MADISON, Wis.—The National Credit Union Roundtable Advisory Council, a leadership council appointed by CUNA’s board chair, and the Filene Research Institute have released “Turmoil in Payments: Credit Union Keys to Success.”
“The evolution of payments is perhaps the most dynamic topic in financial services today,” says Nader Moghaddam, CEO of Financial Partners Credit Union and chair of the National Credit Union Roundtable Advisory Council. “The Roundtable wanted an up-to-the-minute look at the changing landscape to best meet the needs of existing members and attract new ones.”
In conducting the analysis, Filene completed more than two-dozen expert interviews, conducted a survey to gauge credit unions’ challenges around payments and what they’re doing about them, and examined existing literature. The report’s five chapters include:
The Payments Landscape: “Traditional economic models are under pressure,” the paper notes. “Globally, payments represent up to a third of banking revenue and are particularly important in a low-rate environment. But payments don’t always have a clear internal champion, and consumers are used to free and even subsidized payment options, meaning that credit unions must be savvy about their next moves.”
Ecosystem Stakeholders: “The payments value chain has a long and growing list of players, and each participant has unique motivations,” the analysis states. “Most of the available revenue in the chain accrues to participants at two divergent poles: those that directly serve payers (individuals or businesses) and payees (usually businesses).”
Consumer Priorities: “Consumers expect their use of credit, debit, and cash to decline between now and 2020, with the gains flowing to services like PayPal and digital currencies,” according to the research. “And consumers, especially younger ones, show willingness to unbundle their banking services, choosing more specific solutions rather than bundled, brand-loyal methods. A successful digital payment or wallet will not only remove payment friction but also offer consumers incentives and information they don’t currently have.”
Apple Pay and Digital Wallets: “Apple Pay has brought the concept of digital wallets into the mainstream, but it’s still too early to gauge its overall impact,” the paper states. “Watch for deep-pocketed hardware and software competitors to emerge. Early returns indicate that mobile payments are primarily displacing credit and debit card swipes rather than migrating (and monetizing) cash and checks. To date, mobile wallets serve more as a form factor than a new core payment method.”
Technology Scan: “Several technologies, while nascent, are likely to play growing roles in payments, including tokenization, EMV, NFC, beacons, and even cryptocurrencies,” the paper projects, before adding, “also watch the progress of in-app purchases, expedited/same-day ACH, and the battle between open and closed systems (e.g. Android vs. iOS).
Download the report here: https://filene.org/research/report-unlocked/turmoil-in-payments