Truly innovative technologies often spring up overnight. But they can take years to evolve into mainstream financial services. Sometimes they arrive on the market as actual products and services; other times they’re enablers of products or services.
The CUNA Technology Council executive committee offers a brief glimpse here at technologies on the cusp of wider acceptance, and their applications to credit union operations.
Mobile financial services
The wider adoption of smart phones and mobile phones is transforming online banking. The next generation of credit union members will be markedly different from the current crop. They’ll demand that their credit unions meet them where they live, which increasingly is at the mobile device.
Ignore Facebook and Twitter to your peril. Standard home banking ported to a phone won’t be enough to keep young members’ attention.
Members in the next decade will want to:
Cash, checks, and plastic will fade, and more secure mobile transactions will favor the retailer and the consumer and reduce financial institutions’ interchange income.
Mobile banking—while not there yet—is quickly becoming a competitive necessity. Nearly 20% of credit union members who don’t currently use mobile banking would switch financial institutions to get it, according to a May 2010 survey by Mercatus.
While home banking is a reactive platform, mobile banking is interactive. Members will expect the mobile banking platform to go far beyond providing only static information. This mobile transformation will put credit union services in the pockets of all members.
Closely tied to mobile banking is mobile or person-to-person (P2P) payment technology. Soon, for example, most consumers will be able to check balances while waiting in line at Starbucks, view smart ads indicating the special of the day, and click on their choices to place orders. At the counter, their coffee will be waiting. One tap on the mobile phone to pay, and they’re on their way.
Mobile payment technology is moving fast, but lacks set standards. P2P payment competitors include ZashPay, Obopay, Popmoney, and PayPal Mobile. But while the options are expanding, P2P adoption in the U.S. is still minimal.
One technology that might increase adoption is near field communication (NFC)—the addition of small computer chips to cell phones so they’d operate with payment readers like the cards employees use to enter secure offices. NFC adoption would open the door for point-of-sale mobile transactions. As NFC technology advances, it’s likely NFC-capable handsets will too, pushing mobile contactless payments into the mainstream. It’s rumored that the next generation of iPhones will be NFC-enabled.
Several NFC business models are emerging, according to Forrester Research. In all the models, a trusted service manager (TSM) serves as a partner—bridging the end user, application provider, and telecom provider. It’s too early yet to make a determination as to which model will ultimately prevail.
Another mobile payment option is Starbucks’ Mobile Pay, using 2D bar codes, for the Blackberry and iPhone/iPod touch. This technology uses the device’s camera and Starbucks Card Mobile App to display the barcode used to make a purchase. Starbucks is piloting the service in Seattle and the Silicon Valley. Through the pilot, Starbucks will learn about customers’ habits around mobile payments and apply lessons learned while other technologies mature.
While mobile payments seem poised for broader acceptance, most experts advise against heavy investment in technology because of the lack of standards. When your credit union decides to adopt the technology, select vendors that have open integration paths, and be willing to change with the environment. Expect many more changes in the payment systems area in the next few years.
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