Payments Technology Flash Forward
Introduction
It took centuries for civilization to progress from barter to
metal coins and paper money. But in just the last few decades, payments
technology has begun evolving at an exponentially increasing rate. Sparked by the
mid-century introduction of credit cards, and fueled by a revolution in digital and online
capabilities, payments are becoming more mobile and versatile than imaginable just a
few short years ago. Today, mobile wallets, and mobile technologies like card controls and
alerts, offer credit unions an opportunity to position themselves at the forefront of payments
innovation. Seizing this opportunity demands both foresight and prudent planning, as you’ll
discover in the following pages.
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Payments Tech Flashback
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Contents
■■
■■
Mobile Insights
To Take Advantage of Mobile Wallet Technology,
Credit Unions Need to Jump on the Bandwagon
4
Give Your Credit Union Members Control
7
At-a-Glance
The Accelerating Evolution of Payments Innovation
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Payments Tech Flashback
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Mobile Insights
To Take Advantage of Mobile Wallet Technology, Credit Unions Need to Jump on the Bandwagon
While mobile wallets are gaining traction with consumers, credit unions lag behind
banks and other providers such as PayPal™ and Google in offering this rapidly
evolving financial services product. To stay on top of the growth curve, credit
unions need to make a significant and immediate commitment to jump on the
mobile wallet bandwagon or be left in the dust, according to a study by Pleasanton,
Calif.-based Javelin Strategy & Research.
“This is a fight for credit unions to win—or lose,”
states Mary Monahan, a Javelin analyst.
The Javelin report was made available in
September 2013 and titled “Mobile Wallet Game
Changers: A Glimpse into 2014’s Projected
Winners and Losers.” According to the study,
many financial institutions—not just credit unions—
have lagged in deploying working wallets while
non-bank entities such as PayPal and Google
have been steadily growing their usage. “The
financial industry narrative is that nobody wants a
mobile wallet, but that is not true,” explains Javelin
Research Associate Daniel Van Dyke, a study
co-author. “There is a strong incentive to get into
this now. The mobile wallet space is not static.”
Expectations about the future of mobile wallets
are high but confusion is also common and
consumer experience at this juncture is likely to
be fragmented. In this environment, how do credit
unions fit into the picture?
Although there is little time to waste, the first step
might be to sit back, take a deep breath, and
exhale. While there is a lot of interest and activity
surrounding mobile wallets, this opportunity is
still out there for credit unions. The gap between
consumer expectation and usage is still wide,
which makes this the perfect time for credit unions
to stop thinking and start acting.
But how? Here are several recommendations, each
with an eye toward early action and manageable
involvement:
■■ Get
your cards top-of-wallet. Most
members probably aren’t using mobile wallets
at this time, even though they may be thinking
about it. Encouraging them to do so—
especially in tandem with using your payment
cards—increases the chances that they’ll
put a credit union’s cards into their mobile
wallets. Getting in on the ground floor is an
important first step.
■■ Focus
on mobile payments. The terms
“Mobile payments” and “mobile wallets”
are often used interchangeably. However,
mobile payment refers generally to payment
made with a mobile device rather than with
cash, check or a plastic card. A mobile wallet
allows you to store one or more payment
methods (i.e., cards) in a digital format that is
accessible on a mobile device. And, the fact
is people aren’t adopting wallets as quickly
as they are mobile payments. Credit unions
should align their marketing and promotion
with the mobile payment experience to get
members to associate them with mobile
wallets in the future.
■■ Keep
your options open. CO-OP Financial
Services, a credit union service organization
based in Rancho Cucamonga, Calif., is
taking a non-exclusive approach to mobile
wallets with its own foundational products
and technology. The company recommends
the same for credit unions. Rather than trying
to commit to one mobile wallet product,
encourage members to choose their own
(or try many).
■■ Stay
alert. This market is evolving; it’s
important that credit unions stay informed
and evolve with it.
continued...
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Payments Tech Flashback
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So the message to credit unions is: They need to
begin now to get their cards into mobile wallets.
This strategy is not only easy, but it’s smart.
