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Hurdle the Hype [Credit Union Management](Credit Union Management Via Acquire Media NewsEdge) As mobile wallet technology continues to mature, CUs can leverage other opportunities to make more mobile payments a reality. Most of the mobile payments buzz has centered on "mobile proximity" transactions, done at or near a retail store's pointof-sale terminal, and the much-hyped mobile wallets that facilitate these types of transactions. With the launch of Apple Pay, which utilizes near field communication, mobile proximity transactions may gain solid traction after several years of anemic adoption. However, while Apple Pay is grabbing big headlines, it's only part of a bigger mobile payments picture. Consumers are increasingly comfortable using mobile devices to make deposits, pay other people and pay their bills. Credit unions that focus on real and immediate opportunities within mobile payments, including mobile transfers, mobile check deposit, person-to-person payments and bill payments, have a significant opportunity to assume a leadership position in the mobile payments space. Four Pillars of Mobile Payments Credit unions defining mobile payments strategies can best start by considering the recipients of the payments. Think of the four building blocks of mobile payments: * paying self-using a mobile device to make transfers and deposit checks into a personal account using electronic funds transfer and remote deposit capture, respectively; * paying other people-using a mobile device to pay individuals or groups, nationally or internationally; * paying billers-using a financial institution mobile app or a biller mobile app to pay a biller; functionality might include e-bill presentment on the mobile device or mobile-specific capabilities, such as using the mobile device camera to capture an image of a bill to automate payee set up; and * paying merchants/retailersusing mobile proximity payments (near field communication, quick response code, or the cloud) to make purchases in a store, or mobile apps and websites to make virtual purchases. Separating Flype From Reality Consumers are making mobile payments when and where paying with a mobile device is more convenient than traditional payment methods. In its announcement of Apple Pay, Apple touted convenience and speed and also addressed security concerns by stating that the service will utilize tokenization, in which a traditional payment card account number is replaced with a unique string of digital numbers, known as a token. Cards have to have tokenization capabilities to be used with Apple Pay, which is an important consideration for all card-issuing credit unions. To enable transactions that require tokenization financial institutions must tokenize their existing bank identification numbers, which can be done by working with either Visa or MasterCard or a provider that has partnered with them. Once a card is in a mobile payment app or service, it tends to stay there, so it's wise to ensure that your cards meet the requirements to be used through these services. That said, it is fantasy to believe that every emerging player with a mobile wallet solution will be broadly adopted by merchants and consumers. The reality is that mobile proximity payments are still in the early stages of development and many emerging players will not survive. What's more, not all consumers are comfortable making mobile payments with nonfinancial institutions, but a growing number are comfortable conducting transactions on their financial institution's mobile channel. Growing Popularity of Mobile Banking Services Instead of focusing solely on developments related to mobile proximity payments, credit unions can also take advantage of the growing popularity of other mobile payment types. The 2013 Fiserv Consumer Trends Survey (http://tinyurl.com/fiservcons trends) indicates that 30 million households now use mobile banking services-an increase of 21 percent from 2012 to 2013. These mobile banking users are transferring money, making deposits and paying bills. Fiserv's Sixth Annual Billing Household Survey (http://tinyurl.com/fiservbillsurvey) showed that the number of U.S. online households that have made a mobile payment in the last month doubled from 2012 to 2013, an increase of 8 million households. Among smartphone owners, the number of those making a mobile bill payment was up 150 percent. As the mobile payments market matures, such non-financial institution competitors as Apple, Google, Square, PayPal and Walmart may leverage mobile technology along with their own existing customer relationships to disintermediate financial institutions from mobile payment sendees. Globally, financial institutions are taking the threat from outside players seriously. For example, The Australia and New Zealand Banking Group and Commonwealth Bank of Australia both have comprehensive mobile offerings across various payment types. It would be wise for U.S. financial institutions to follow suit. CUs and banks have an advantage over non-financial institution competitors as the mobile banking and mobile payments user experiences converge. Consumers are becoming more comfortable making financial transactions through the mobile channel. According to the 2014 Consumer Insights Survey by Ovum (http://tinyurl.com/ ovumsurvey), consumers most often cite their financial institution as the service they most trust for mobile payments, with financial institutions tmsted by 43 percent, compared with 13 percent for credit card issuers, 