The New Way To Pay: Mobile Wallets And The Path To Credit Union Adoption

Processors do the back-end lift while credit unions focus on meeting a growing demand.

Top-Level Takeaways

  • A small but active base of consumers use mobile wallets.
  • Education, marketing, and accessibility are keys to member usage.


Consumers Credit Union
Data as of 12.31.18

HQ: Kalamazoo, MI
MEMBERS: 92,707
12-MO LOAN GROWTH: 15.9%
ROA: 1.22%

Consumers Credit Union ($1.1B, Kalamazoo, MI) was the first financial cooperative in Michigan to offer Apple Pay and has continued to blaze that trail, adding Samsung and Google wallets, too, as they became available.

That’s because the west Michigan institution intends to be there for members as they reach for their digital wallets to pay online and in store as more point-of-sale merchants make contactless payments available.

We don’t want to restrict our members, says electronic payments manager Katie Warren.

Katie Warren, Electronic Payments Manager, Consumers Credit Union

Where checking accounts and mortgages have long been a sure sign of stickiness, the future standard for creating loyalty might well be digital payment options, something Consumers is already seeing.

Whereas approximately 1% to 3% of Consumers’ debit and credit transactions go through mobile wallets, the people who do use them use them religiously, Warren says.

Warren also expects member wallet use to grow as merchant adoption escalates and consumers get used to using their smartphones as pay anytime, anywhere devices.

It takes a while to warm up to something when it’s new, says Warren, who led her credit union’s adoption of interactive teller machines before taking on her current position in late 2016. She also saw the same hesitance and uncertainty when EMV cards came along.

Education, marketing, and availability are ingredients of the secret sauce for wallet adoption and use. Consumers educates and empowers its retail team to be digital experts, Warren says, an effort that includes mobile app days in the branches.

No one wants to feel silly, the Consumers electronic payments manager says. Help your members to understand how the wallets work and how to look for the signs that show where they can be used.

Amy MacMullen, Senior Product Manager, CO-OP Financial Services

The 92,707-member credit union also has learned that its cards processing partners do most of the back-end work when it comes delivering a mobile wallet.

Enrollment is easy for credit unions, says Amy MacMullen, senior product manager for CO-OP Financial Services, the California-based processing and payments CUSO. We do the heavy lifting with the associations and the wallet brands, and we provide comprehensive marketing support.

At Florida-based PSCU, the CUSO completes the enrollment processes and implementations on behalf of credit unions.

We also help them through enabling the tokenization, says Jeremiah Lotz, vice president of product management. Essentially, PSCU enables the cards to work but the wallet provider does the remaining work in terms of functionality.

4 Tips For Mobile Wallet Adoption

Offer an app but have low adoption? Have decent adoption but low usage? Try these four tips.

  • Give members choices. Offer all or most wallets, not just one or two. Once tokenization is implemented, supporting multiple wallets is not complicated.
  • Top The Wallet. Make sure card programs, rewards, and interest rates are competitive to ensure members reach first for the credit union.
  • Make It Known. Educate members about the convenience and security of using digital wallets.
  • Onboard. Make digital wallets, including PayPal, a part of new member account opening.

Digital tokens are at the heart of contactless payments made with digital wallets. For each transaction, they replace a card’s primary account number with an alternate number for that transaction. The alternate number is the token and the reason vendors can tout high levels of security against hackers and breaches.

Security is a huge advantage of the Pays, because the card credentials are not stored at the merchant, says MacMullen at CO-OP. She adds, Enrolling is easy but educating users on how to use the wallets can be challenging. Emphasizing the security and getting users comfortable is important. Promoting usage and consumer adoption is key.

CO-OP is covering its bases by offering support for Apple Pay, Samsung Pay, Google Pay, Fitbit Pay, and Garmin Pay.

PSCU offers each of those, plus Microsoft Pay, and is always open to testing new mobile wallet options as they come along, Lotz says. According to the VP, more than 260 credit unions use PSCU for Apple Pay and approximately 240 offer Samsung Pay and Google Pay.

Jeremiah Lotz, Vice President of Product Management, PSCU

Each of those wallets offer different flavors of the same recipe for convenience and engagement that credit unions need to compete as digital natives come of age.

With a digital wallet in hand, members are more likely to take part in other credit union services and products, Lotz says. Credit unions can capture the buying power of their members and meet the expectations of younger generations.

According to Tony DeSanctis, a senior director at Cornerstone Advisors, Apple Pay has the highest adoption level among digital wallets, at about 3% usage and 6% ever tried.

Tony DeSanctis, Senior Director, Cornerstone Advisors

Apple made headlines last week with the long-anticipated news of its own feature-laden credit card, but DeSanctis notes that usage of PayPal although technically not a wallet dwarfs Apple Pay usage. And, there are other merchant-specific wallets, including from Starbucks and Walmart, that are very niche, heavily used in some cases but specifically at those merchants.

That notion of niche combined with low POS merchant adoption means credit unions might not have the member demand to adopt mobile wallets right away, says Lotz at PSCU. However, it might not stay that way for long. The rise of physical contactless cards will prompt more merchants to turn on the Near Field Communication capabilities of their terminals, which will support mobile wallets.

Consumers with contactless cards will see how easy it is to use those and realize using a mobile wallet is the same, Lotz says. Tap-and-go will be the new way to pay.


September 3, 2019

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