RANCHO CUCAMONGA, Calif. — Momentum is "building" for mobile payments technology Apple Pay from credit unions as well as consumers and merchants.

That is the assessment of Michelle Thornton, manager of core products for CO-OP Financial Services, who told Credit Union Journal Apple Pay is "lifting the mobile payment boat."

"Apple Pay is increasing the visibility and viability of mobile payments for both merchants and consumers," she said. "The merchants need to install terminals that accept Apple Pay, so it will be interesting to see how that works. They have to install EMV-ready terminals anyway, so in many cases the terminals will be made NFC-ready [near field communication] at the same time."

Consumers will drive adoption of Apple Pay in the end, as with all payment vehicles, Thornton continued. She noted public use of debit cards started out slowly, but today they are ubiquitous.

Part of the reason Apple Pay may not take off as fast as some new technologies is it is limited to certain devices: iPhone 6 and iPhone 6 Plus. Within apps, Apple Pay is compatible with iPhone 6 and iPhone 6 Plus, iPad Air 2 and iPad mini 3.

"Only a small percentage of consumers have iPhone 6s right now, but a year from now that number will be quite a bit larger," Thornton predicted.

Catching On With CUs
Earlier this month, several credit unions made Apple Pay available to their members. On Jan. 8 PSCU noted it had completed the implementation process for two of its clients: $2.6 billion Virginia CU, Richmond, Va., and $530 million Consumers CU, Kalamazoo, Mich. In Chubbuck, Idaho, $1.8 billion Idaho Central Credit Union became the first CO-OP client to go live on Dec. 16.

Part of the appeal is security, as the iPhone 6 models use biometrics. According to information from Apple, when consumers add their credit or debit cards to Apple Pay, the actual card numbers are not stored on the device nor on Apple servers. Instead, a unique Device Account Number is assigned, encrypted and securely stored in the Secure Element on your device. Each transaction is authorized with a one-time unique dynamic security code, instead of using the security code from the back of the card.

Thornton said from CO-OP's perspective the move toward Apple Pay is "going well."

"The industry as a whole is doing things very quickly," she said. "As they go through implementation some credit unions are finding things that need to be addressed, but there have been no major hurdles. We had a client go live in December and expect a couple may go live in January, pending all approvals. And there will be considerably more in February."

One critical step Thornton said some CUs may not realize is Apple has a rule that 95% of a financial institution's cards must be ready to use in Apple Pay. For example, if a CU has 10,000 credit and debit cards spread out across four BINs, at least 9,500 of those must be eligible.

"Often times credit unions use different credit and debit processors, so they just need to make sure they hit the 95% rule," she advised. "There needs to be coordination between the debit processor and the credit processor."

'Wild, Wild West'?
One credit union interviewed for this series compared the burgeoning mobile payments space to the "Wild Wild West."

But Thornton said there is little to fear. She said CUs that are interested should call the account manager at their processor, such as CO-OP, and that person will walk them through the steps.

"A lot of the time needed is on the Visa/MasterCard/Apple side," she counseled. "It is the 'Wild Wild West' because so many things need to be worked through, but six months from now it will be easier as processes become automated."

The next step for Apple Pay will be streamlining, Thornton continued. She said "everyone is working very hard," from Visa and MasterCard to regional networks such as Star and Plus, and processors such as CO-OP, but noted, "it will take some time."

"Consumers are adopting Apple Pay, merchants are putting in new terminals to accept NFC and more credit unions will be coming in to the technology. As a percentage of transactions Apple Pay is still very small, but anything new in the payments industry takes a while to get up to critical mass."

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