TAMPA, Fla. — Expect credit unions to pay greater attention to P2P, upgrade aging home banking systems, ramp up EMV migration timelines and increase credit card marketing and analytics in 2014.
Those are some of the predictions analysts told Credit Union Journal regarding a year in which the payments landscape will see even greater change than in 2013, they say.
"I think 2013 could be somewhat transformational for payments," said Barney Moore, senior portfolio consultant at CSCU. "It really could be that way, especially if the Merchants Customer Exchange (MCX) formally launches. With the companies behind the new merchant mobile payments system, you may see rapid adoption by consumers."
The key to MCX's success, according to Moore and several analysts, is if the network offers enough reach for consumers. "MCX has to deliver the kind of convenience consumers know they get with their favorite credit card-knowing they can use it almost anywhere."
Moore added that he expects to see more financial institutions offer targeted discounts and coupons to cardholders, and rewards will increase.
P2P Predictions
While P2P has been around for a while, Stan Hollen, president and CEO of CO-OP Financial Services in Rancho Cucamonga, Calif., expects the alternative payment method will take greater hold in 2014, especially with credit unions.
"We see P2P as one of the most active areas for credit unions. It's the next big thing they are excited about implementing."
Hollen also predicts that a good number of credit unions will upgrade aging home banking systems to make the experience similar, if not the same, to what members receive via the credit union's mobile channel.
IQR Consulting, Santa Clara, Calif., expects credit unions will significantly increase their credit card marketing, leveraging analytics to effectively target offers and maximize advertising dollars.
Managing Director Karan Bhalla believes credit unions have to make the move to fend off banks.
"Credit unions had a better year than banks in 2013 when it comes to credit card growth," said Bhalla. "Banks won't let that happen again."
In 2013 credit unions grew credit cards by 6% to 7%, while banks' credit card growth was flat, according to Bhalla. "With banks increasing their competition this year it means credit unions have to get more bank-like with their offers. That means better use of analytics to target."
Bhalla also fears that rising rates, which will hurt card margins, may impact credit unions' primary marking tool-low rate.
As the October 2015 EMV liability shift deadline from Visa and MasterCard draws closer, experts believe more credit unions will pay attention to the fact it can take six to nine months to migrate the card base to EMV-from planning, to setting up with processors, to EMV certification with payments networks. Some caution it will take longer as the deadline gets nearer and FIs step in line with payments networks and processors.
In Des Moines, Iowa, The Member's Group's Ryan Anderson, VP of product, said 90% of the company's clients say they will convert to EMV within the next 18 months, with 50% going with a dual interface card that also allows for tap-and-go payment.
But Hollen pointed out the EMV initiatives among all FIs will start with credit cards, as the future of EMV remains cloudy due to U.S. District Judge Richard Leon, this past July, striking down the new limits on swipe fees, and the Federal Reserve now appealing that ruling.
Hollen said that until the case is decided, and not knowing the future of network routing and exclusivity rules, many CUs will remain on the sideline with their plans to migrate the debit base to EMV.
Anderson predicts credit unions this year will also learn about an emerging card technology that may fit nicely alongside EMV, called tokenization.
"Essentially, tokenization removes the static card number and uses the proxy instead," explained Anderson, who said the technology is aimed at card-not-present fraud.
CUs will place additional emphasis this year on credit, sources agreed, due to debit's uncertain future. Hollen noted that if the Federal Reserve loses its fight to uphold the new swipe fee limits, and the cap for institutions above $10 billion falls to 10 to 12 cents, "That will put a lot of pressure on card associations to reduce the current 42-cent cap enjoyed by the exempt group. Stay tuned."
The Cincinnati-based Vantiv sees 2014 as the year in which more credit unions develop "well-rounded" card programs to meet the needs of all cardholders, keeping CUs at the forefront of members' payments choices.
Royal Cole, president of financial institution services, said that means an EMV strategy, mobile, prepaid, rewards and card offers that appeal to older members as well as Millennials.
"Each credit union needs to have a strategy that stretches across its entire payments portfolio," said Cole. "You must have an overarching strategy to be successful. It's the guidepost for what you do. The strategy has to consider the capabilities of the organization and the CU must do research to find the voice of the membership."