Credit unions don’t have to choose the winning
technology, at least not yet. They don’t have to
create or mobilize their own new technology. Even if
things change in the future, there’s no real downside
to having their cards in today’s wallets. And, for the
record, interchange works the same in wallets as it
does anywhere else.
Taking an active role in getting members to try this
technology offers several advantages to credit
unions. It positions them at the front of this trend,
opening conversations about security, card benefits
and convenience features, and driving home the
message that credit unions are on point with new
technology.
At the same time, consider mobile wallet
transactions as a valued portion of overall growth
of the card portfolio. If increased card usage is a
worthy goal—which we all know it is—why not build
usage through mobile wallets?
As consumers move toward
mobile wallets, credit unions should position
themselves as mobile leaders. Don’t wait to
offer mobile banking.
■■ Perform
$
a card program evaluation. Are
the programs meeting members’ needs?
Credit unions should be sharpening their card
programs now.
■■ Create
rewards tied to mobile wallet
transactions.
■■ Run
contests to incentivize adoption.
■■ Use
content marketing to promote
adoption. Showcasing credit union staff or
members who are road-testing wallets and
reporting their results might inspire members
to follow. Additionally, remember that keeping
a credit union card top‑of‑wallet in the
mobile sphere is largely the same as it is
anywhere else.
■■ Promote.
Consumers are using credit again.
Credit unions need to remind members of the
things that make their cards competitive.
■■ Use
analytics. Credit unions should use
analytics to track interest and usage. Knowing
what members are up to is one of the most
important advantages that credit unions have
to promote their institution and new products.
$$ $ $
■■ Mobilize.
$$ $ $
Here are a few ideas to consider for
encouraging mobile wallet usage
among members:
$$ $ $
It’s a fast-moving world and the Javelin study
underscores the velocity of the mobile wallet market
momentum. “In the past 90 days, 21 percent of
smartphone owners have used a mobile wallet
such as Google Wallet or Apple Passbook,” the
study says. “When consumers were polled about
using a mobile wallet in the future, 30 percent of
smartphone owners (22 percent of all consumers)
said they were likely or very likely to use a mobile
wallet in the next 12 months.”
$$ $ $
Digital Wallets
Average number of active mobile
users making domestic transfers
in the U.S. and Canada is expected
to more than double between 2011
and 2013. By 2016, that number is
projected to nearly double again.
Mobile Wallets
9.4
302016
percent of polled
consumers said they were
million users
likely or very likely to use
a mobile wallet in the next
122013
months.
2013
5.4
million users
Source: Javelin Strategy &
Research, September 2013:
Mobile Wallet Game Changers:
2011
A Glimpse into 2014’s
Projected Winners and Losers.
2.3
million users
Source: “Mobile Money Transfer & Remittances—Business Models & Monetisation Opportunities 2011- 2016” – Juniper Research
Engagement:
How Will Wallets Take Off?
Credit unions can and should pursue mobile
participation now. But that still leaves very important
questions: How and when will mobile wallets truly
take off? How will they go from being an emerging
technology to an everyday tool?
Historically, changes in the payments area
happen slowly. EMV card technology has been in
existence since 1994, but it’s only beginning to gain
acceptance in the U.S. The payments system has
so many moving pieces that large‑scale change
takes time.
Fueling the transition to mobile wallets along with
mobile banking in its entirety is the increasing clout
of Gen Ys. The Javelin study says that Gen Y’ers are
the most productive age group to target for potential
mobile wallet users, which consists of consumers
between the ages of 25 and 34. Of that group, the
study notes that 34 percent of Gen Y’ers said they
continued...
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Payments Tech Flashback
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were likely to adopt a mobile wallet in the next 12
months, compared to all consumers at 22 percent.
much seamless. Think of how consumers made
the switch to smartphone photo galleries.
Additionally, the study found that 28 percent of
consumers making more than $150,000 annually
indicated they are likely to adopt mobile wallets in
the next year. “One in three will use a mobile wallet
in the next year and if their financial institution
does not offer one, they will go elsewhere,”
Monahan warns.
