Emerging Payments: The Next Step in Providing Member Convenience via Channel Expansion Presented by CO-OP Financial Services
Today s Presenters DR.KATHYHERZIGER-SNIDER Vice President, Product Development AMANDASMITH Senior Manager, Technology & Innovation GRACEMANUELE Senior Product Manager
Agenda Introduction Definitions Marketplace Recommendations CO-OP Vision CO-OP Current and Future Solutions Q&A
Introduction to the Situation
Introduction Kaleidoscope of options for access Mobile devices are an extension of consumer s arms Apps to do anything and everything Payments - most sought after/most fear-inducing mobile activity For many online and mobile services = convenience No multi-institution, multi-functional financial app yet
Credit Unions are Positioned to Benefit from Mobile/Virtual Banking Revolution ONLINE BANKING INNOVATION ACCESS 73% of credit union members use online banking at least 3 times/year 60% of credit union members rate their financial institution excellent for providing innovative technologies 85% of credit union members rated their CU performance excellent for access to online/mobile banking services Source: Consumer Pulse 2012
Top Convenience Activities Check balance or history Transfer money between accounts Transfer money to a friend belonging to another CU or a bank Deposit a check remotely Receive a text alert from financial institution Pay a bill digitally Source: Consumers and Mobile Financial Services, Federal Reserve Board, March 2012
Definitions of Emerging Payment Components
What is P2P? P2P payments consist of moving money between people and their various types of sending and receiving accounts. INCLUDES
How does P2P Work? ACH facilitates movement of funds between the parties
Some Major Providers of P2P
What is a digital wallet? provide a view of and access to accounts and payment tools. They can deliver real-time coupons, offers, and loyalty/reward programs.
Account Aggregation + Merchant Acceptance = Successful Wallet Digital wallets start as account aggregators but the key is how the wallet is used to interact with the merchant both online and at the POS Digital wallets require the intersection of account aggregation and merchant acceptance for success The goal is getting the card to the top for usage
How Do Other Channels Feed Your Wallet Strategy? Consider: MOBILE ONLINE CLOUD SECURE ELEMENT BRICK & MORTAR INTERNET MERCHANT
Current State of Wallets for CUs Currently there are no mature wallet products Security is a concern with all wallets Your cards can be enabled in multiple wallets Conversely wallets can have many participants, e.g. Google wallet No current product solves top of wallet challenge
Examples of Current Wallet Products
Other Types of Wallets Other types of wallets do not require a swipe or tap. These solutions are data-driven vs. card-driven.
Other Types of Wallets PayPal: The New Way to Pay In-Store Home Depot now allows customers to pay at the register by entering a phone number and pin. No cards required.
Other Types of Wallets Square Credit/debit card linked to Square account Open "tabs" at places you'd like to buy things Phone connects with shop and shows your name and picture at the register When ready to buy give name to cashier Cashier matches name and photo and confirms transaction You don't even have to take out your phone or wallet
What is NFC? NFC technology allows for communication between two devices that are in close proximity to one another. NFC technology respects the traditional card issuer/acquirer relationships, which keeps financial institutions involved in the payments value chain.
Near-Field Communications The U.S. is nearly a decade behind the European Union in deploying chip reader terminals at the point of sale SLOW ADOPTION RATES ONLY 3-4% OF PHONES HAVE NFC CHIPS 140,000 OF 7 MILLION MERCHANTS HAVE NFC READERS The future of NFC communications as a delivery channel for payments is heavily integrated and dependent on the merchant endorsement and enablement of the technology as part of the payment checkout process
Marketplace
Recent Developments September 21, 2012 Apple launched the iphone 5 without an NFC chip, prompting many to wonder aloud if they were leapfrogging that technology
Recent Developments September 27, 2012 Bank of America announced it is testing Quick Response (QR) codes for mobile payments, also bypassing chip technology
Recent Developments November 8, 2012 Starbucks Using Square Launched in 7,000 Starbucks stores Plans to use geofencing to recognize customer as they near the POS terminal. Customer can pay without removing a card or mobile device from their pocket. Linked to a debit or credit card, this app does not require reloads like Starbucks app does.
