Three Strategies for Prosperity in the Expanding Payments Universe

Credit unions welcomed 2 million new members in 2012, originated $330 billion+ in loans and opened 3 million checking accounts. Opportunities for auto loans, credit cards and mortgages are also growing as the economy improves. CUNA projects 2013 capital ratios will approach 11.5%, a level that hasn’t been reached since 2006. And credit union loan balances are expected to grow by an attractive 5%.

The future looks bright, but credit unions still need to work hard to reserve their seat at the payments table. That means actively participating in the mobile payments revolution and focusing on products that are meaningful to your membership to build a strong foundation for ongoing relevance and growth.

Card-based payments still play a dominant role in the payments ecosystem with Visa and MasterCard credit, debit and prepaid cards generating $2.9 trillion in purchase volume.  But the landscape is changing because of the new domination of mobile for personal communication — and it is impacting financial interactions, as well. Consider this: 56% of Americans have a smart phone, 30% use mobile commerce and 24% say they use their phone for making payments. Consumers are clearly getting more comfortable accessing their financial life through their mobile devices – so how relevant is your credit union in this new landscape?

Here are three strategies that can help credit unions capitalize on the opportunities presented by these changing consumer payment trends.

#1: Find New Ways to Engage Your Members

Consumers have embraced online banking for its convenience and 24/7 access. When one credit union shifted their channel focus from brick-and-mortar to online they saw dramatic results in just one year – total subscribers jumped by 28% and mobile logins quintupled in frequency. The number of users registered for remote deposit capture more than doubled. Brick-and-mortar is not going away any time soon, but these steps are important precursors to higher levels of mobile engagement with members.

Strategy #2: Move Boldly to Meet Member Expectations 

Your credit union may have built a significant web presence so members and prospects could find you in searches, but mobile consumers spend 82% of their time on apps. So it’s time to invest in an app that matches consumer payment behaviors on their mobile device.

Google Wallet is an attractive choice for credit unions because it supports the major brands’ credit and debit cards. More than 30 PSCU Member Owner credit unions have already enrolled in Google Wallet. These credit unions report a smooth implementation and branding experience along with steady month-over-month growth in NFC transactions. We expect continued growth in digital wallets with the expansion of mobile devices that can support Google Wallet along with  the entrance of Visa’s v.Me and MasterCard’s MasterPass mobile wallet offerings.

Strategy #3: Upgrade Your Credit Card Program

Credit cards are vitally important because they continue to offer the highest ROA of any credit union product. However, in 2012, only 14.7% of credit union members, or 1 in 7, held a credit union credit card. Those numbers point to tremendous opportunity.

To achieve maximum results, we recommend three things:

  1. Focus on rewards
  2. Upgrade technology
  3. Target the affluent.

Rewards are compelling loyalty builders for credit cardholders, so it’s smart to employ both credit-union sponsored and merchant-funded rewards. The average monthly spend on rewards cards is almost double non-rewards: $890 versus $465.

EMV card usage is an emerging opportunity because of the liability shift announced by Visa and MasterCard for 2015. So start now if you have a membership comprised of foreign-based military personnel, affluent globetrotters or international business travelers since EMV is the standard there.

Affluent consumers also play a huge role in creating opportunities for credit unions. Some telling research shows the impact of the affluent market vs. non-affluent cardholders: they spend 2.6 times more; conduct twice as many transactions and average a 17% higher ticket size.

Another significant appeal of this affluent portfolio is that interchange income is even greater than interest income and delinquency levels are well below the non-affluent market.

Timing Is Everything

Credit unions have a unique opportunity to dramatically increase credit card revenue, attract new members and build loyalty with an engaging mobile payments offering. To be successful, credit unions must deploy a blend of new mobile technologies and card programs that will satisfy consumer needs. Expect the investment to be well worth the effort.

Fredda McDonald

Fredda McDonald

Fredda McDonald leads the Credit Union Experience division of PSCU, which includes national sales, account management, marketing, and strategic portfolio consulting. Fredda has been instrumental in helping to lead a ... Web: Details