ATLANTA-The place P2P will eventually take in the overall payments landscape is unclear, yet CUs can't afford to ignore the alternative payment platform.
Analysts who spoke with Credit Union Journal acknowledged that the growth of P2P payments to date has been limited. However, there is consumer appeal, especially among younger demographics, and that's precisely the reason cited by analysts as the primary reason credit unions must have a P2P strategy in place ahead of that future growth.
"P2P has not turned the corner. But as mobile payments step in to take over more for cash and checks, then P2P has a lot more promise," said Dom Morea, SVP and division manager for First Data Advanced Solutions and Innovations.
Rick Oglesby, senior analyst at the Boston-based Aite Group said that if financial institutions play too conservative and do not get involved in P2P strategies, they could easily miss an opportunity. When digital wallets become more accepted, Oglesby projects that many consumers will want to wrap all of their mobile payment options into one wallet. "If the financial institution lacks a P2P application, consumers may choose another wallet service than the credit union's."
Jeff Russell, senior advisor for the Des Moines, Iowa-based The Members Group, which owns P2P platform Dwolla, acknowledged that P2P does not currently provide credit unions with a "pure revenue stream. The idea, however, is your members know you are part of the payments future. They know they can continue to look to you for emerging payment services rather than, say, Verizon."
Start Building The Next Thing
Russell said adopting P2P is really about "how you start building the next thing and being part of it so you don't get left behind. Go back years ago when checks were the largest form of payment and debit cards came out and people said, 'I don't know if debit will make it. Checks are pretty good.' Well, when it became clear that debit was going to do much more than survive, Wells Fargo, which was in debit from the start, had gained huge amounts of market share before the rest of the financial institutions caught up. You want your foot in the game now because it's a lot harder to play catch-up."
But Tom Roberts SVP marketing for CashEdge, a division of the Brookfield, Wis.-based Fiserv, said P2P is doing well already and growing. "P2P transactions happen almost a billion times every month. Do the math. This is changing the payments space."
The transactions, Roberts explained, are more for recurring monthly needs rather than more casual payments. "A lot of people think P2P is being used mostly to pay a bet or split a dinner check. But people are paying their landlords for rent, splitting rent with roommates, paying portions of utility bills . . . This is taking the place of cash and checks. It is more convenient and more secure."
Fiserv offers two P2P solutions, ZashPay and Popmoney, and will soon merge both into one branded financial-institution-centric product, Roberts said, noting 1,400 FIs use the services. He said Fiserv's P2P transaction data shows that 40% of the payments are for rent or some other shared bill.
More 'Casual' Payments
The largest segment of Fiserv's P2P users are ages 22 to 32 who use the service to pay rent. Older adults, ages 44 to 54, represent a large user segment as well, sending money to kids in college or using P2P to split vacation expenses. "We are also seeing more causal payments like gifts and events like weddings," Roberts said.
Roberts said P2P can be a revenue stream, it just depends on how the credit union structures the offering to members. "The basic service for sending money can take a few days to complete, to get the money into the accounts," said Roberts. "Some financial institutions will charge for this and some won't. But most will charge for expedited delivery. There are other value-added services too, like a personal greeting, a birthday card and across-border transactions."
Test That App With Staff First
LAKE MARY, Fla.-Before a credit union introduces a P2P payments solution to members, it should first give the app to the staff.
Tom Berdan, VP of product management at Harland Financial Solutions, said that approach builds a big support team to answer members' questions on the new platform, and improves service and the CU's image.
Harland offers DPXPay, and Berdan said many credit unions have benefitted by getting their entire staff involved in the P2P service.
"I tell our customers to have their employees use DPXPay daily for a month to understand what their member will experience. So when a member calls with a question about DPXPay, your employees don't say, 'Let me have Stacey from Internet banking call you back.' It derails any momentum you are trying to build."
Even if staff members can't solve the problem, they can speak intelligently with the member about the issue. "It just gives the member a better impression, that the credit union is on top of emerging payments," Berdan said.
Just as important as being prepared to support members after launching a new payment application is making sure the credit union does not overcomplicate the move to the mobile payments space. Berdan advised choosing a provider that won't simply pile app on top of app.
"Choose a provider that has one framework your membership base will utilize. If the credit union has one app running all of the capabilities, as opposed to multiple apps standing on their own, it lowers the complexity level and challenges for call center employees."
Berdan said he is aware of credit unions that have not taken the simpler approach and had their support infrastructure "overwhelmed." -Ray Birch
