DES MOINES, Iowa-Most credit unions that believe they know what's coming with mobile payments should think again, one analyst is cautioning, as they're going to need to stay knowledgeable and be nimble to react to change in the mobile space and protect card revenue.
Brian Scott, VP of The Members Group, painted a picture of a mobile payments space that is now "messy" and in a state of flux. He stressed that while Visa and MasterCard are pushing for EMV conversion in the U.S., giving merchants and issuers incentives to convert to chip and pin, the payment technology that could win in the not-too-distant future could be one not controlled by the big payments networks, and will likely be mobile-based.
"I am not talking about a solution from Visa and MasterCard," said Scott during a recent TMG webinar on the future of payments. "The winner could well be someone no one has their eyes on now, who will come up with some disruptive technology that everybody will want and say, 'I got to have that.'"
Talking Payments At Meetings
Scott recommended credit unions stay on top of mobile payments at management meetings, with the payments teams at the table for those discussions. "Getting involved in alternative payments networks is also a good place to start. It's amazing what insights a credit union can gain when their staff and even their members start using new payments technologies, learning what works and what doesn't," said Scott. "Credit union staff are in a unique position to provide great feedback and information about their experiences and how they think payments will impact members. Real life experience is the best teacher."
Scott emphasized that one reason mobile's direction is murky is because the way mobile payments are conducted today does not tap the remote service's full capabilities. Saying mobile payments are still not much more convenient than swiping a card, Scott gave the example of a consumer paying for coffee at Starbucks via a smartphone app. "But there is a step when the cashier scans the barcode on the phone's screen. So it's no more convenient than paying with plastic," he observed.
Giving the example of what is a "true" mobile payment, Scott described someone walking near a Starbucks, and getting a vibrating message on the smartphone that lattes are on sale. With a tap of the phone screen the coffee is paid for before walking into the store, where the customer's name is called to pick up the order. "That is where I think mobile is headed."
What The Projections Show
What is clear is the speed of change coming, said Scott, based on the fact projections have mobile users reaching 100 million users in a total of four years. It took mag stripe 28 years to reach that level and debit cards 12, he pointed out. "There just is not the consumer familiarity and willingness with mobile payments yet," observed Scott. "We need to get to a critical mass to make mobile payments more of a way of life."
What's helping drive that mass, according to Scott and a number of previous analyses in Credit Union Journal, is the grab for consumer spending data by non-traditional financial services providers, such as Google. Experts have pointed out that these new players' payment solutions are much more interested in the data, and may forego or significantly reduce the interchange they take, a big threat to financial institutions.
"So if a consumer is using one of these alternative solutions," said Scott, "and is not paying interchange, the merchant is getting a break."
'Simple Things' CUs Can Do
Scott believes it's important for credit unions to start mining the information from their members' current payment tools-credit and debit cards-to find insights.
"Simple things like who are the top 25 merchants where my members are spending their money? Which cards do they prefer to use at which merchants? Then, begin to use this information to grow their programs. For example, if members use their debit cards more often for gas transactions, how could you incent them to use their credit card instead to earn higher interchange?"
There is tremendous marketing power within strong analytics, insisted Scott, who heard a story about how one department store, which was analyzing consumer spending behavior, knew that a young girl was pregnant before her father did. "Seeing an ad the store sent the girl for baby bottles, the dad asked his daughter why she was getting the offers. He found out the reason, after the store already did. They knew she was buying home pregnancy tests."
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