ST. PETERSBURG, Fla.—“Emerging payments can be fun. It doesn’t have to be scary.”
That’s the word from Tom Davis, chief technology officer with CSCU, who said not only should credit unions not fear all the changes occurring in payments, once they understand where they are well-positioned, where they need to make changes, and where lies the growing value of what they hold or could potentially hold, they will see opportunities to pursue.
Tom Davis, chief technology officer with CSCU, speaking to the company's Solutions Conference in St. Petersburg, Fla.
In a far-ranging discussion of payments and payments channels here at CSCU’s Solutions Conference, Davis told an audience of card executives and portfolio managers credit unions have significant opportunities in the payments channel.
Davis, like CSCU CEO Bob Hackney, believes it’s unfortunate that so many credit unions sold their card portfolios—especially to banks—during the recession. “But credit unions have said, ‘We realize it’s scary to be in payments, but we also realize we can make this work,’ and many credit unions came back.”
The reason to make a credit card portfolio a cornerstone product offering is obvious, as its often the highest performing asset—and that’s critical to any credit union with plans to survive.
“You either work at a credit union that has merged, or will merge,” said Davis, pointing to the average 299 mergers that have taken place among CUs over the past few years. With NCUA projecting the number of credit unions will decline to 5,400 by 2018, it’s imperative to recognize the ROA that comes from a card portfolio, Davis stressed. “You have to realize the value of your payments products. You want to be here for the 30th anniversary of CSCU (in five years),” he said.
'Going to Be Just Fine'
The “disruptions” in the card market only seem to increase each day, acknowledged Davis, pointing to not just the traditional players but providers such as the Merchant Customer Exchange with CurrentC, Facebook, Amazon, Apple Pay and others.
“We’re adopting EMV, learning about tokenization, trying to figure out Apple Pay, dealing with post-Durbin interchange issues,” said Davis of all the challenges. “But we’re going to be just fine.”
With credit unions up against an October EMV liability shift deadline from Visa and MasterCard, Davis said most CUs are now in the operational phase and he believes they will “make this happen.”
With EMV underway, credit unions and their card portfolio managers now must also try to get their arms around a host of other developing technologies, such as tokenization, Davis said.
“Tokenization isn’t new,” he said. “It’s been around for a long time. It feels complicated, but we’re just replacing the PAN with a token. This is driven by mobile. It includes a domain ID, which is what many don’t understand.”
To help make tokenization more understandable, Davis explained it this way: “It’s as if you have a plastic card for every single place you were going to shop. A Target version. A Walmart version, etc. If the Target version gets exposed, it doesn’t affect my Walmart card. There is a separate domain for your mobile device. It’s just a little different than the way we do it. If I lose my mobile device, it’s OK, I can still use the same card. If a token gets exposed, no problem, I can push out a new one in a few minutes. Think about the re-issue there: it’s awesome! This combined with EMV is going to allow us to battle these fraudsters.”