The Bank to Beat: PayPal

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LAS VEGAS-Credit unions must unite against PayPal by offering alternative payment services that members are willing to pay for-before the online giant makes off with all the profits.

That was among the sentiments share at the recent CUNA Technology Council Summit here. "Credit unions don't have a god-given right to control the payments space, and a lot of organizations want a piece of it," said Jeff Russell, EVP, The Members Group (TMG). Russell spoke to a group of CU IT and operations managers in a Summit session on Sept. 30.

The TMG CUSO "is working with some credit unions to explore alternative payments and to compete against PayPal," Russell added. "Payments are the key to your future with your members," and will most likely migrate to the mobile channel.

Plus, PayPal recently began accepting mobile check deposits from iPhones. At Wescom CU in Pasadena, Calif., more outbound transactions go to PayPal than to any other payee, confirmed John Best, CTO at $3-billion Wescom CU. "We'd better darn well figure out how to be a mobile payments endpoint," Best said.

PayPal is not the only one that wants a piece of the payments pie. Major mobile carriers and card companies plan to launch mobile contactless payments. Apple is working on embedding payments technology into the iPhone-consumers would pay simply by waving the phone past a near-field communications point-of-sale device.

The iPhone model would most likely feature iTunes credits as the default payment option, though consumers would also be able to choose an institution to process their iPhone payments.

"But the majority of the world just takes the software default, so how often would credit unions have the opportunity to intervene and participate in that iPhone transaction from a payments perspective?" Russell asked his audience.

Add to the competition Google Checkout, Square, PaymentOne, and Revolution MoneyExchange, and credit unions could get left in the dust. "Are we just dinosaurs?" asked Jonathan Fuld, member, Board of Directors, at $346-million Oxnard, Calif.-based CBC FCU. "Can a credit union under $250-million in assets reinvent itself with the economies of scale to compete? And if so, will the credit union boards take the risk to do that?"

Person-to-person (P2P) payment tech is available from many vendors and is a good "incremental investment" into the payments market, answered Russell. CTC member Walter James Burke, VP-member care at InTouch CU, agreed. The $852-million CU in Plano, Texas, offers P2P payments. Plus, CUs can weave P2P into the social media craze by integrating the platform with Facebook, Russell added.

With non-sufficient funds and interchange fees dropping, credit unions need to make money by charging for services, he continued. "Free checking is over. How do we create a bundle of services that our members are willing to pay for?" Adding P2p could be part of that bundle.

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