It’s about the data
Mobile apps that are purely informational will go only so far. “Transactional apps that combine both information and ecommerce represent the larger value to consumers,” Guerry says. “On the back end (financial institutions, merchants, carriers, and marketers), the focus will be on leveraging the behavior and activity data to add value and inform marketing activities.”
The real value of the transaction resides in the data; the payment itself is simply a commodity, says Guerry. “Credit unions will need to organize, understand, and leverage this data to provide added value to both the member and the credit union,” he says. “Credit unions shouldn’t ignore or dismiss the value of this data. They need to digest it and use it to improve the value proposition to the member.”
“Mobile banking solutions need to be part of a credit union’s entire range of mobile engagement,” says Willard. “Credit unions need to be thinking beyond payment services to marketing opportunities via mobile platforms.”
Mining this data while keeping it safe continues to be a daunting—and essential—task. More than half of respondents to a recent CUNA survey of smartphone users say they use their mobile phones to make payments. And nearly 92% of those smartphone users say “ease of use” is the greatest benefit of mobile payments. But more than three-quarters of respondents say security is their most serious concern.
In his book “Digital Bank,” Chris Skinner looks to the “Internet of things” as the next big wave of change and opportunity that will affect banking.
The “Internet of things” refers to Internet communication— both wired and wireless—that will be enabled through an embedded microchip in everything from cars to watches. It’s in this world, where everything is connected and can trade and transact, that Skinner sees huge opportunities for banking because it will enjoy an unparalleled and unprecedented view of human behavior.
Making payments via smartphones, whether that involves bitcoins or dongles, produces vast amounts of consumer data that will become accessible to financial institutions. Mining and analyzing that data will radically transform the current banking paradigm.
Traditionally, the trust guarantee in banking has been to keep your money safe, Skinner notes. In the future, the trust guarantee will be to keep our data safe. Assuming financial institutions get that level of trust, Skinner suggests that data will replace the currency they now store in their vaults.
The data vault
Banking is ripe for a technology revolution, but it hasn’t occurred yet, according to Jignesh Patel, professor of computer sciences at the University of Wisconsin- Madison. “A lot of the technology in banking is far behind the rest of the technology field in terms of optimizing the efficiency with which that network moves,” he says.
His biggest concern, however, reaches beyond security and to the exorbitant amount of data that’s accumulated from consumer behavior through smartphones, geo-tracking, and social media.
“I don’t think people understand how much data they’re giving away as consumers,” he says. “I think if they realized what they were doing, they’d behave differently.” Patel says it all comes down to education.
If unbridled personal information is going to become the new currency in the future world of financial services, then member education and data security should top a credit union’s list of priorities as it forms its own payments strategy.
“Credit unions have a unique advantage and therefore a great opportunity to connect with a new generation of members who share their core values of service and community,” says PSCU’s McDonald. “Credit unions have a high trust factor in their communities.”
“If it’s done right, members will benefit and even welcome the opportunity to save time and money,” says CU Wallet’s Fiore. “Credit unions can begin with simple programs to present mobile offers on behalf of reputable merchants, earning revenue and determining if they’re striking the right balance between privacy concerns and providing value to members. Mobile apps make it easy for inpidual members to opt-out of any such promotions if so desired.”
While the trust factor gives credit unions a distinct advantage, it also hands them a great responsibility, not just in the way they provide member convenience, but also in the way they manage members’ data.