MADISON, Wis.-The fast pace of technology growth has payments systems at an "inflection point." For credit unions, that means staying informed and working collaboratively if they don't want to get left behind.
That advice was passed along by George Hofheimer during CUNA Mutual Group's 2011 online Discovery conference. The chief research officer at the Filene Research Institute here urged CUs to "be flexible to seismic shifts" in payments and technology and be vigilant.
"Because the past trends may not make a lot of sense going forward," Hofheimer said. "It is not clear what will tip us from the current payments state to a future point, but you have to be aware something like this will happen."
That shift could well occur in the next three to five years, Hofheimer said, but stressed predictions are difficult. He urged credit unions to monitor trends, including: consumers going mobile, consumers always online, movement from software to cloud computing, "mash-ups," and regulation forcing financial institutions to be more innovative.
The advance of wireless demands close attention, with the U.S. penetration of wireless going from 13% in 1995 to 96% in 2010. "For the first time ever, smart phones will almost eclipse feature phones, or phones that are not smart, allowing consumers to be extremely mobile not only with products but with companies," said Hofheimer.
Mash-Ups
Mash-ups, or combinations of two separate databases that produce something in the end more useful to the consumer, have the potential to quickly accelerate the evolution of the payments landscape, noted Hofheimer. For example, a user with a smart phone and cloud service access connecting Google Maps with a credit union database to find locations of the nearest branch or ATM.
"There is a clear opportunity to take info credit unions have about their members' payment and transaction history and securely match it up with local advertisers to get more members to go to these retailers."
Considering the scope and unpredictability of the future of payments, credit unions need to collaborate on new payments opportunities, insisted Hofheimer. "A credit union is not able to handle this by itself. You gain a lot more expertise and capability if you move as a block."
But Hofheimer also noted that it's easy to get caught up in the appeal and sexiness of new technology, and that credit unions can't ignore the fact that any new payment method still has to prove to consumers, merchants, and the financial industry that it is better than the card swipe. "The excitement around these new trends has to be tempered with the fact that what we have today may be good enough."
