Brian Day, TMG
DES MOINES, Iowa—Credit unions can no longer overlook a big question that’s right around the corner with payments—what to do if cards no longer become the preferred payment mechanism within digital wallets?
Brian Day, director of digital strategy at The Members Group, is advising CUs to begin now in formulating strategies to address this potential major payments shift.
“To date, digital wallet strategy has been centered around a couple of big questions. First, which of the many available technologies—NFC, beacon, QR code, for example—will enable the majority of the nation’s mobile payments,” said Day. “Second, which of the many digital wallet solutions will win consumer and merchant favor? In 2016, the conversation is likely to include a third big question: On which payment mechanisms will the leading digital wallets rely?”
Model Should Change
Apple Pay, Android Pay, Samsung Pay and even Walmart Pay are card-focused today. Yet that model is likely to shift in the future, especially as retailers continue to look for ways to avoid interchange and other fees, explained Day.
“Just look at the success of Target’s debit card, the transactions of which ride ACH rails today. It isn’t a stretch to assume the capabilities and processes Target has built from the inception of its Red debit card could be applied to its own ‘Target Pay’ digital wallet solution,” said Day.
Just weeks after the launch of Walmart Pay in early December, Target indicated that is it working on its own digital wallet.
Day said credit unions need to consider how they will position themselves for what could be less reliance on plastic among “digital natives.”
“How will they align themselves with the right partners? How will they educate and incent their members to drive the best transaction models for the health of the cooperative?” he said.
Multiple Tokens
The other component to consider is how credit unions will manage and support multiple token requests from multiple merchants and devices, noted Day.
“Over the past 12 months, tokenized transactions have come almost exclusively through Apple Pay purchases. That’s about to change in a big way, as Android Pay, Samsung Pay, Chase Pay and others begin to request tokens,” said Day. “Very soon, online merchants will join the fray, as well, meaning a single card account could be associated with literally hundreds of tokens, depending on how active he or she is with digital purchases.”
Credit unions need to develop a proactive token management strategy now, advised Day.
“This will not only position them to offer members more digital payment solutions, it will prepare them for what is likely to be a challenging back-end management process,” Day said.