By learn­ing from oth­ers’ mis­takes, CUS may be in a po­si­tion to make real strides for­ward in dig­i­tal wal­lets, de­spite lack­lus­ter adop­tion rates seen in this space thus far.

Credit Union Journal - - Contents - BY W.B. KING

Credit unions — along with con­sumers — haven’t widely em­braced mo­bile wal­lets, but con­sumer at­ti­tudes are chang­ing quickly. Here’s how credit unions can still get in the game be­fore it’s too late.

THE MO­BILE WAL­LET MAR­KET HAS evolved rapidly, with large banks and tech com­pa­nies sprint­ing ahead of what smaller in­sti­tu­tions can do. But in the process, those com­pa­nies have made count­less mis­takes that credit unions can learn from and over­come.

Ac­cord­ing to First An­napo­lis Con­sult­ing’s March 2017 re­port, “Study of Mo­bile Bank­ing & Pay­ments,” less than one in 10 of study’s 1,514 banked smart­phone users said they had an is­suer wal­let. The most fre­quent is­suers cited were Chase and Cap­i­tal One banks. The good news for credit unions is that 65 per­cent of re­spon­dents said they wanted one pay­ment app on their phone pro­vided by their fi­nan­cial in­sti­tu­tion.


When asked what non-tra­di­tional pay­ment method they would use, 13 per­cent said Ap­ple Pay, four per­cent said An­droid Pay and three per­cent noted Sam­sung Pay. Re­spon­dents pre­ferred tra­di­tional providers, such as their fi­nan­cial in­sti­tu­tion, 48 per­cent of the time.

“With mo­bile wal­lets, the Ap­ple Pays and Sam­sung Pays of the world, the fu­ture is un­clear,” said NCR Cor­po­ra­tion Fi­nan­cial Ser­vices Di­vi­sion Vice Pres­i­dent and Gen­eral Man­ager, Pay­ments, Steve No­galo. “The adop­tion has been lack­lus­ter, as we all know.”

But the strong pref­er­ence for a tra­di­tional fi­nan­cial in­sti­tu­tion to take the lead could sug­gest a silver lin­ing be­hind that lack­lus­ter per­for­mance.

If credit union lead­ers de­ter­mine a mo­bile wal­let of­fer­ing is im­por­tant to the CU’S over­all pay­ment strat­egy, ex­ec­u­tives should dif­fer­en­ti­ate its CU’S mo­bile wal­let from what is in the mar­ket­place, Strate­gic Re­source Man­age­ment EVP Michael Carter said.


“Con­sider po­si­tion­ing the of­fer­ing as an ad­di­tional method for mak­ing pay­ments that will be more con­ve­nient for ‘some’ mem­bers. Be sure that the of­fer­ing is a sub­com­po­nent of the over­all mo­bile bank­ing of­fer­ing the credit union pro­vides mem­bers,” said Carter. “The of­fer­ing must be em­bed­ded within the mo­bile bank­ing mod­ule, not sep­a­rate from it — no one wants to have to open an­other app when there is an ex­ist­ing one that should do the same thing.”

Still, there’s a lot of un­cer­tainty among credit unions and banks about which type of mo­bile pay­ment is go­ing to be the best in­vest­ment, in part be­cause of the lack of clear data.

One as­pect of dig­i­tal pay­ments that credit unions and con­sumers alike are show­ing more in­ter­est in are per­son-to-per­son pay­ments. In­deed, over the last year, ques­tions and queries about P-to-p pay­ments have flooded into NCR from its credit union clients, No­galo said.

“These credit union clients are look­ing for guid­ance on how to nav­i­gate the path for­ward and find that right bal­ance be­tween in­vest­ing in what are by-and-large un­proven tech­nolo­gies, while not be­ing left be­hind in the process,” said No­galo. As­set class, se­cu­rity con­cerns and mem­ber strat­egy will in­form re­spec­tive ap­proaches, he added. “There is no one-siz­e­fits-all an­swer.”

“The [dig­i­tal wal­let] must be em­bed­ded within the mo­bile bank­ing mod­ule, not sep­a­rate from it.” — Michael Carter, Strate­gic Re­source Man­age­ment


What’s been driv­ing that in­ter­est is not Ap­ple Pay or Sam­sung Pay, but rather Zelle, the multi-bank P-to-p net­work that re­cently re­launched with a com­mon brand­ing lan­guage across par­tic­i­pat­ing fi­nan­cial in­sti­tu­tions.

“They are em­bark­ing on a very

am­bi­tious di­rect-to-con­sumer ad­ver­tis­ing cam­paign and we ex­pect to see some sig­nif­i­cant track­ing in the mar­ket­place as a re­sult,” No­galo ad­vised.


