Mobile Mania

Smartphones have become a driving force for innovation and credit union relevance.




There’s an understandable frenzy to get into the mobile game. Mobility takes convenience to another level and consumers are shifting toward a new type of behavior. Credit union members are asking questions like:

  • Why should I carry a card when I have a phone?
  • Wouldn’t the ultimate convenience be one device with unlimited capabilities?
  • Couldn’t my phone track my financial profile with different retailers and recall my last transactions?
  • If mobile payments providers have my information, are they going to send me targeted messages tailored to my interests?

All of these scenarios are possible and most of them are already in the works. The intersection of technology and escalating consumer expectations is driving a surge of innovation. That innovation is transforming the mobile industry and creating new opportunities. A growing number of credit unions are booking passage on the mobile bandwagon to relevance. And even if some consumers are not quite ready to ride with them, that day is rapidly approaching.

There’s Plenty Of Room On The Bandwagon

A recent Javelin Strategy & Research report analyzed mobile banking offerings, which vary according to the size of the financial institution, as well as consumer adoption rates. While 90% credit unions surveyed offer at least web-based mobile banking, a full 30% of community banks reviewed do not offer mobile banking in any form.

Among the top 10 credit unions, 50% offer the triple play — that is, mobile web, an application, and SMS text banking — and the percentage of members using mobile banking reached 19%.

While these metrics are impressive, there is still room for credit unions to grow, as 80% of the largest regional banks now provide all three services and their consumer adoption has in turn reached 28%. In general, consumer mobile banking growth tends to follow Smartphone adoption, which is currently at 56% in the United States, according to information firm Nielsen.

Javelin also reports that the U.S. mobile banking ranks swelled by 10 million adults this past year, as smartphone usage continues to surpass feature phones and tablet adoption surged upward to 21%.

Mobile banking is looming as the new normal for consumers and this technology will soon follow a path to the mainstream similar to the one forged by online banking bill pay. Consider that by 2015, 53% of retail locations will be equipped to handle mobile transactions, according to Aite Group. And PayPal is expected to handle $10 billion in mobile payment volume in 2013 — 50% more than the year before.

Convergence in mobile will also be critical to the mass market adoption of emerging payments and eCommerce.

Who Are The Leading Emerging Payments Players?

Mobile wallets have sought market share through a variety of options, including NFC tap-to-pay, QR code readers, location-based payments, and merchant loyalty programs. All indicators are that 2013 will be the year that mobile payments technology moves into the consumer mainstream, but the question of who will win the top spot in terms of adoption is still unsettled.

Digital And Mobile Wallets

  • Visa And MasterCard

Visa’s digital wallet,, stores information for each of the major card brands. When shopping online at a participating merchant’s site, the consumer only needs to enter a email and password to make a purchase. Similarly, MasterCard’s new digital wallet service lets consumers register their payment cards to securely store their payment, billing, and shipping information in the card company’s cloud servers. Both Visa and MasterCard have indicated future versions of their wallets will support transactions at the point-of-sale.

  • Google Wallet

This product lets consumers register any major payment card and pay at the point of sale via Near Field Communications (NFC) tap-and-go functionality. Card data is not stored in the device but securely in the cloud and the information is also protected by a user-selected PIN. Numerous analysts believe that after making a stuttering start, NFC technology is finally ready to assume a prime position in mobile payments. As NFC assumes a foothold, participants are realizing they must work together to create a strong U.S. mobile wallet and payments industry.

  • PayPal

PayPal offers a digital wallet, not a mobile wallet. The wallet exists in the cloud and is not specific to any device. A major story in 2012 was PayPal’s announcement that it had joined forces with Home Depot on a new POS payment model. The basic premise is that shoppers can purchase items without cash or a conventional credit card. Shoppers pay via PayPal by typing their phone number, as well as a personal-identification number, into a payment terminal. The phone number is connected to customers’ PayPal accounts.

