By Jim Benlein, CISA, CISM
Walk around your office. The members in your lobby. The employees at their desks. Ask yourself, “Would they ever leave home without it?” Their cell phone, that is.
If the answer comes back, “No. Never.” then you are beginning to see why AT&T, T-Mobile, Verizon, Sprint and Google are so interested in turning your cell phone into a mobile wallet. Using near-field communication technology, these folks are looking at ways to turn your cell phone into the new “wave at the register” payment device.
ISIS, a joint venture between AT&T, T-Mobile and Verizon (Google and Sprint are working on their own separate systems), was developed to provide a payment system through which purchases using your phone would be added directly to your phone bill. Wave your phone at the register, and pay for it later when your phone bill arrives. No credit cards, no credit unions; just you and your phone. And you were worried Dodd-Frank would crush interchange income.
Luckily (perhaps) for CUs, Visa and MasterCard have managed to insert themselves into the ISIS plan and, going forward, it looks like purchases would route to a credit card rather than a phone bill. Recently released information on the Google and Sprint plans indicate MasterCard will be their initial payment processor. At this early stage, it is difficult to know how wide and open the selection of credit cards will be. Will it be limited to a select chosen few, or open to any and all? Or will brand expansion and interchange income be enough for these guys to consider limiting your options to “their” card alone (Google. It’s everywhere you…)?
For your credit union, some things to consider…
- Are you keeping up with what’s happening in the mobile payments marketplace?
- Historically, payment systems have followed the typical product and services "wave pattern" life cycle: growth, stability, decline. We saw it with barter systems, cash, traveler’s checks and credit cards. Are we starting to see it with debit cards? Are smartphones the new rising star for payment systems?
- Pulling out and using a credit or debit card is a continual reminder of the importance and role the CU plays in a member’s life. Though somewhat subtle, it’s a constant reminder of membership. What happens to the CU’s brand and “mindshare” when “my CU card” is replaced with “my Droid” or “my iPhone”?
- Many CUs are breathing sighs of relief on the Congressional shift on interchange fees. Perhaps that's a bit premature. Depending on how this shapes up, CUs may be wise to look at scenarios where future interchange income levels off and/or starts to drop.
- Are you maintaining a close relationship with your card payment system account rep? Are you leveraging that relationship to gain insight into how your rep sees this unfolding?
- Two or three years ago, we’d never have expected (and accepted) Amazon to be a major player in the IT services marketplace. Will the same be true of Google and the financial services marketplace in a few years?
Jim Benlein, CISA, CISM, is the owner of KGS Consulting, which provides policy and practice consulting and auditing services on information technology and information security programs for CUs.
Learn more about the new CUES School of Product and Channel Management.
Read the series of articles about information security authored by Benlein for cumanagement.org.
Read about BOKU, a firm that already lets consumers charge to their phone bills, on cumanagement.org.