Back in the day, if someone asked to see a picture
of your kids, you would pull out printed photos
from your wallet. Sometimes these photos would
be outdated. But now, nearly every smartphone
user has a gallery of photos, new and old. The
transition didn’t happen deliberately, or with effort.
It happened organically because smartphone
photo galleries are simpler, easier, more accessible,
convenient, available and fun.
That said, there’s plenty of other evidence that
mobile wallets could catch on quickly once the
stars are aligned. Many of the elements that make
a mobile wallet of value are already in place—and
in use:
■■ Mobile
banking, including mobile P2P, is
available at many credit unions already.
■■ Proprietary
payment cards and apps,
such as those being used by Starbucks and
Dunkin’ Donuts®, are popular.
■■ Digital
loyalty cards, apps, coupons
and e-receipts demonstrate an obvious
advantage over their conventional
counterparts.
■■ Electronic
ticketing for air travel, public
transit and events is fast becoming the
standard.
■■ Geolocation
native to smartphones has all
but replaced the standalone GPS.
With so many pieces already in place, rapid,
widespread adoption isn’t hard to imagine—and if
it does happen, expect the transition to be pretty
If the same advantages of use applied to mobile
wallets, would consumers make a similar switch?
It’s hard to imagine why they wouldn’t.
Cooperation Brings
Engagement
Right now, the best move for credit unions is to
get members to actually use mobile wallets and
at the same time sharpen card programs to keep
cards top of mind and top of wallet. Credit unions
must also continue to watch all forms of emerging
payment types, as not every solution will ride the
card rails. So, it is important for credit unions to
adopt mobile technology enthusiastically but stay
flexible; the strategic demands placed on credit
unions are likely to change.
For individual credit unions, trying to keep up with
what’s happening in the developing technology
marketplace can be difficult. Actually deploying
those technologies in a timely and productive
manner without some form of collaboration can be
even more challenging.
Taking an active role in getting members to
try this technology offers several advantages
to credit unions. It positions them at the front
of this trend, opening conversations about
security, card benefits and convenience
features, and driving home the message
that credit unions are on point with
new technology.
Industry alliances are vital. The risks and costs
of developing individual solutions in the mobile
wallet space are beyond prohibitive. Add in a
large factor of difficulty (remember, Google is still
struggling with its mobile wallet product) and the
best way forward becomes clearer. Leveraging the
cooperative model—and leveraging cooperative
technology—is the only viable way for most credit
unions to compete and succeed.
In a field where disruptive innovation is not only
possible but likely, the best defense credit unions
have is to take extraordinary measures to deliver
what their members need: Excellent, secure,
leading-edge payments and access from a trusted
financial partner.
About the Author
Amanda Smith is Manager of Emerging Products
for CO-OP Financial Services.
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Payments Tech Flashback
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Mobile Insights
Give Your Credit Union Members Control
Mobile banking and payments are becoming a mature component of the banking
landscape, with surveys showing nearly 50 percent of smartphone owners having
engaged in mobile banking in the past 12 months.
Once used primarily for balance inquiries, mobile
The technology is not yet available inside or
banking now encompasses an ever-growing
outside the credit union movement, but it will be
variety of financial transactions. Members now
in 2014 from CO-OP Financial Services. Controls
have the ability to make direct person-to-person
can be set by the cardholder so that specific
payments and conveniently accessing all their
types of transactions are immediately denied and
accounts in a single portal, including accounts at
the cardholder is alerted about any potentially
different participating credit unions.
fraudulent use.
This expanded use and functionality of mobile
Controls and alerts technology also enables credit
devices for banking presents credit unions with
unions to introduce advanced new card payment
challenges to keep up with consumer demands,
programs that will be attractive to some key target
particularly for greater individual control of mobile
audiences, like affluent cardholders, high-volume
services. It also presents them with opportunities
users and young, first-time card members. These
to enhance their net income, through reduced
consumers place a high value on mobile banking
fraud and increased transaction volume.
tools that promote self-service and empowerment
One emerging solution that puts the member in
through useful, timely and accessible data.
the driver’s seat is mobile card controls and alerts
Once they know about the value of card controls
technology. Consumers today need and want to be
and alerts technology, members will not only be
more vigilant than ever to protect their card usage
attracted to credit union card programs, they
and data. And credit unions will have services
will be more willing to pay a premium for their
that differentiate them from competitors so that
substantive advantages.
members reach for their cards first.
continued...
