CHICAGO-Sixty percent of the world today doesn't have a bank account, but within the next 10 years it is projected that the mobile phone will be the dominant payment method, regardless of whether or not consumers have a dedicated financial institution.
That's a reality credit unions will need to adapt to, or else, according to Brett King, author of "Bank 2.0" and founder of Movenbank.
"We think of mobile as new, but it's not new for digital natives," said King, adding that those consumers will constitute 50% of CU member bases by 2020. "Kids coming into the banking market now have never had a life outside of using a mobile device; the idea of coming to a branch is ludicrous."
King shared with a meeting hosted by CU Direct Lending (CUDL) here a statistic from the Wall Street Journal that $202 billion in pre-paid debit cards were issued in the United States during 2011. "If a customer takes out that card at the point of sale, do they think of it as a bank account? Probably-it has a balance on it, they can take money out of an ATM and they can buy things with it."
King added that half of all prepaid debit users are college graduates, which flies in the face of the idea that that product is only used by poor, uneducated consumers.
"Customers want the functionality of debit as a part of banking, but credit unions start by offering checking to a market that will never write checks, even if they have free checking," said King. "The reason this market exists is that we've insisted on selling checks. ... At some point, if people want the luxury of writing a check, they're going to have to pay for it."
'Explode & Fragment'
Mobile is on its way to replacing debit, just as debit largely replaced the ATM, which largely replaced checks, which replaced passbooks. King said it's possible that the next iPhone will include some kind of mobile wallet, and predicted that mobile payments will "explode and fragment" in the next five to 10 years, but with no one dominant mobile wallet provider.
He stressed that it's "not reasonable" to assume that one provider will come out on top-"that's like saying there's just going to be one bank." Rather, he predicted that consumers will have multiple different wallets for different institutions, including the likes of iTunes, Starbucks and the local CU.
Branch closures will also continue to increase, according to King, who offered the Apple Store as an example institutions could look to as they move forward. Apple customers buy their hardware at the store but use the App Store for nearly every other purchase, only returning to the Apple Store for things such as tech support.
"If you had to go to the Apple store every time you wanted to buy an app, do you think Apple would be as successful as it is?" King asked.