Recent Developments Isis (the mobile carrier consortium) and Google are running independent pilots. Neither seems to be getting off to a crisp start.
Recent Developments Alternative to debit/checking accounts by Announced by Walmart and American Express Contains digital wallet features like P2P Not FDIC insured No fees
Recent Developments Mastercard/Visa PayPass and Paywave have been around for years No real traction Both companies developing wallet products
Recent Developments 3 Big Banks have teamed up A Mobile P2P by Payments are powered by ACH
MCX (Merchant Customer Exchange) Coalition of leading retailers announced in August 2012 plans for a mobile commerce platform that works on any smartphone Open to all branded credit and debit cards, proprietary credit and loyalty cards. Merchants are looking to lower their transaction costs. Likely to involve multiple network channels for routing, real-time settlement and EMV compliance.
MCX (Merchant Customer Exchange)
EMV (Europay/MasterCard/Visa) Open-standard set of specifications for smart card payments and acceptance devices FIs, retailers and consumers collectively benefit from this migration Dynamic authentication with enhanced contactless environment creates a reliable/rapid infrastructure needed for seamless mobile payments* With EMV as the foundation, future innovations like biometric verification and new payment types can more easily be implemented Source: MasterCard, April 2012 report
CO-OP s View: Recommendations, Vision and Solutions
Getting CU Card to Top of Wallet Get experience, educate yourself and be informed Counsel members so they know to use your guide NFC chip technology and mobile wallets in a state of flux No clear leaders in the field Select a trusted partner that has your best interest in mind
Getting Started Create a multi-channel member strategy that includes Mobile, Online, Wallets, Rewards, Loyalty Strengthen your relationship with your members to avoid disintermediation of the member from the CU Maintain your relationships while providing emerging payments technologies members desire Assess and fill any gaps to get back to basics with typical card activation and usage
What CO-OP Offers Connectivity between you and your members via trusted CO-OP Connect Real-time Good Funds model Meets member expectation of immediacy; on-demand culture Options to meet your needs One-size-fits-all approach does not work for you and your existing infrastructure, nor for your members
Solving the Top of Wallet Challenge CO-OP Total Revelation is the perfect analytics tool to help you really understand your members preferences and usage patterns Use data to drive usage of your cards in wallets Offer double points for wallet usage
CO-OP s Vision for P2P and Digital Wallets Create a payments network that operates online, and in Make it easy for members to. to their accounts. to deliver maximum merchant locations for POS transactions.
CO-OP s Vision for P2P and Digital Wallets Work with credit unions to ensure the card is Create a delightful user interface for a Allow credit unions to.. in CO-OP s wallet or anyone else s..
CO-OP s Vision for P2P and Digital Wallets Afford with existing mobile and home banking apps. end users privacy and financial data. Provide a for credit unions and their members.
Current Solutions Offered by CO-OP MasterCard Paypass and Visa Paywave NFC Pilot programs launched 3 years ago and still running Merchant enablement is very low Pay Anyone transfer function Supported in ecom Bill Payment product CO-OP branded cards in digital wallets Amazon and Apple top the list Me2Me account transfer Pilot program for all CUs connected to a CO-OP switch
Future Solutions from CO-OP
CO-OP s Phased Approach: Phase I Wallet with Account Aggregation Transact between my credit union accounts Transact between my accounts and yours within credit unions Remote Deposit Capture
Sprig: Available 2012
Sprig: Available 2012
CO-OP s Phased Approach: Phase II Pay Anyone Standalone P2P available to integrate with your current solutions. Standalone Remote Deposit Capture Wallet partnerships that add value and strengthen relationships Mobile alerts
Polling 1. Do you current have a P2P Solution? 2. If not, are you planning to implement one in the next 12 months? 3. What is your primary area of interest regarding wallets? a. Getting to top of wallet b. Understanding integration issues c. How to avoid disintermediation (big data) d. How to keep up with emerging technology while keeping costs down e. Learning about wallet options available to my members f. Validating my credit unions current or planned offering in this space g. None of the above
Q&A