By linking mobile payments with money transfers, Western Union created a new use for Apple's mobile wallet. But it must still rigidly conform to the basic requirements of an Apple Pay transaction — without a bank account, there is no payment.

Apple is working with more than 750 credit unions and banks to support Apple Pay, but the tech giant does not provide a clear option for the underbanked consumers who make up a large part of Western Union's audience. Western Union's next step is to close the gap, extending mobile payments to its entire customer base.

"As we look at innovation from companies like Apple and all of the people that are coming into the financial services arena that aren't banked, by using our services with this technology we can open a door," said David Thompson, Western Union's executive vice president of global operations and chief information officer.

Thompson emphasized that underbanked consumers are a vital segment for mobile financial services, and that the company is actively looking to add new mobile payment options to accommodate this audience. Western Union's internal research shows that over two thirds of migrant international money senders, long considered an underbanked demographic, own a smartphone.

At first, Western Union envisions the Apple Pay partnership will work primarily on the front end of transactions, with consumers using Apple Pay to initiate transfers to recipients who will retrieve the funds via more traditional means, such as cash, a prepaid card account or an ATM. But as Apple Pay and other mobile technologies expand, there will be more options on both ends of the transaction, Thompson said.

"We want to give consumers more options in retail and online," Thompson said. "Apple Pay gives us an opportunity to offer our customers another way to pay."

An Opportunity for CUs?

Ben Rogers, research director at the Filene Research Institute, noted that FIs with Apple Pay have "instant credibility" with members and potential members these days. The catch, he said, is that iPhones constitute just less than half of the smartphone market share, and are still mostly a middle- and upper-class item.

"What's interesting to me is that if Google and Android follow with a second competitor that does exactly what Apple Pay does, I think we're going to see the market really bloom," Rogers told Credit Union Journal. "So whether Apple Pay specifically or with Android, we're definitely going to see an opportunity to put it into low- and moderate-income people's hands."

One problem right now, however, is that many credit unions are interested in getting on board with Apple Pay, but are worried about the interchange ramifications. "But I've talked to a lot more credit unions that say that interchange is going to be narrowed anyway by outside forces, so why not sign on with something that lets them do it right away?"

Rogers said he was not aware of any CDCUs or LICUs currently using Apple Pay, but said that having Apple Pay or an Android equivalent could be "a compelling part" of the equation that brings more underserved members to credit unions.

"Is it the prime driver? No — but I think it's four or five steps below the prime drivers, and people will consider it." One other component to that, he added, is that low- and moderate-income consumers right now are often bypassing laptops and desktops all together in favor of a smartphone as their primary internet device. "Having that functionality be one step closer to the way they're living their lives is definitely an opportunity," he said.

Big in Biometrics

Another big advantage Apple provides is account control, Thompson said. "It's another way to reduce fraud, because the sender has to go through Apple," Thompson said.

Western Union is planning a future service that includes Touch ID, a biometric authentication option that's a large part of Apple's marketing for its mobile wallet.

"It's yet another check in the fraud process that demonstrates that the user is with his device," Thompson said.

Western Union is additionally developing in-app support for Apple Pay, which would allow consumers to use the service without visiting a Western Union agent in person, Thompson said, though he added that option is not currently in release.

The Apple Pay partnership can also help Western Union encourage agent locations to upgrade to accept mobile payments, according to Tim Sloane, vice president of payments innovation for Mercator Advisory Group.

"As long as Western Union agents accept NFC transactions and are connected to Amex, MasterCard and Visa, then Apple Pay will work," Sloane said. "So Western Union is probably urging agent locations to upgrade."

Credit Union Journal Reporter Aaron Passman contributed to this report.

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