Be sure to have a good offense and defense--and keep up with the changing rules.
By Chris Joy
Mediums of exchange have been in existence for thousands of years. Today’s payments game features an interesting blend of time-tested products and delivery systems coexisting with technological innovations. It may seem impossible to keep up, but staying on the sidelines is not a viable option. The challenge for whoever is in charge of payments at your credit union is this: You have to manage your business line, first and foremost, but you also have to keep tabs on evolving technology and changes in the marketplace. Consider: What are the performance measures and levers in your business and how can you marry them with technology advancements? On the marketplace front, small payment providers and payment threats are lurking at every turn. Since the market is still relatively fractured and immature, each credit union needs to research, study and discuss where it fits into the landscape. At this point, it’s hard to know which options will take root. Some good questions to ask include:
- Where do we see potential investments in payment technology benefiting our members?
- What technologies seem to be getting a foothold with consumers?
- Are there solutions we can white label?
- How can we make sure we have the right products for our targeted consumers at the right price?
- Do we have the skill sets and/or partners to help execute a revamped payments strategy?
These decisions are tough. There is no clear-cut playbook (beyond supporting major digital wallets offered by phone providers) and resources are limited. However, the cost of not competing with technologies that gain consumer traction is a potential loss of card usage, members or both. Think back to the origins of online banking. Adoption went from a starting point of 0 percent to today’s usage rate of maybe 40-50 percent of your members. Did you experience overnight adoption? No. Is usage near 100 percent? No. But would you be competitive in the financial arena today without online banking? I think not. The same kind of growth and adoption curve will likely exist for various payment options, and you can use that as a factor in determining where you invest. Millennials may not appreciate this analogy, but Baby Boomers will get it: No one wants to be invested in Betamax when the marketplace adopts VHS. Three key drivers appear to be pushing demand: technology (which includes acceptance and ease of use), security, and rewards. There is hot competition on all fronts. Consumers will ultimately choose the payment option that has the best mix of features they value. And remember, plastic is not likely to go away—it still works well and will be used by a large percentage of your membership. So how do credit unions begin to integrate new payments options into their portfolios? You don’t need to be at the forefront of the market, but you can’t afford to be a laggard. For example, you don’t have to be first to adopt something like Apple Pay, but if you don’t have a mobile payments strategy two years later, you’ll be left behind as mobile adoption accelerates. The key to being competitive is having both solid offensive and defensive strategies. Credit unions are known for providing great value, and have built trust with members. The key is expanding on these strengths to make inroads into arenas where other providers are currently ahead on the scoreboard.
Chris Joy is director of credit consulting for Advisors Plus, a nationally recognized consulting firm that assists credit unions with financial and marketing challenges. Joy’s unique specialty is creating balanced and effective credit card portfolio solutions. Your approach to payments impacts overall member satisfaction and makes a lasting mark on your bottom line.