9 percent for online payment providers and 6 percent for mobile operators. Consequently, credit unions should take action today by pushing forward with their mobile payment strategies to establish themselves as the preferred provider of mobile payments. In doing so, credit unions will be better able to compete with the ever-growing number of non-traditional players-and will better position their organizations to win mobile proximity payments as those services become standardized and more commercially viable. The Path to Payments In addition to focusing on existing mobile banking users, credit unions should think of every consumer with a debit or credit card as a potential candidate for mobile payments. Brand programs should extend to the mobile channel to be sure members and potential members recognize that mobile payments are integral to the brand. And since mobile banking does set a good foundation for mobile payments, campaigns should be implemented to convert members to the mobile channel and encourage channel use. The path to building up mobile payments includes several best practices. To accelerate returns on the mobile payments investment, credit unions should first leverage and optimize offerings for the most prevalent mobile payment types: * paying self: offer members the ability to make mobile deposits and mobile transfers to both internal and externally held accounts; * paying other people: provide the ability to make mobile person-to-person payments; and * paying billers: enable bill-pay via mobile banking and invest in photo billpay and actionable push notifications. CUs should also build out capabilities related to POS payments, including mobile proximity payments. This includes offering such capabilities as tokenization that enable cards to be used via Apple Pay, as well as offering merchant-funded rewards, loyalty program functionality, paymentrelated alerts and the ability to activate card accounts during international travel. By doing so, credit unions will be positioned to encourage mobile payments at the POS. Finally, it is important for CUs to consider and leverage the POS payments user experience in designing the mobile banking experience and other transaction types. This will increase the likelihood of members seamlessly transitioning from mobile banking to mobile proximity payments. Design elements may include adding card and payment information in mobile banking's contact us and help sections, and using card-aligned PINs for authentication. Start Now Successful implementation of a full complement of mobile payment capabilities requires focus and commitment. A good strategy should be flexible enough to adapt when new services such as Apple Pay come along, with a focus on how new developments fit into your existing plans. We suggest establishing an institution-wide mobile channel management discipline assigned to an owner from the executive management team and including stakeholders who will help formulate strategy and implement tactics; engage in industry forums to keep pace with the development of mobile payments; train and develop staff; and put monitoring and management tools in place, inclusive of reporting dashboards. While mobile proximity payments are still highly fragmented in terms of providers and technologies, activity is increasing in such areas as mobile P2P transactions, mobile bill payments and mobile payments made through a browser or an app when the purchaser is not at a physical point of sale. Consumers, financial providers and retailers clearly see the value and the opportunity in mobile payments, with consumers increasingly using their mobile device as the primary point of interaction with many aspects of their financial lives, from banking to bill payments to retail purchases. Although the growth of mobile proximity payments has been slower than expected, many industry experts are forecasting exponential growth in the number of consumers who use their smartphone to make POS payments. Forrester Research Inc. (www. forrester.com) expects proximity payments to grow to nearly half of all mobile payments by 2017, reaching $41 billion in total transaction value, according to its report, "U.S. Mobile Payments Forecast, 2013 to 2017" [h t tp://ti nyurl. co m/fo rres ter for ecus t). Such forecasts should only accelerate with the launch of Apple Pay. Expect consumers to continue to increase and customize their usage of mobile payments of all types, choosing the apps and payment methods that fit their day-to-day buying habits and giving preference to the options that deliver an exceptional experience. CUs are well-positioned to benefit from mobile payments by encouraging members to conduct many types of mobile payments today and retain their business for a lifetime. By focusing now on delivering solutions for the way members are already using mobile payments, CUs can benefit from increased transactions and greater member loyalty while creating the potential to attract new members as mobile payments become more widespread. Once CUs establish a mobile payments foundation for paying self, others and billers, they can go on to develop additional services focused on mobile payments to merchants, as the market demands. Resources Read bonus coverage, "Thoughts on Apple Pay, EMV" at cues.org/W20 Mapplepay. Sign up for CUES School of Product and Channel Management (cues.org/spcm) in April in Chicago. Shirra Frost is director/mobile marketing for CUES Supplier member Fiserv ('www.fiserv. com), Brookfield, Wis. (c) 2014 Credit Union Executives Society |