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Payments Tech Flashback
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A 2011 user survey by Javelin Strategy and
How exactly do the controls work? Controls can
Merchant. Merchant categories can be limited
Research found this technology can reduce
be set in any number of ways:
to gas, hotel, travel, restaurants, groceries and
per-member support costs. It costs a financial
institution $19/year less to service members who
regularly receive mobile alerts and an additional
$9.22/year is saved through interactive alerting.
Location. The cardholder specifies a geographic
region where the card can be used, with transactions
denied when used outside the parameters. So if
electronics—whatever the cardholder mandates. A
specific merchant can also be authorized solely for
a single transaction if the cardholder has concerns.
they never travel abroad, they can set their card to
Dependent. Businesses can set controls per
The study further estimates that this technology
not work there. The cardholder could also set up
employee based on their location and corporate
can reduce fraud expense by up to 50 percent.
a “follow-me” travel itinerary to reduce fraud and
rank, while parents can set controls for themselves
This is because card controls available to the
service denials.
or their kids.
Transaction. Again, the cardholder, parent or
On/Off. The cardholder, be it a parent or business
business specifies allowed transaction types,
administrator, simply turns the card on or off, with
such as in-store, online, recurring or ATM cash
transactions denied if the card is off.
cardholder enable them to prevent fraud before it
happens. They also have the ability to be alerted of
fraudulent card transactions in real-time.
withdrawals. Other types of transactions, such as
card-not-present, can be denied in real-time if the
cardholder has selected this control. They can also
set a limit on the transaction amount and then turn
About the Author
that same parameter off when they’re standing in
Caroline Willard is an executive vice president at CO‑OP
Financial Services, Rancho Cucamonga, California.
line to pay for a flat-screen television, for example.
It costs a financial institution
$19/
year
less
to service members who
regularly receive mobile alerts.
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An additional
$9.22/
year
is saved through
interactive alerting.
Payments Tech Flashback
8
At-a-Glance
The Accelerating Evolution of Payments Innovation
The accelerating trend toward greater mobility, flexibility and convenience in payments technology has primed consumers
to expect more from their financial institutions. Solutions such as Sprig by CO-OP, and coming soon Card Controls and Alerts
by CO-OP, can position credit unions for leadership as the evolution of payments innovation continues.
®
Today
Stanford Federal Credit Union becomes
the first financial institution to offer Internet
banking services to all its members.
1990
2000
DEP
$10 OSIT
.00
1997
Basic text-based
mobile banking
introduced.
1999
Mobile web
enhances user
experience.
• Sprig®
• Card Controls
and Alerts
(coming soon)
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T!
$
Online Banking Logs In2
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You ount
acc ance
a
b l t 5%.
is a
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T!
1994
Continuous Innovation
Empowers Consumers
in New Ways
AL
Mobile Banking Accelerates Rapidly1
AL
1990s–2000s
2010
2008
Mobile apps turn
smartphones into
indispensible tools.
REFERENCES:
1 Wikipedia: http://en.wikipedia.org/wiki/Mobile_commerce; Wikipedia: http://en.wikipedia.org/wiki/Mobile_banking; Wikipedia: http://en.wikipedia.org/wiki/Mobile_app
2 Wikipedia: http://en.wikipedia.org/wiki/Online_banking; "Stanford Federal Credit Union Pioneers Online Financial Services." (Press release). 1995-06-21.
To learn more about Sprig by CO-OP, arrange a conversation with a CO-OP Sales
Representative by visiting http://info.co-opfs.org/SprigProduct_Contact-Me
To keep posted on the latest information for this developing product of Card Controls and Alerts
visit http://info.co-opfs.org/10-21CardControlsAlertsAwareness_Landing
020 62014CF14 3 4
CO-OP Financial Services
9692 Haven Avenue
Rancho Cucamonga, CA 91730
CO-OPFS.ORG
Payments Tech Flashback
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