CAMBRIDGE, Mass.-Members will look for last-minute ways to instantly pay bills in the tough economy of 2009, and contactless cards, mobile payments, and ACH options will help them do it, according to one person's forecast.
In response, said Jim Lawrence, retail operations administrator at Harvard University Employees CU here (HUECU.) The $260-million CU has been distributing contactless cards to its 8,000 debit card holders over a four-year period as part of its MasterCard PayPass program launched in 2007.
With its contactless feature, HUECU hopes members will be encouraged to use their CU debit card more often, and thus bolster interchange income for HUECU, said James. Currently, that income is being wrested away by giant competitors such as PayPal, Google and Capital One, which are offering attractive products in the online and mobile payments space.
"PayPal has already jumped in and taken the lead for person-to-person payments," Lawrence said, noting that online merchants favor PayPal's low or zero interchange fees.
HUECU's contactless program is the precursor to mobile payments and expanded ACH options, explained Lawrence. "I want to be ready for mobile payments."
The payments strategy will include a switch this spring to St. Petersburg-Fla.-based PSCU Financial Services and away from Milwaukee, Wis.-based Metavante Corp. for debit card processing, he continued.
Although both Metavante and PSCU-FS offer mobile banking and payment solutions, the move to PSCU will allow HUECU to centralize processing for debit, credit and ATM cards and engender a greater volume discount, James said. PSCU-FS, a CUSO, is "specifically for credit unions," and HUECU CEO Gene Foley sits on the PSCU-FS advisory committee, he added.
Asked if members expect credit unions to offer contactless and mobile payments, Lawrence replied, "not yet. Right now, these technologies are a differentiating factor. But we want to be in the forefront, with tools that members only expect from larger institutions."
Members may not be ready for alternative payments, and technology may not be, either, he added. Lawrence believes contactless activity at HUECU is minimal, although he could not provide transaction statistics for the PayPass program because of constraints imposed by Metavante.
Then there's the cat-and-mouse factor of contactless acceptance, he said. "In our area, we have more retailers who accept the contactless card than in other areas, but it's slow. Many retailers are waiting to see if consumers demand it and consumers are waiting to see if merchants will offer it."
As for mobile payments, "the industry is still in the VHS-Beta phase," Lawrence said. Although it's "great" that MasterCard is enabling consumers to deploy PayPass software on their mobile phones, not many members have devices with the requisite Near Field Communications or data plans to support the software, he said. Mobile services providers, the companies that make mobile devices and financial institutions need to decide who is going to pay for the infrastructure that will allow interfaces between their disparate mobile systems, said Lawrence.
Metavante offers a "short-term solution" in the form of a contactless sticker that members can attach to their phones to make mobile payments, said Lawrence. "But we're leery because we're switching processors."
Lawrence said he has high hopes for ACH solutions such as NACHA's Secure Vault Payments, which allows consumers to shop online and pay bills electronically through a connection to their financial institution's multi-factor secured Internet banking platform and the ACH Network. "Members don't have to give private information to merchants, and are automatically directed to Secure Vault to pay," he said. "The merchants like it because there's less of an interchange fee."
HUECU currently enables ACH payments from any financial institution to HUECU credit cards, said Lawrence.
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For info on this story:
* www.huecu.org
* www.mastercard.com
* www.securevaultpayments.org
