The Mighty Mobile Opportunity

How credit unions are using payments, loan applications, and location-based offers to build a big user experience in a small delivery channel.

In its March 2014 Consumers and Mobile Financial Services report, the Federal Reserve makes the case that mobile phones are playing an increasingly important role in personal financial services.

Highlights from the report include:

  • 61% of mobile phones are now Internet-enabled smartphones.
  • 51% of smartphone owners have used mobile banking in the past 12 month, up from 48% a year earlier.
  • 12% of those mobile phone users who are not currently using mobile banking say they will probably use it within the next 12 months.
  • 17% of all smartphone users have made a point-of-sale (POS) payment using their mobile phone in the past 12 months, up from 6% in 2012.

Together, this data supports the fact that it has never been more important for financial institutions to have a mobile presence.

These devices have changed the way the public banks and have introduced a wider set of uses that are growing by the day. Here are three evolving capabilities that credit unions should consider right now mobile payments, mobile loan applications,and location-based offers as well as an exploration of their benefits for members and the cooperative.


Kinecta Federal Credit Union

  • HQ: Manhattan Beach, CA
  • ASSETS: $3.4B
  • MEMBERS: 265,096
  • 12-MO SHARE GROWTH: 4.62%
  • 12-MO LOAN GROWTH: 15.71%
  • ROA: 0.65%

Mobile Payments

Several credit unions have already taken initial steps into the mobile payments space by partnering with a third-party vendor, collaborating with other cooperatives, or striking out alone.

None of these approaches are a one-size-fits-all solution. However, if consumer demand grows as expected, then cooperatives of almost any size will want to offer some type of mobile payment solution.

Kinecta Federal Credit Union ($3.4B, Manhattan Beach, CA) and Workers’ Credit Union ($1.1B, Fitchburg, MA) are partnering with the CUSO CU Wallet to offer members a mobile payment solution via a QR code-based system.


Workers’ Credit Union

  • HQ: Fitchburg, MA
  • ASSETS: $1.1B
  • MEMBERS: 76,438
  • 12-MO SHARE GROWTH: 8.50%
  • 12-MO LOAN GROWTH: 8.77%
  • ROA: 1.45%

We believe that mobile banking and everything surrounding it is where the growth is going to be looking forward, says Tim Smith, the senior vice president and chief financial officer at Workers’.

Even now, in the early days of this technology, evidence of the need to make payments a primary component of the credit union’s mobile strategy is plentiful.

For one, mobile point-of-sale (POS) transactions promise to be more secure than current magnetic stripe payment cards, whose inherent vulnerability prompted a shift in fraud liability starting in late 2015. Fewer physical cards in members’ hands equalsfewer cards for a credit union to convert to chip and pin before that deadline.

Additionally, members get the convenience of consolidating all of their physical cards into a single device while credit unions gain the ability to directly collect and process member data on things such as spending habits and preferences invaluableinformation from both an operational and marketing standpoint.

Don’t Reinvent The Wheel, reuse it

Do credit unions need to rethink technology to increase member convenience? If the new iPhone app from Mission Federal Credit Union ($2.6B, San Diego, CA) is anyindication, not always.

The app incorporates multiple pieces of current technology and is a great example of how to use what’s available to create something new. Users can search transaction history, see available credit amounts for credit cards and lines of credit,find the closest Mission branch or ATM, and even use Apple’s AirPrint to wirelessly print documents right from the app.

Lastly, a mobile payment option can help credit unions gain better control and accountability in regard to their POS payments activity.

One of the things that we think is going to be table stakes is the idea of channel congruence, which is providing this consistent and integrated experience across all of our touch points, says Keith Sultemeier, CEO of Kinecta. We wantto control that digital environment to ensure we have the consistency and quality that our members are getting now [through other channels].

The ability to have access to these financial tools anywhere, anytime? You can’t un-fire that gun.

In many cases, getting to the forefront of a new technology like this requires looking not only at other credit unions and banks but also outside the financial services industry or even outside the United States.

Providing the latest technology for members that they can use to make their lives easier is one of the things that sets some institutions apart, Smith says.

