Digital Payments ‘Happening Now’
New payment methods threaten to disintermediate traditional financial services providers.
Digital payments aren’t some futuristic concept: Credit union members are embracing them now at rates unforeseeable just a couple of years ago.
“It’s happening now,” Jeff Krogman, vice president of U.S. client sales for MasterCard, said Wednesday during the National Association of Credit Union Service Organization’s annual conference in Lake Buena Vista, Fla.
With options such as PayPal, Square, and Starbucks’ app payments method threatening to disintermediate traditional financial service providers, it’s incumbent on credit unions to find ways to offer members legitimate alternatives.
Also at stake: Control of members’ data and the ability to develop a digital pathway toward other revenue sources.
“The key is to understand what your members’ needs are,” Krogman said. “We need to come up with a strategy that meets their needs, and more importantly their wants.”
Such a strategy must transcend individual product developments such as digital wallets, focusing instead on integrating forms of payment into their daily existence, Krogman said.
He aired a video in which a college student searched for a new chair for her dorm on her tablet, summoned her mother via a video “surface” to lend advice—and eventually cajoled her to lend money for a purchase that originally was out of her daughter’s appointed budget, all within the digital realm.
“We have to make it part of their everyday experience,” Krogman said.
Consumers might not care which payment method prevails, but they have three demands: that it be safe, simple, and smart.
“That’s on us as an industry, to make sure the technology captures those three things,” Krogman said.
He touched on several other topics related to the future of payments, including:
- A crowded digital wallet field: “I’m not sure you’ll ever have a single wallet that’s ubiquitous, but I know you’ll have a lot of merchants accepting wallets in coming years.”
- The dubious nature of near-field communication security, although he believes this concern has been overblown: “We know things can get hacked. Anything digital can get hacked.”
- Cooperation around developing a fraud-mitigation standard: “MasterCard will take a leadership role around tokens,” Krogman said. “You can’t have everyone doing their own thing everywhere.
“We’re working with a lot of people—including our competitors in some cases—on standardization.”