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This is bonus coverage from “Payments End Game” in the February 2016 issue of CUES’ Credit Union Management magazine.
Merchants are asserting themselves in the payments arena, which means credit unions face an additional threat in the non-interest income world.
But it’s a threat, not a death sentence, according to Richard Crone, CEO and founder of Crone Consulting LLC, San Carlos, Calif.
What credit unions need to do to have staying power in payments is make sure they align with merchants in the payments systems they give their members to ultimately drive use-related income. To do this effectively, credit unions may need to build direct, payments-related relationships with merchants, including their select employee groups.
To succeed and attract merchant support, credit unions need to do four things, Crone says:
- Embrace the cloud. The cloud can help provide payments content and functionality not resident on mobile devices. Using the cloud supports CU deployment, ideally with a CU-branded wallet, all of its payment options on all mobile devices.
- Find a way for cloud-based mobile payments to qualify for card-present rates. Card-present rates are better than card-not-present rates (given in such situations as e-commerce transactions). Visa and MasterCard dictate the card-not-present interchange. But it is possible, as Apple Pay has shown, to use encryption, multi-factor authentication, biometrics and tokenization to make mobile payments more secure. This could help to qualify cloud-based mobile payments for the better card-present interchange rates.
- Share data and support reciprocity. Retailers covet smart loyalty programs. They will value cardholder data, shared by CUs via the cloud. Let retailers put their loyalty cards inside CU-branded wallets, and get CU-issued debit, credit and prepaid cards pre-populated into retailer wallets, Crone suggests.
- Ride merchant apps’ coattails. Support deep links with retailers’ apps, like those of Starbucks and Subway that are creating customized shopping experiences, by putting those apps in a CU-branded mobile wallet.
Richard H. Gamble is a freelance writer based in Colorado.
