By Robert McGarvey
Buckle up and enjoy the ride. That’s the central advice from mobile payments gurus, who foresee substantial upheavals in that world.
That also means there will be opportunities for alert credit unions.
A reality: we are not quite three years into the mobile payments revolutions, meaning this is early days, Apple Pay currently has a substantial lead over second-place Android Pay, which has a lead over Samsung Pay—but in the mix are many more payments technologies such as PayPal. While some consider Apple the clear leader, others are more circumspect. “No real leader has emerged,” said Paul Fiore, CEO of CUSO CU Wallet, a digital wallet.
Mobile payments remains an area of active combat.
Another reality: consumer adoption of mobile payments has disappointed many (“anemic” is the most most commonly used descriptor), but huge growth lies ahead. Researchers at Forrester say mobile payments will hit $282 billion by 2021.
Globally, Allied Market Research has predicted that mobile payments will reach $3.4 trillion by 2022.
Meanwhile retailers have been rushing to accept mobile payments. Boston Retail Partners reported that 36% of US merchants now accept Apple Pay, up from 16% in 2016. Another 22% of retailers said they plan to accept it within the next year. Furthermore, most retailers who accept Apple Pay may also accept Android Pay, which runs over the same NFC pipe.
These numbers mean we are rapidly reaching a point where the majority of retailers accept mobile payments and that is a kind of tipping point.
So, yes, so far consumer usage of mobile payments has lagged expectations, but most experts believe that their usage will steadily grow, if only because—for many of us—phones are increasingly integral to our lives. We are using smartphones to do almost everything, so why not use them to pay, too?
The holdup so far in consumer usage, said James Wester, research director, global payments, IDC Financial Insights, is that consumers still don’t quite see what the advantage for them is in using mobile payments.
But, little by little, consumer usage is growing and the trend is clear.
Which raises a crucial question: what does a credit union need to do to keep pace with the shifting sands of mobile payments?
A big prediction from Wester is that probably many more entrants will launch mobile payments apps, and these will include both retailers and financial institutions.
Read that again. He is saying that financial institutions may well directly enter mobile payments, which might mean both revenue and enhanced member loyalties to the credit unions that take the plunge.
Wester’s point: most retailers are enviously eyeing Starbucks’ success in mobile payments (by most yardsticks it is the most successful app), and they are beginning to deploy their own tools. He pointed to Target (Target Pay) and Walmart (Walmart Pay) as cases in point. The latter is already rolled out; the former is said to likely go live in mid 2017.
Many more retailers will likely follow as they seek to own more of the consumer’s shopping experience and to reduce fees paid to third parties such as Apple.
But, for credit union executives, the more exciting development, per Wester, may be the emergence of mobile payments as a tool inside mobile banking apps.
A for instance already on the market—although it now is a standalone app—is Chase Pay, which, according to Fiore, is “an app you want to pay attention to. They have a winning approach.”
Other institutions will follow.
Wester argues that consumers already have close relationships with their financial institution’s mobile app—many use it daily; some use it multiple times a day. Notably, many already consult a mobile banking app from retail locations in deciding what tools to use for making a payment.
From there, it would be an easy step for the consumer to pay with a tap on the mobile banking app itself.
Here’s your to-do, according to multiple experts: start discussions with mobile app experts and payments processors about the how-to of integrating mobile payments directly into the app.
By all means, continue offering Apple Pay, Android Pay, and Samsung Pay, but be prepared to go direct, too.
The biggest institutions will be doing exactly this, but this is a space where fleet-footed credit unions may be able to get a jump.