Pandemic as Prelude to Payment Revolution

The COVID-19 pandemic provided the impetus for a lot of members who had been reticent about digital channels and payments to try them out—and for their credit unions to start planning the next steps to streamline and improve the payment experience.   

“Once you go digital, you don’t go back,” says Fran Duggan, CEO of CUES Supplier member Payrailz, Glastonbury, Connecticut. “Once people start paying for things with a digital method that ultimately is much simpler, easier and faster, there’s no need to go back.”

Going forward could lead credit unions toward new solutions that dovetail with members’ embrace of their smartphones, watches and other devices and digital assistants. Rather than encouraging members to enter their card numbers in Apple Pay and Samsung Pay, Duggan suggests that the movement could offer its own payment app, such as a product that Payrailz plans to introduce in 2021. The goal is to develop a payment option as part of its mobile app, so that members could press a button on the app and wave their phone or watch to pay at contactless point-of-sale terminals.

As more consumers embrace these new payment forms, some credit unions are looking to step up their digital delivery and launch P2P payments to win back business from members who’ve turned to Venmo, PayPal and Square Cash. “I believe people still prefer to use their credit union as their trusted financial institution and main source of transactions, but if we don’t offer P2P payments, they’re going to find another way,” he says.

Instead of adding another discrete and incremental service to facilitate P2P transactions, Payrailz is working on a bigger scale to bring together all the platforms and mechanisms for completing payments.

On a basic level, every payment involves debiting one account and crediting another, Duggan notes. “Think of it from the member’s standpoint: Whether they’re paying their friend or paying their AT&T bill or buying a shirt from Amazon, they’d like it all to be the same.”

Credit unions should be looking for solutions that offer that seamless payment experience, he says. Payrailz is working toward that end to facilitate payments across card networks, the RTP (real-time payments) network, BPX (Bill Pay Exchange), ACH and all other payment rails using smart routing capabilities that are built into the Paywayz platform.  

“Credit unions have all this data about their members. They know what members’ habits are, when they like to make payments, who they pay often, how much they like to pay, when they like to pay,” Duggan suggests. “All that information is sitting in this ‘golden database’ of credit unions, but it has never been unlocked.”

Payrailz is enhancing its Paywayz engine with AI to learn about members’ payment habits and create “action insights” that could proactively help them manage their money, with rollout scheduled in early 2021. Maybe a member has three bills due next week and not enough money in checking to pay them. The system could offer to transfer funds from a savings account at the credit union or another financial institution—or to schedule them to pay when the members’ direct deposit paycheck arrives in the next week.

Over time, these systems could reach out to members with offers to save them money or help them manage their finances based on specific behaviors. Maybe they’ve been making minimum payments on three credit card accounts for several months, and their credit union could offer to consolidate those balances and significantly reduce accruing interest.

The company launched a pilot this fall on a system that recognizes when members are paying more for phone and internet access than their fellow members and offers to contact their providers to negotiate a lower rate on their behalf.

“When we talk about a digital experience, that’s where the world is headed,” says Duggan, citing the examples of Nest thermostats learning homeowners’ comfort settings and Amazon suggesting that it may be time to reorder household staples based on the timing of the customer’s last order.

“What credit union leaders need to do is think of ways to deliver a really valued member experience,” he recommends. “The Venmos and PayPals of the world can’t match that, because credit unions have all this information and their members trust them. But they want their credit unions to be more proactive with them. The pandemic is giving us a big push in the back toward building a digital relationship with members.”

It’s not too early to start envisioning how members can manage their credit union accounts from the backseat of a self-driving car, Duggan adds. As just one example of the speed of technology evolution, smartphones replaced PCs and laptops for many users in about 15 years.

Payrailz has launched a credit union service organization, called CU Railz, with 14 investor credit unions that actively participate in the direction of Payrailz’s development projects.

“We see AI as that next big leap in technology and user experience that we have to worry about, because it’s coming fast, it’s coming hard, and we’re seeing it every day from the Googles and the Amazons,” he says.

The good news? “It’s not impossible for credit unions to be in that world. We actually believe AI offers an opportunity to leapfrog,” he suggests. “Don’t worry about catching up. How about getting to this new world and leveraging what we already have? We have that trusted relationship. We have the data. We already have that premium fuel for an AI engine. We just need to unlock it.”

Karen Bankston is a long-time contributor to Credit Union Management and writes about membership growth, operations, technology and marketing. She is the proprietor of Precision Prose, Eugene, Oregon.