Viewpoint: The Payments Landscape: The Friction is Real
By Cindy McGinness, PSCU
We are in a more complex world where technology is advancing far too quickly for consumers to keep up. And payment methods are plentiful. All this has some consumers yearning for the good ol’ days when the only choice was between cash or check!
First came Apple Pay. Then Android Pay, Samsung Pay and LG Pay. And several others are getting ready to announce new mobile wallets for secure contactless payments. What used to be a smooth, routine process has become more complex as we approach the counter to make a purchase. There is a careful evaluation of whether the terminal will accept your chip card or your mobile wallet transaction. Or should you just go with the swipe card to be on the safe side? What if you swipe, only to receive an error message that your card should be dipped instead?
Bottom line? When it comes to the payments, there are more choices than sweet treats at Dylan’s Candy Bar in NYC (i.e., the world’s largest candy emporium!). The payments landscape is likely to become increasingly confusing and fragmented as retailers ramp up their efforts to influence buying decisions. If we don’t help our members evolve and understand how things are changing, credit unions risk losing the transaction and engagement with that member. Below are several considerations surrounding the importance of mobile wallets, and what credit unions need to know.
All about Security
In 2014, there were 164 retail data breaches, according to Verizon’s 2015 Data Breach Investigations Report. Security is certainly top of mind for consumers in the midst of the holiday shopping season. The risk of consumer information being stolen from merchants is high. New mobile wallets that utilize tokenization are touting security as a key differentiator, as they reduce the risk of personal information being exposed and comprised at the point-of-sale. When members choose secure mobile payment methods, it also protects the credit union from losses and, in turn, helps keep costs down at the credit union, an indirect member benefit.
But there is a lot of heavy lifting to be done to help members understand how new mobile payment technologies are more secure, keeping it as straightforward as possible so mainstream consumers can understand and gain confidence in these tools. Texas-based Research Now found consumers who don’t use their mobile devices to make in-store purchases cited identity theft (70 percent), payment fraud (70 percent) and privacy concerns (71 percent) as their primary reasons. If consumers had a better understanding of what makes new mobile wallet options more secure, there’s a much greater chance they would use them.
As we enter a new era of retail marketing, where the competition is heating up to capture the consumer relationship through the buying experience, consumers have almost unlimited choices. Retailers are reducing friction by bringing payments, loyalty and coupons together in their closed-loop wallets. Dunkin Donuts, Starbucks and Subway are the most well known examples.
As we service the credit union member, it’s critical to highlight the value of payment methods utilized on a regular basis. For cards, it is about great rates and rewards, and making it easy for members to redeem rewards on their mobile devices. For mobile payments, it is about convenience and helping to ensure your card is top of wallet. Larger banks have made significant investments in marketing this year to bring more awareness to the growing mobile payments opportunities. Credit unions should do the same to make sure your members know you’re in lock step with these new solutions.
One Size Doesn’t Fit All
A unique approach is required for different member segments with varying levels of awareness and interest in trying new things. Start by considering what each segment values most. For millennials, for example, it’s time and convenience; whereas for baby boomers, it’s security. While some segments may be a more natural fit for mobile wallet offerings (think: millennials), it does not mean you cannot make headway with other groups with the right positioning and messaging.
Here to Serve
Aside from additional mobile wallets already poised to grab their share of the mobile payments market, credit unions need to ensure their cardholders are educated on all available payment-enabling tools that add value to the member relationship. We want to focus on capturing the transaction and be the card of choice, regardless of whether they swipe, dip or tap.
As one of the largest credit union service organization, PSCU has a history of being fast to market with emerging technologies and is dedicated to evolving its model and making strategic investments in technology and resources to meet the changing needs of credit unions and their members. We recently became one of the first group service providers to enable the Samsung Pay wallet for credit unions and also announced all new Apple Pay enrollments will include the onboarding of all three digital wallets currently supported by PSCU — Android, Apple and Samsung.
The credit union philosophy is, “People Helping People,” and there is no better time for credit unions to step up and help their members. If enough attention and consideration is not given to member education, members may abandon cards and banking relationships where there’s too much friction.
Cindy McGinness manages online and mobile channels, as well as digital payments, for PSCU’s consumer-facing solutions. In this role, she shapes the product vision, directs the product road map, and has responsibility for the performance and expansion of PSCU’s consumer-facing digital solutions in market. Cindy can be reached at CMcGinness@pscu.com.
In Viewpoints, payments professionals share their perspectives on the industry. Paybefore’s goal is to present many points of view to offer readers new insights and information. The opinions expressed in Viewpoints are not necessarily those of Paybefore.