By Ray Birch
BOSTON—It's time credit unions focus on business payments to not only streamline operations but also retain business accounts that one analyst says are already leaving many credit unions because their business payments processes lag those of banks.
Erika Baumann, director of commercial banking and payments at Aite-Novarica Group, told CUToday.info the payments landscape in the commercial space has also become more complex, with the demands on business payments are evolving.
“Are you offering the right experience and level of automation to meet new market expectations, or are you at risk of disintermediation?” Baumann asked of credit unions.
Not surprisingly, said Bauman, as consumers have become very aware and adept at making easy payments in their lives, those experiences are setting a standard.
“Whether it’s Venmo, Cash App or Zelle, everyone is very aware of making easy payments,” said Baumann. “There's all of these different ways we can interact with the worlds of payment that bring very little friction to us in the business world. We have historically had a little more friction with business transactions, but expectations are spilling over from our personal lives into the corporate world.”
Numerous Options
Baumann noted there are many different options for business transactions, such as ACH, checks, the RTP Network, push to card and more.
“It can be very hard to incorporate new processes, but you need to do so because being able to select the payment device and method by use case has become really important for businesses that are paying consumers, and vice versa,” she advised. “We expect those interactions to be seamless. We expect an Amazon-like experience. We want quick, instant gratification in all aspects of businesses. And if we don't have a quick, seamless interaction, we find somewhere else where we will.”
Just like consumers, Baumann explained businesses choose the payment type based on need. For some groups of payments speed is the primary concern, for others the payments decision is driven by transaction price.
“More businesses have international capabilities today…they want a system that has the intelligence built into it so they can send you all their payments and based on who you're paying and the criteria, ultimately your system's going to intelligently make the right decision,” Baumann said. “This frees the businesses up to focus on there on their core business activities.”
How Credit Unions are Affected
How does this affect credit unions?
Several ways, said Baumann.
Erika Baumann
“In order to attract new businesses and maintain their portfolio of business members, credit unions have to be able to offer these capabilities, because the largest banks are already doing it,” she said. “My research shows that in the last 12 months we've seen this shift away from the regional banks and community banks to the largest banks (for business accounts). The big banks are gaining market share because they are providing access to more robust payment capabilities. Not only do they allow access to the various payment types to be able to differentiate by use-case, but also the technology to enable and automate that payment process.”
Not only are credit unions lagging behind the major banks with their business payments capabilities, but their reputations are not helping, as well, Baumann suggested.
“I've done research on credit unions, and it really depends on the institution, but I think a lot of people view credit unions as having fewer resources, being less forward-looking, sort of in that group of mass adopters,” she explained. “You’ve got the early adopters and the innovators, then you have fast followers and then the mass adopters. This is the group that does everything once it's already been done.”
No Feet-Dragging
With all the developments in payment types and speed, abilities in the cloud, the RTP Network and more, Baumann contended CUs should not be falling behind in business payments.
“There is no reason for credit unions to be mass adopters here. They can absolutely be on top of these trends,” she said, cautioning the credit union community cannot be dragging its feet.
“I wouldn't speak in absolutes, and every circumstance is going to be a little bit different. But payments accessibility is better than it's ever been as well as the availability of partners to be able to provide technology solutions to integrate with back-end systems and deploy solutions in the cloud,” explained Baumann. “But don’t wait for your business members to ask you about this. If you do that, then that is too late. What businesses need is a way to solve their business problems, and if you're not presenting your solution in this way you are falling behind.”