Although Workers’ won’t introduce its mobile wallet solution until fall 2014, it expects mobile members to adopt this technology at about the same rate as they did remote deposit capture, which saw about a 25% adoption rate within the first sixmonths.

For its part, Kinecta is less certain on how quickly members will adopt its mobile payments system.

At some level, it’ll be up to credit unions to get members to accept and integrate, Sultemeier says.

Mobile wallets might be the next big thing, but they’re not the only thing happening in the payments space, and it’s important to understand what members might expect in the years ahead.

The ability to have access to these financial tools anywhere, anytime? You can’t un-fire that gun, Sultemeier says. That’s why you have to stay on the leading edge and hopefully you build some loyalty by being progressive.

Loyalty will indeed be a key part of success in this space, especially considering that popular non-financial institutions such as Apple have already launched their own mobile payment technologies.

Credit unions already have valuable membership pools and financial data, but the longer they are absent from the mobile payments space, the more they become the interlopers instead of the other way around.

I’m not afraid of competing for the business because I think we are going to win that battle, Sultemeier says. My worry is if we don’t have this offering, then the competition wins automatically.


America First Credit Union

  • HQ: Ogden, UT
  • ASSETS: $6.3B
  • MEMBERS: 659,395
  • 12-MO SHARE GROWTH: 6.38%
  • 12-MO LOAN GROWTH: 10.29%
  • ROA: 1.67%

Mobile Loan Applications

Members that prefer conducting business through the mobile channel now have a streamlined way to request a loan at America First Credit Union($6.3B, Ogden,UT). But this achievement wasn’t easily won.

For years, members that wanted to electronically apply for a loan were limited to doing so only through the credit union’s website.

However, that didn’t stop the cooperative from receiving approximately 200 to 250 auto loan applications a month via smartphones, a much smaller environment than the loan application interface was truly suited for.

Mobile members were shrinking the screen to apply for a loan, says Brice Mindrum, the credit union’s mobile services manager. It’s a clumsy process to do that on an application designed for a desktop.

That activity hinted at untapped potential in mobile, so the credit union approached Fiserv who powers the institution’s mobile app to see if it could add a mobile auto loan application process to that offering.

As the credit union investigated the idea, it saw a similarity between auto loan application forms and those for other types of loans, including Visa cards, lines of credit, personal loans, and RV loans.

Ultimately, America First revamped its mobile app to give users the ability to apply for all of these products from the palm of their hand using a streamlined format suited to a smaller screen.

The member interest in having a tailored mobile loan application has been so strong that the credit union has had to move processing these loans out of a 50-person call center and into branches.

We realized this call center was not going to be able to handle that demand, Mindrum says. So we expanded it out to about 50 branches so we could accommodate the volume of traffic that was coming in.

Location-Based Offers

When America First rolled out its mobile loan application, it also introduced a capability it already offered on its website location-based offers.

The credit union partnered with Cardlytics a vendor that specializes in card-linked marketing and various merchants to serve up both location-based offers as well as blanket promotions that aren’t dependent on region.

When a member opens the credit union’s mobile app they see a series of tabs including the ABC Deals tab, where offers are stored. From this tab, users can see the offers they have not activated and the amount of time left before each offer expires,which encourages users to check back often.

The credit union’s location-based deals even work outside of its Utah footprint. For example, on a trip to Chicago, Mindrum says he had deals everywhere on the map.

But merchant discounts are only half the benefit of this program. When members shop and pay using their America First card, the credit union automatically transfers 10% of the transaction amount into an account designated by the member. For example, ifthe member activated a Lowe’s Home Improvement deal and subsequently spent $100 there, America First would transfer $10 to the specified share draft account.

The credit union is not yet able to separate location-based offers from regular offers, but it does track the statistical differences between its mobile and online deals.

On a monthly basis, the credit union sees approximately twice as many deal activations on mobile as it does online. This is important considering Mindrum’s belief that competition in this space is not limited to other banks and credit unions but includesnontraditional competitors as well especially technology firms.

Our members want to compare us with Google and others in terms of how the application functions, Mindrum says. Our application has to hold up to those huge companies, and that is a daunting task. So we’re focusing on giving membersthe best experience we can.

February 19, 2015

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