Last month at the EDGE Conference in Las Vegas, payments was a thread that ran through many conversations and sessions. While there are already many changes underway in the U.S. as it relates to payments, driven by a combination of accelerating technology and changing consumer behaviors, much of what was discussed boiled down to one key question: “What’s next for payments?”
Trend #1: Flexibility is increasing competition for payments.
The long-standing goal of staying “top of wallet” is shifting as new ways for consumers to decide how to pay enter the market.
- Flex Credentials: While in its infancy in the U.S., the idea of flex credentials has begun to take hold in Europe. Using flex credentials, or “one credential to rule them all”, consumers can pre-set conditions under which different payment methods are used behind a single set of credentials (e.g., purchases under $150 to debit and over $150 to credit or grocery purchases to this card and travel purchases to another). Having the right value proposition to stay “top of algorithm”, for example with the right rewards or benefits, will be crucial to ensure credit union payment stay in the mix of pre-selected payment methods.
- Merchant-Driven Alternative Payment Methods: Whereas merchant-driven alternative payment methods like buy now, pay later (BNPL) have become commonplace in online purchasing, they are now starting to pop up in in-person purchasing contexts as well with merchants embedding these options into their point-of-sale systems.
Trend #2: Technology is increasing the control consumers have over their purchases.
Flex credentials are an obvious way that technology is increasing consumer control—consumers can now make conscious decisions ahead of purchases about what payment methods are best for them. This idea of control is extending out is various other ways that consumers can control how, when, and where they’re spending their money.
- Shared Digital Credentials: Currently, primary cardholders’ controls over shared cards are fairly limited, sometimes as basic as setting a spending limit on a physical card. Shared digital credentials aim to change that: In the future, primary cardholders could share a digital credential with a secondary cardholder and control how and when that credential can be used, above and beyond just a simple spending limit.
- Digital Banking Subscription Management: Today, most consumers have at least one subscription service, and many consumers have many (some they are likely not even using). Meanwhile, the ability to manage across subscriptions within a single experience has been relegated to a few smaller fintechs, but there is potential for this to become more commonplace within financial institutions themselves. In the future, financial institutions could be the ones sending consumers reminders about upcoming payments and allowing them to cancel subscriptions from with their digital banking experience.
Trend #3: The importance of “real-time” continues to increase.
The topic of real-time payments is ever-present, most often in the context of consumers and their changing preferences and expectations. While this patterns continues to grow, here are three areas that real-time actions will have a big impact on the member experience.
- Real-Time Payments for Small Businesses: Beyond just a desire for instant payments, small businesses need fast and reliable payment methods to receive money from customers and send money to vendors. Lags create friction and detract from a great experience for any member, consumer, or business.
- Instant Account Funding: Account opening is an important moment in the member lifecycle, setting expectations for how good, or not, their interactions will be in the future. Instant account funding through real-time payments allows new members to begin using a new account right away, creating momentum for future usage of that account.
- Frictionless Card Issuance: With digital wallets, embedded payments, and flex credentials increasing a “set it and forget it” mentality around payments, it’s important that credit unions’ cards don’t fall out of members’ considerations. Whenever a member requests a new card or a card needs to be replaced, having immediate access to card information is key. A lag in access means that another card is taking its place and creates a friction point for the original card to become the default again. New card issuance needs to be real-time, at least digitally.
To stand out, payments must feel as frictionless as possible, happen instantly, and be reflective of a member’s needs.
So—what does this all mean for credit unions?
Flexibility is quickly becoming table stakes (if it isn’t already). Does a member want to use a debit or credit card for purchases? Does an accountholder want to adjust a secondary user’s access level? Does a member want to quickly manage their subscriptions from the security of their banking app? Making payment decisions convenient for members can give credit unions a competitive edge in today’s financial landscape.
Of course, flexibility is only as important as speed. A credit union’s technology also needs to support real-time interactions, from the transaction level to the service level. These capabilities will allow credit unions to be relevant from the time a member opens and funds their first account, to the first time they need a card replacement, and with every instant payment thereafter.
Finally, as always, it’s critical for credit unions to stay top of mind for their members. When it comes to payments, rather than being a card members pull out of their wallet by chance, a credit union’s card needs to be the one members consciously put at the top, both in their physical and digital wallets. To achieve this, credit unions need to understand their members’ spending habits and what matters to them when it comes to payments. That then becomes part of the value a credit union offers in return to members.
Credit unions operate in a saturated payments environment, alongside banks, fintechs, and even merchants. To stand out, payments must feel as frictionless as possible, happen instantly, and be reflective of a member’s needs.
— JG
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