Mobile Payments

The single greatest opportunity—and threat—CUs will face in the foreseeable future.

June 01, 2013
/ PRINT / ShareShare / Text Size +

Banks enter the fray

Even though retailers are leading the charge into mobile payments, some financial institutions aren’t far behind.

Bank of America, for example, is enrolling 10,000 customers a day on its mobile banking app, and has 12 million users. U.S. Bank launched its own mobile payments wallet in December 2012, allowing mobile device owners to apply for the U.S. Bank Go Mobile payment service.

Customers are provided an iPhone case containing an NFC chip with their U.S. Bank Visa card credentials, allowing mobile payment at any Visa Pay- Wave terminal.

Some financial institutions are piloting a whitelabel solution (one that’s produced by one company and marketed by another) developed by Paydiant that enables mobile payment from any smartphone and requires no new hardware at the POS. Payment credentials are securely stored in the cloud and linked to the mobile banking app for a financial institutionbranded, seamless, and secure customer experience.

Rather than presenting the payment credential as a code, the phone reads the transaction code at the POS and executes the transaction in the cloud, eliminating any Payment Card Industry Data Security Standard concerns.

Mobile payments can allow financial institutions to collaborate with merchants for additional benefits. Cross-pollination enables financial institutions and merchants to share consumer information that provides a more complete picture of customer preferences, financial sophistication, or demographic background. That way, both parties can make more targeted offers.

Remember the key strategic point from earlier: The one who enrolls is the one who controls.

If the merchant enrolls the customer in the merchant’s mobile payment app, the merchant controls the customer experience, including which financial institutions it will work with. But if the credit union enrolls the member, the credit union controls the relationship.

Credit unions also can tie in mobile payments with mobile banking, cardless access to ATMs, and other technologies for additional member convenience. Each channel can reinforce the others because mobile is the cross-channel enabler—it’s present in every other channel.

By aggregating inside its own mobile app, credit unions can benefit from increased spending and the opportunity to advertise and bring in new members. Credit unions can also better understand members’ wants and needs, offer incentives, provide direct and complementary advertising from mobile app partners, and broker connections back to partners from a position of strength.

The mobile advertising and gross revenue opportunity is two to three times greater than the gross revenue available from card-based accounts, and at least five times greater than the revenues available from a simple demand deposit account—a critical factor to consider as credit unions look for additional sources of revenue.

Mobile payments can work for a credit union or against it, depending on who controls the user interface and data. By enrolling members in mobile payments, credit unions have the contact information and data on the member’s spending habits, which helps them offer more targeted messages.

If the merchant or another third party enrolls the member, however, those targeted advertising dollars become potential costs to the credit union, not benefits. The result is incremental revenue if the credit union enrolls the consumer, or incremental cost if the credit union wants to advertise to the consumer who’s enrolled by another party.

And mobile payments can provide an additional layer of security that other forms of electronic payments don’t: identification of the device using one or more unique data elements and the location of the device, as well as multifactor authorization.

Google Wallet mitigated some of the risks and costs of NFC payments when it moved its mobile wallet to the cloud in 2012, storing credit card credentials there. This keeps sensitive credentials behind the firewall of the cloud, rather than on the mobile device itself.

NEXT: Strategy integration

Post a comment to this story


What's Popular

Popular Stories

Recent Discussion

Great article! Unfortunately, most employees don’t feel valued or appreciated by their supervisors or employers. In fact, research has shown that the predominant reason team members quit their jobs is because they don’t feel valued. This is in spite of the fact that employee recognition programs have proliferated in the workplace – over 90% of all organizations in the U.S. has some form of employee recognition activities in place. But most employee recognition programs are viewed with skepticism and cynicism – because they aren’t viewed as being genuine in their communication of appreciation. Getting the “employee of the month” award, receiving a certificate of recognition, or a “Way to go, team!” email just don’t get the job done. How do you communicate authentic appreciation? We have found people have different ways that they want to be shown appreciation, and if you don’t communicate in the language of appreciation important to them, you essentially “miss the mark”. Additionally, employees need to receive recognition more than once a year at their performance review. Otherwise, they view the praise as “going through the motions”. A third component of authentic appreciation is that the communication has to be about them personally – not the department, not their group, but something they did. Finally, they have to believe that you mean what you say. How you treat them has to match the words you use. If you are not sure how your team members want to be shown appreciation, the Motivating By Appreciation Inventory ( will identify the language of appreciation and specific actions preferred by each employee. You then can create a group profile for your team, so everyone knows how to encourage one another. Remember, employees want to know that they are valued for what they contribute to the success of the organization. And communicating authentic appreciation in the ways they desire it can make the difference between keeping your quality team members or having a negative work environment that everyone wants to leave. Paul White, Ph.D., is the co-author of The 5 Languages of Appreciation in the Workplace with Dr. Gary Chapman.

Your Say: Who should be Credit Union Magazine's 2014 CU Hero of the Year?

View Results Poll Archive