As chair of the CUNA Council Forum, I have the great pleasure working with CUNA management and the chairs and vice chairs of CUNA’s six Councils: CFO; Lending; Marketing/Business Development; Human Resources/Training & Development; Operations, Sales & Service; and Technology. These Councils—and the Council Forum—represent more than 5,000 members.
During the Forum’s planning meeting last September, we identified “payments strategy” as an issue to explore across the Councils because in some way this everchanging strategy affects each council and its members.
Payments will continue to evolve, and the days of relying on a steady income stream from debit card interchange fees are fading. Credit cards will be next. For example, the recent legal settlement between Visa and MasterCard and retailers allows merchants to pass along their payment processing costs (up to 4%) to consumers who pay with credit cards.
This means that a merchant who chooses to exercise this new right could impose a surcharge, also referred to as a “check-out fee,” on purchases using credit cards. If retailers adopt this “check-out fee,” what will it do to member transactions? How will this change affect reward programs? How will this alter marketing programs designed to drive credit card transactions over debit card transactions, particularly by financial institutions affected directly or indirectly by the Durbin Amendment?
We couldn’t have imagined these questions a few years ago. But many credit unions continue to operate as if nothing is changing.
The emergence of mobile payments is one effect of the changes to credit and debit processing. It’s unlikely that mobile payments will replace all other forms of payment. We still will have checks, cash, and plastic, at least until we’re guaranteed nearly 100% network reliability (also known as “five nines,” or 99.999%) and on-demand instant access.
Bank of America offers mobile payments with the release of its version of Square, which the bank will make available to more than two million small-business customers.
Mobile payments will be a different animal. Members came to us to get cash; members ordered checks from us and our name was on those checks; and members came to us for their ATM, debit, and credit cards. But members won’t be coming to us to get their mobile payment branded devices.
Instead, mobile payments will come down to access and not devices, such as branded checks or plastic. So how do we retain our members in a mobile payment world, when mobile devices aren’t checking accounts?
Consider this: The term “checking account” is becoming archaic. It’s probably better known as a payment account. So make every effort to ensure your payment account is members’ primary payment account. Offer members incentives to set up your payment accounts as the settlement account for their Pay- Pal accounts. Offer members incentives to set up your credit card as their primary credit card in iTunes.
We own the checking/payment account relationship, and as payments evolve and until someone invents a different settlement account, we can continue to provide our members with the best payment account around.
In many ways some things never change, but how our members access their payment account certainly is evolving. The CUNA Council Forum will work to frame this “payments strategy” more completely, and we look forward to sharing it with credit unions.
RUDY PEREIRA is president/ CEO of Royal Credit Union, Eau Claire, Wis., and is chair of the CUNA Council Forum. Contact him at 715-833-8105.