also be issued digitally without a lapse in service.”
The consumer will drive these changes, concludes Lotz. “Your challenge is ensuring your strategy stays relevant in the mobile payments space. Take the time to understand your consumer demographics, research their expectations and align with partners that can innovate and build your product strategy based on those same consumer demands.”
Stephanie Schwenn Sebring established and managed the marketing departments for three CUs before launching her business, Fab Prose & Professional Writing. Follow her on Twitter@fabprose.