When checks were first introduced, experts predicted it was the death of cash. Then came along credit cards, and once again, cash was expected to fizzle out. Then came debit cards, and, unsurprisingly, experts unanimously assumed we’d reached the end of both cash and checks.
When Apple Pay initially launched in 2014, it was predicted that mobile pay options, powered by near field communication technology (NFC), would soar and eclipse other types of payments.
Yet, cash and checks are still around. Even with Apple Pay, the preponderance of non-cash transactions continues to be handled using plastic cards.
Now comes the question of contactless cards – are they a defensive or offensive strategy?
Contactless payments pioneered in 2003, but acceptance at the point of sale was not a standard until the mass adoption of EMV cards in 2015. Although most top retailers accept contactless card payments, consumers have yet to fully accept and adopt this new method. Issuers such as Citi, Amex, Chase and Bank of America continue to lead the charge, but we have yet to see the shift in consumer payment methods.
While most financial institutions are focused on finding ways to capitalize on NFC, consumers, on the other hand, are in a frenzy to understand the best method to use for their transactions: Should they insert, swipe, hover, or tap?
Realizing that mobile pay isn’t going away anytime soon, financial institutions are in a rush to promote contactless cards. They hope that by issuing these cards, they’ll be able to avoid giving away 15 basis points of every credit card transaction and a half cent on every debit card transaction to Apple, or any of the other mobile wallet providers.
Credit unions are faced with a tough decision to make – in order to keep their member base active, they have to add NFC. At the same time, however, adding NFC cards will only spread awareness of the ease and speed of contactless payments, ultimately highlighting the attractiveness of the mobile payment experience even more.
Credit unions should consider the following points in order to help make their decisions:
Evaluate your portfolio usage patterns: What percentage of your member base is using Apple Pay or any other form of mobile payment? What percentage of your transactions are being routed through mobile wallets?
Evaluate your portfolio demographics: Not every consumer wants to pay with a mobile device. Apple might consider Apple Pay as the future of transactions, but still didn’t hesitate to release the Apple Card.
Educate your Members: Credit unions need to up their marketing efforts to educate their members on the benefits of contactless vs. EMV chip vs. digital wallet if they don’t want to lose to mobile wallet providers.
Offer additional enhancements: Although contactless cards are secure, they still don’t offer the same level of security as the fingerprint, facial scan, and two-factor authentication features of mobile payments. To really push contactless cards, credit unions need to provide slick financial management tools that can compete with what mobile wallets offer.
Despite the growing popularity of mobile payment options, plastic cards aren’t going away any time soon – as long as they have contactless features, of course. Similar to what we witnessed with the evolution of cash and checks, we’re going to see a shift in the channels or methods Members use to make payments. As with every strategy, Member Experience is essential, and thus payment fragmentation becomes pivotal in educating our members to use the best method of payment.