Other Payment Options

  • Starbucks

The coffee giant rolled out its own mobile payment app in 2011 and encouraged its customers to link their rewards cards to that app. Rather than switch over all its POS terminals or wait for a standardization of mobile payments, the Starbucks app put a barcode on customers’ iPhones. The company could then use its regular barcode readers to read the mobile barcode. The ease of this solution has led to Starbucks customers making $42 million in payments throughout 2011 alone.

  • VenMo

This option brings ease of use and fee-free payments to the Person-to-Person (P2P) payments space, which was previously cluttered with players that were either flawed, too expensive, or too slow. VenMo runs on the ACH rails and has successfully combined SMS speed and free P2P transfers within social networks.

  • The EMV Factor

As acquirers deploy Europay, MasterCard and Visa (EMV)-enabled devices in step with the card associations’ timelines for fraud liability shifts, this technology will be critical to enabling the large volume of transactions required to dramatically stimulate mobile adoption. EMV is the next foundation in payment platforms and technology. It represents a paradigm shift that will be both fundamental and transformative to consumers’ payment experiences.

The Local Credit Union Brand Must Rule

The primary facilitators of emerging payments are not financial institutions, but technology companies, marketers, and payments processors. Many financial institutions seem unconcerned about these challengers, adopting the attitude that as long as the institution holds the deposits, there is no harm in members and customers interacting with other payments enablers new to the competitive terrain.

This is a mistake. There is no way of knowing who will have a depository institution charter in five or ten years. There is also no way of knowing what future partnership deals might disintermediate your depositors. Imagine if one of these emerging payments players aligned itself with a large national bank, essentially becoming their deposit broker. What if Square partnered with a bank so that small businesses accepting credit cards via a Square dongle would have their payments deposited into a Square account?

Credit unions must begin to offer advanced mobile services including emerging payments while still keeping their brand as the principal and organizing icon for these services. A credit union may partner with other payments facilitators, but their names should always be secondary to that of the cooperative.

Make members’ loyalty a central tenet of the business and don’t facilitate a transfer of allegiance from the cooperative institution to another entity. The smart application of member knowledge, based on advanced analytics, needs to be a prominent component of your virtual strategy. Understanding member behaviors across all channels, including mobile, will better enable a credit union to strengthen its relationships via couponing, rewards offers, or other value added services that align with members’ shopping and spending preferences.

Looking Forward To Tomorrow

The uptake rate of mobile technology has established its compelling value proposition. Fortunately, there are still market opportunities for institutions that are developing strategies for their own virtual and traditional delivery channels. The statistical modeling of innovations theory demonstrates that even if a credit union has missed marketing to the early adopters of emerging payments, a full 84% of the market is still available.

Many questions remain as handset and chip manufacturers, telecom companies, card networks, financial institutions, and software providers all try to secure their position in mobile payments. Some are smaller and more manageable, including the question of who consumers will call when they encounter a problem. Others are more complex, such as how these different players will come together to smoothly handle mobile payments as they move through the settlement process.

Mobile is not an “if” imperative for credit unions but a “when.” The consumer will drive this process, as they have done every time a new technology innovation occurs. But with proper preparation, the local brand can be the one to win their allegiance in the long run.

Credit unions’ strong member relationships and local presence will be key differentiators going forward. An effective mobile strategy begins with promoting activation and usage of an existing online banking, bill pay, and mobile banking platform. These products, when properly branded, establish awareness that credit unions are relevant and can deliver the next generation of mobile technologies.

Teri Koenke is vice president of Credit Union Solutions for PSCU. She can be reached at Mobile changes everything. PSCU offers eCommerce and mobile banking solutions, including mobile and digital wallets to help keep credit unions at the forefront of the emerging payments movement. Our EMV solution set includes contact chip credit and prepaid reloadable cards, to give credit union members greater protection against fraud and help them make the transition to a whole new level of transactional experiences. For more information about our game-changing payments solutions and strategies, please contact us at or call 888-918-7351.



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