As the Internet of Things expands, credit unions are dipping a toe into the wearables space to the point where members of some credit unions can now celebrate their 10,000 daily steps by purchasing items with a swipe of new FitBit and Garmin devices.
“Getting involved in wearable devices comes back to our payment vision to provide payment solutions to our members that are both relevant and intuitive,” said BECU’s Digital Payments Senior Manager of Product Management Nidhi Shandilya. “Wearables payment form factors makes our members’ lives easier.”
BECU and First Tech Federal Credit Union are early adopters of these new wearable devices. Both CUs are supported by CO-OP Financial Services, which offers those technologies as part of a partnership with MasterCard.
“We are helping credit unions work with partners that may otherwise be out of reach. Digital wallet enrollment is a process we have fine-tuned since the early days of Apple Pay,” said Todd Clark CEO of the Rancho Cucamonga, Calif.-based CO-OP Financial Services CEO Todd Clark.
“Wearable payments – whether made from a watch, a jacket, a pair of sunglasses – they are powered by a digital wallet,” said Clark. “That’s a really important clarification because some credit unions will hear ‘wearables’ and dismiss it as technology too advanced for their current capabilities.”
First Tech Federal Credit Union’s Vice President of Cards & Payments Terry Rodrick explained that the CU has been involved with Apple Pay since 2015. Since then, First Tech FCU has rolled out other digital wallets including Android Pay and Samsung Pay.
“When MasterCard approached us a few months ago about participating in the pilot for the Fitbit and Garmin payment devices, we were eager to do so,” said Rodrick.
The $10.6 billion Mountain View, Calif.-based First Tech supports over 488,000 members, 302,000 who are active online banking users and 117,000 who are active mobile users.
“We anticipate that we’ll see five percent of our member base utilizing wearable payment devices in 2017, and possibly seven to 10 percent in 2018,” said Rodrick. “However, we won’t hit 10 percent unless merchant acceptance becomes more ubiquitous and the device costs come way down.”
After a period of beta testing to ensure payments were quick and seamless, the Tukwila, Wash.-based BECU was go live this month with payments capabilities for the FitBit Ionic and Garmin Vivoactive 3, both of which retail for $299.
The $17.2 billion BECU supports more than one million members, and Shandilya noted that more than 60 percent of these members are active mobile users, while just six percent are active mobile wallet users. She said the CU has “received a steady endorsement on digital wallets” from members, but time will tell if wearables will be as desirable.
“As with any emerging payments product, except for early adopters, there can be initial skepticism among the general users,” said Shandilya. “Most of it is around understanding how the technology works, which may manifest in terms of an either adoption or security concern.”
Will credit unions adopt?
Whether or not credit unions will take a wait-and-see approach or quickly jump on the wearable train will depend on respective digital strategies, said Clark. He pointed to a recent CO-OP survey that found 88 percent of respondents said digital transformation is “extremely or quite” important. Additionally, 73 percent said their credit union is planning “to increase budgets for digital initiatives” in 2018.
“Credit union executives see very clearly the need to offer members, and prospective members, digital experiences. And that’s because the average consumer is having digital experiences all day long in every aspect of their lives,” said Clark. “They are expecting their credit union to provide seamless access to the apps, devices, platforms and experiences they love and that includes wearables.”
From a CU technology perspective, Shandilya said “the bulk of the work” in relation to these new wearable devices was done in partnership with CO-OP and the card networks during initial digital wallets rollout in 2015.
“We were using the tokenization as the underlying technology, which essentially replaces a card’s PAN number (the 16-digit number on the plastic card) with a unique alternate card number or token,” said Shandilya.
“Wearables are just another implementation of a digital wallet in this sense,” Shandilya continued. “As an early adopter of the various digital wallets that have launched over the last couple of years, one of the things that we discovered is the amazing repeatability of this secure and seamless payment technology.”
In Rodrick’s view, the adoption of these wearable devise will likely be slow due to pricing as well as the time and resources required for proper implementation. But these factors will not deter the CU’s approach to the digital payment landscape.
“We don’t want to blow the horn as loudly now that everyone has a device that’s wallet enabled, but we’ll continue to add every wallet that we are eligible to participate in and communicate that out to members that are looking for it,” he said.