More credit unions and banks are showing interest in developing their own branded mobile wallets, and Visa has launched a platform to make that possible.
Visa's service, called the Visa Digital Commerce App, allows financial institutions to offer contactless payments, security alerts, card controls and account balance information. The product is launching with more than 40 FIs (including some 10 credit unions) already signed on to use it.
Affinity Federal Credit Union is one of them.
"By using the Visa Digital Commerce App, we are able to quickly deliver a robust and highly intuitive mobile app to our members that allows them to manage and use their cards on their terms," said Affinity President and CEO John Fenton. "This new solution, which we are calling the Affinity Card App, meets the needs of today's consumers — making it faster, easier and more convenient to bank with us. We are already experiencing higher usage rates from our members who transact in our digital space."
In addition to Affinity and a few dozen banks, the following CUs are implementing the service: A+ Federal Credit Union, GESA Credit Union, KCT Credit Union, Kern Schools FCU, Landings Credit Union, Members 1st Federal Credit Union, Our Community Credit Union, Publix Employees Federal Credit Union and Utah Community Federal Credit Union, according to Visa.
"Clearly there is a desire for connected consumers to get their mobile wallet from their primary financial institution," said Todd Brockman, senior vice president of issuer processing and enablement for Visa.
Third-party mobile wallets such as Apple Pay, Samsung Pay and Android Pay, have not provided the features or the user base that they initially expected, giving CUs and banks an opportunity to regain control of consumer spending.
By building their own mobile payment apps, financial institutions can oversee enrollment, marketing and branding. It also enables CUs and banks to take the lead on partnerships with merchants.
In addition, the partnership allows FIs to offer services they may not otherwise be able to do given their size.
"We know Visa plans to grow the service and our clients are getting services that normally from a bank our size couldn't exist," said from Todd Treadway, digital channels manager for the $12 billion-asset Old National Bank in Evansville, Ind. "Our clients are now more comfortable doing business with us in digital channels: mobile, online and SMS. Every time we added something we were gaining that consumer confidence."
John Weeks, senior vice president of Payments at the $25 billion-asset Webster Bank in Waterbury, Conn., called the partnership "a no-brainer."
"It is simply the latest example of our shared commitment to provide Webster customers with the technology that allows them to manage and use their payment cards whenever and wherever they prefer," Weeks said.
Both Weeks and Treadway both noted that the partnerships with Visa were motivated by the need to find a secure solution that would allow them to offer mobile wallets.
More than half of consumers would prefer to use a mobile wallet provided by their financial institution, according to Javelin Strategy & Research. And after a slow start, people are using mobile apps to pay in stores more often, with CUs and banks being among the biggest beneficiaries, according to Retale.
PayPal also scores high in consumer mobile payments research, giving financial institutions a competitive reason to offer their own mobile payment service soon—and Visa more impetus to counter PayPal by enabling its issuers to be more competitive in the digital realm.
"Financial institution issuers do have some advantages and can deepen their relationships with consumers overall," Visa's Brockman said.
Some larger banks have already brought their own wallet apps to market, particularly on the Android platform, which enables third-party apps to support contactless payments.
Credit Unions are also using their traditional shared resource model to build mobile wallets through consortia such as CU Wallet.
"We think Visa's Digital Commerce App is great for the market because it continues to underscore the value of keeping the financial institution brand front and center with their members," said Paul Fiore, CEO of CU Wallet, a consortium of financial institutions with a shared mobile wallet platform. "Visa's announcement also shows that all of the major players now truly believe that digital payments will continue to grow and will help to accelerate consumer and merchant adoption."
Some in the credit union community see the advent of Visa's app as a positive step for the industry — especially when many CUs do not have the resources available to develop their own payment services.
"The availability of Visa's Digital Commerce App is a tremendous step toward issuer-branded wallets that allow community financial institutions a way to quickly and inexpensively compete with the 'Chase Pays' of the world," said Brandon Kuehl, manager of product development at TMG.
Tom Davis, SVP of finance and technology at Card Services for Credit Unions (CSCU) agreed. "Very few credit unions will endeavor to take on a commerce app of their own," Davis said. He noted that CUs are constantly looking ahead to what payment methods will be available in the future like Bluetooth-low energy, suggesting that it would be disadvantageous for CUs to attempt to be on the edge of innovation themselves when it comes to payment platforms.
Visa's new service uses host card emulation, which enables contactless payments without requiring access to a device's secure element, and Visa's token service, which the card network uses to protect mobile payments by substituting a replacement for the traditional account number.
The service is also designed for the Visa Developer Platform, which allows internal and external programmers to build digital commerce technology. Visa would not disclose the fee structure for its mobile wallet offering, and said the issuing financial institution decides which services to enable.
"This will help with flexibility and improve time to market," Brockman said.
Visa faces some challenges with the new service, such as usability with iOS due to Apple's well-known desire to control what users can and cannot do on its platform, said Richard Crone, a payments consultant.
Notably, Apple does not support host card emulation, thus preventing third-party wallets from making contactless payments. According to Visa, this is the only feature that is absent on iOS; otherwise its technology is the same across Apple and Google devices.
"Visa is buying time to show a set of services and a sandbox that banks can play in to make their app more relevant," Crone said, adding "everything" Visa announced in its new service is available to banks and credit unions from other sources, such as core vendors and technology startups.
— Eric Guldenstern, Graham Rapier and Robert Barba contributed to this article.
