By Ray Birch
SAN CARLOS, Calif.—How important are fintech partnerships, especially in the payments space? One expert says if credit unions do not creatively pursue relationships with both upstart fintechs and huge players such as Google, they run the risk of diminishing their membership “one payment at a time.”
It’s a critical strategic change credit unions are going to need to make as the marketplace enters a new era of payments, according to Richard Crone.
“There are many new payment options emerging, not just buy now pay later and request to pay, but Google’s Plex Account, Facebook Diem, cryptocurrency…and COVID-19 has propelled increases in contactless payments, P2P and mobile wallets,” pointed out Crone, CEO of Crone Consulting. “There's certainly a battle for being the primary payment account.”
Crone stressed credit unions need to pay close attention to Google’s Plex Account, the company’s first foray into offering a consumer checking account. As CUToday.info reported, the account is being piloted by a number of CUs, including $3.6-billion Stanford FCU in Palo Alto, Calif.
Three Glaring Issues
“If you look at the typical credit union, the majority of their new account relationships come from the transaction account,” observed Crone. “The transaction account is a gateway to a lending product and a healthy member relationship. With that said there are three glaring issues that need to be addressed.”
Crone reminded the pandemic has highlighted the need for safe and contactless mobile payments.
“And for good reason. Card readers themselves, even chip and PIN, cannot be sanitized for security reasons. Merchants aren't allowed to sanitize the card reader or the chip reader,” said Crone. “That makes contactless payments very important. On top of that, consumer preference has clearly moved toward safer and contactless payments. In the new era of payments, it's all about safe and contactless, and it's certainly driven by a mobile device.”
The first step credit unions need to take is to reissue their plastic into contactless, if they have not done so already, according to Crone, who said a signficant majority of CUs have yet to make the move to contactless. PSCU, however, has reported that a shift to contactless is taking place among its member CUs.
Not Into the ‘Pays’
“Credit unions, too, are not heavily into the pays—Apple Pay, Google Pay, Samsung Pay…,” said Crone.
Supporting the major digital wallets will lead members to embed their payment credentials into retailer apps or service apps such as GrubHub, Uber Eats, Walmart Pay and more, said Crone.
“So, credit unions really need to be active in the new payments space, first and foremost, to do what they can so they have control over their card base,” Crone explained. “There's still thousands of them that don't support Apple pay and Google Pay and Samsung Pay, and thousands of them don't have the contactless card option.”
Richard Crone
The Next Step
The next capability credit unions need to make sure they have today, asserted Crone, is to offer consumers the ability to open an account and instantly provision a card into the pays.
“And part of that has to be supported certainly with digital account opening,” said Crone. “There are literally thousands, if not most credit unions, that don't really have a true digital account opening capability through their mobile app. That has to be enabled and it also has to be integrated into instant issuance of the payment credentials into the pays, including platforms like Walmart Pay, Starbucks, Instacart or even Amazon.”
Digital account opening, too, has to be fast, at “Apple Card” speed.
“The benchmark is Apple Card–it's really a benchmark for service,” said Crone. “Apple allows a consumer to open a new account and have it instantly provisioned into Apple Pay all in less than three minutes. It has to be that simple.”
Back to Google
And that brings Crone back to his initial point, that to offer all of these services will likely require the credit union to strike partnerships with fintechs and other payments solutions providers. The most important relationship, Crone believes, will be to participate in Google’s Plex Account when it becomes available nationwide.
“The bellwether for change, for the new era of payments, is Google’s Plex Account,” Crone said. “Some credit unions have been blessed to be in the initial launch of the offering. I believe there are nine financial institutions that will be piloting this, and one is Citibank. GooglePlex could be a massive opportunity for the credit union movement—it will offer the ability to instantly open an account in less than three minutes—for a demand deposit account or for checking. It will also provision instant payment credentials into Google Pay.”
Reaching that point, Crone explained, means the credit union will have the capabilities to provision payments credentials into other platforms and instantly give members person to person payments.
“It will give members the ability to pay their bills, give them financial reporting, offer financial literacy… and it's likely to all be provided to the credit union free,” said Crone.
Crone emphasized that by “free,” he means the CU won’t pay in dollars.
“But it will cost them something—their data,” said Crone, “which Google wants.”