Zelle — which counts CO-OP Fi­nan­cial Ser­vices, FIS, Fis­erv, Jack Henry & As­so­ciates, CI World­wise, CGI, D3 Bank­ing Tech­nol­ogy and IBM as part­ners, among oth­ers — cel­e­brated the one-year an­niver­sary of its de­but this month, and third quar­ter 2017 statis­tics showed an av­er­age of 65,000 con­sumers en­rolling daily, re­sult­ing in the net­work pro­cess­ing more than 60 mil­lion real-time P-to-p trans­ac­tions val­ued at $17.5 bil­lion.

Among early Zelle adopters were the $9.4 bil­lion First Tech Fed­eral Credit Union, the $15 bil­lion BECU, along with much big­ger banks, such as Wells Fargo, Ally Bank, Bank of the West, Bank of Amer­ica, Citi, Mastercard, Visa, PNC and Mor­gan Stan­ley.

“Our real-time pay­ments net­work is un­lock­ing new op­por­tu­ni­ties for an en­tire in­dus­try,” noted Paul Finch, CEO at the bankowned Early Warn­ing Ser­vices, the net­work be­hind Zelle. “We have built and de­ployed multi-lay­ered fraud and risk man­age­ment tech­nol­ogy to en­able safe pay­ments in a real-time world.”


Con­ced­ing he doesn’t have a crys­tal ball, No­galo said his credit union clients are un­der­stand­ably over­whelmed by what dig­i­tal pay­ment medium will make the most sense. And to date, he said there isn’t a clear an­swer.

But by join­ing Zelle, credit unions can take ad­van­tage of years of trial and er­ror that the mega-banks un­der­went on their own. Zelle orig­i­nally came to mar­ket in 2011 as clearx­change, and even its found­ing mem­bers — Jpmor­gan Chase, Bank of Amer­ica and Wells Fargo — were in­con­sis­tent in their tim­ing and pre­sen­ta­tion of the ser­vice.

The launch of the Zelle brand is more than just a mar­ket­ing ex­er­cise; it re­flects a gen­uine shift in phi­los­o­phy that stems from years of trial and er­ror.


“What peo­ple are try­ing to get their heads around is what they should do — Venmo, Zelle, Sam­sung Pay, Ap­ple Pay and so on,” said No­galo. The “sands of the hour­glass” are not yet run­ning out, but he said lead­ing so­lu­tions will be com­ing to mar­ket next year.

“2018 will be the year that peo­ple will have to place their bets or they will po­ten­tially be left be­hind,” he said. “We [at NCR] are hedg­ing our bets be­cause we don’t know which of these so­lu­tions will even­tu­ally pre­vail, so we are go­ing to of­fer our clients a menu of these dif­fer­ent ca­pa­bil­i­ties.”


Strate­gic Re­source Man­age­ment’s Carter sug­gested that, iron­i­cally enough, more tra­di­tional pay­ments might be the key to suc­cess. Dif­fer­en­ti­at­ing be­tween mo­bile wal­lets and other dig­i­tal pay­ments is part of the prob­lem.

“They are count­ing [e-com­merce] pay­ments made via a mo­bile phone in with pay­ments made with mo­bile wal­lets, which can be mis­in­ter­preted as ev­i­dence of more mo­bile wal­let use than is ac­tu­ally oc­cur­ring,” he said.

Mem­bers can make pay­ments from their phones in nu­mer­ous ways, in­clud­ing a mo­bile bank­ing app, a mer­chant app, a credit card is­suer app and/or browser, trans­fer­ring money us­ing a per­son-to-per­son ser­vice pro­vided via an app or us­ing a mo­bile wal­let app to make a pur­chase at the point of sale in a phys­i­cal store. Carter said re­lated card user statis­tics, how­ever, are of­ten mis­con­strued.

“I have seen stud­ies that demon­strate a very strong growth trend in mo­bile pay­ments be used to sup­port a the­sis that mo­bile wal­lets play a role in gen­er­at­ing this growth,” said Carter. “They do play a role, though it is not a sig­nif­i­cant one … The fact is dig­i­tal wal­lets have not suc­ceeded. That said, there is plenty of mo­bile pay­ment growth, but it is not via dig­i­tal wal­lets. Credit unions should look for ways to pro­vide con­ve­nience to mem­bers us­ing your tra­di­tional pay­ment op­tions.”

Since a credit union has the abil­ity to “see” if a mem­ber is mak­ing au­to­matic or credit card pay­ments on the web­site of a mer­chant, util­ity, mo­bile phone and/or prop­erty man­age­ment site, for ex­am­ple, Carter said CU ex­ec­u­tives should de­velop pro­grams geared to­ward ab­sorb­ing this mar­ket share.

“Af­ter iden­ti­fy­ing those [mem­bers] who are pay­ing bills in this fash­ion, launch a cam­paign tar­get­ing them that gives them an in­cen­tive to use their [Cu-branded] debit cards in­stead,” he said.

“2018 will be the year that peo­ple will have to place their bets or they will po­ten­tially be left be­hind.” — Steven No­galo, NCR Cor­po­ra­tion

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