As the iPhone® 6 made its way into the hands of tens of millions of consumers, it also heralded a fundamental change in the way consumers pay with its embedded Apple Pay™ capabilities.
It may also provide the tipping point for widespread adoption of mobile point-of-sale payments, which could increase exponentially over the next five years.
Apple announced recently that Apple Pay is doing well, with about 750 banks and credit unions signed up. The credit union movement’s commitment to remaining relevant and increasing its growth momentum is evidenced by the fact that, so far, credit unions represent 40% of the financial institutions that already support Apple Pay.
Within applications like Apple Pay and in mobile payments more generally, it will be critical for the credit union’s brand and its payment capabilities to be “top-of-wallet” for members—not only to keep your credit union brand visible but to protect and increase interchange revenue streams.
Once payment card information is stored in a mobile payment app or service it tends to stay there. In the case of Apple Pay, a card must have tokenization capabilities to be used through the service.
Tokenization enhances the security of online and mobile transactions by replacing sensitive payment account information, such as 16-digit card numbers, with digital account numbers called tokens.
Tokenization is becoming a new standard in global payments to enhance security and improve the cardholder purchase experience through digital channels. It enables additional security for mobile and online payments by creating a digital account number, or “token,” which acts as a substitute for a consumer's personal account number.
Tokens can be used for mobile proximity payments at a physical point of sale, for mobile remote payments such as in-app purchases, and for e-commerce transactions.
Fiserv’s partnerships with Visa and MasterCard to support tokenization, and our planned support of tokenization through our Accel network, are part of our overall commitment to bringing secure and simple digital payment solutions to our credit union clients and their members.
Also, tokenization is complementary to the evolution of chip-based (EMV) payments, which have proven to be successful at reducing fraud at the point-of-sale.
This is because tokenization addresses the potential for fraud to shift to the card-not-present environment and enhances overall payment eco-system data security.
While Apple Pay now accounts for two of three dollars charged via contactless payments on the nation’s three largest payment card networks, it is only part of the equation.
Credit unions can enable their members to undertake a broad spectrum of money movement capabilities using their mobile phones or tablets, such as person-to-person payments, online bill pay, and mobile deposits.
Also, additional peripheral capabilities—including mobile alert services, card management, and mobile photo bill pay—will create more value around mobile payments and will drive increased use.
Credit unions have a unique opportunity to help create the mobile payments ecosystem and benefit from it in the way of more transactions, more revenue, and more loyal members.