It’s CU 2.0 Fintech Friday! Today, Chris Otey sits down with Pay By Car to discuss all things credit union, fintech, and digital innovation.

PayByCar is a payment system that streamlines purchases made in and from cars. Instead of going through the often-clunky process of handing a debit or credit card back and forth between driver and cashier.

In-vehicle purchases exceed $200bn yearly. From toll roads to car washes, drive-through coffee stands to fast food restaurants, paying on the go accounts for a significant portion of daily purchases. If you can imagine paying at the pump with an E-Z Pass, then you’re on the right track to understanding PayByCar.

PayByCar allows people to forego the usual card- or phone-based transaction. PayByCar transponders reduce in-vehicle transaction times by eliminating the need of a middleman.

Credit unions who wish to partner with PayByCar can offer their members a simple, easy payment system for in-vehicle transactions. In-vehicle payment systems are a growing technology with increasing demand. Giving members an in-vehicle payment option can reduce their transactional friction and increase their appreciation for their credit union’s services.

If this sounds like an intriguing credit union–fintech partnership, check out the video and PayByCar snapshot below!

Credit Union Fintech Snapshot: PayByCar

Top 3 Problems Solved

1. In-vehicle payments
2. In-vehicle transaction times
3. Drive-through sales

PayByCar Founder: Kevin Condon

PayByCar Market Strategy

Credit Unions and individual drivers.

Credit Union Fintech: PayByCar in the News

PayByCar simplifies in-vehicle payments

PayByCar partners with E-Z Pass

Interested in seeing more fintech entrepreneurship? Check out the CU 2.0 fintech infographic, Death by 1,000 Cuts. You can see firsthand the impact fintechs have had on the credit union industry, as well as how fintech innovation can improve your income statement, balance sheet, interest margin, services, and more.

Credit Union 2.0 believes fully in the power of credit union and fintech partnerships. With the shared goal to redefine multifaceted financial services models look like to members, more credit unions are looking to partner with forward-leaning fintechs.

If you want to learn more about credit union–fintech partnerships, click here.

It’s the Credit Union podcast! CU 2.0 is excited to bring you the fifteenth in a series of credit union podcasts from Robert McGarvey. Welcome to the CU 2.0 Podcast, regular interviews with credit union leaders, thinkers, movers, shakers and more.

Click the photo below to listen now!

Check out other podcasts in the series here!

By Robert McGarvey 

For Credit Union 2.0 

 

The Citi 2018 Mobile Banking Study told us what we should already have known: consumers love a decent mobile banking app.  And they use it a lot. 

How often? Citi said that mobile banking apps come in third, after only social media apps and weather. 

That’s based upon a survey of 2000 US adults. 

How often do your members use your app? 

The question is not theoretical.  It’s in your face, life and death.  If your members don’t like your app – and I personally dislike the apps used at the two credit unions I belong to – what’s your future look like? 

Almost half – 46% of consumers – told Citi they have increased their mobile usage in the past year.  Nearly two thirds of Millennials have done same. Expect that number to keep trending higher. As more of us discover that we can easily do most routine banking chores on a phone, we’ll migrate there – especially if we get the message that generally a mobile phone banking session (via cellular) is more secure than the same session on a Windows computer connected to WiFi. 

Citi threw more numbers at us. 8 out of 10 of us use mobile banking nine days a month. One-third of us mobile bank 10 or more times a month. 

91% of us prefer mobile banking over a visit to a branch – and don’t expect that number to decrease. Branches are dead, except for special purposes. If a consumer needs a wire transfer as part of a home purchase, sure, he/she may go to a branch (I did exactly that five years ago); it just seems simpler.  But for routine banking chores – including check deposit – it just is vastly more time efficient to do it in one’s home, work, or car. 

Personally I just deposited three checks via MRDC and transferred money from one account to another, all done at my desk, all done within five minutes. Going to a nearby branch would have eaten up at least 30 minutes and who has time for that? 

Not many of us anymore. 

According to Citi, we estimate we save 45 minutes a year by using mobile banking.   

“Mobile banking usage is skyrocketing as more consumers experience the benefits of greater convenience, speed and financial insights driven by new app features and upgrades,” said Alice Milligan, Chief Digital Client Experience Officer, U.S. Consumer Bank, Citi, in a press statement. “Over the past year we’ve witnessed this increase in engagement first-hand, with mobile usage in North America increasing by almost 25 percent, and we don’t see this trend slowing down any time soon.” 

Mobile banking users also told Citi they feel more in control of their finances.  95% believe they know their exact balance right now, compared to 85% of non users.  Citi elaborated: “Nine out of ten (91 percent) have experienced additional positive outcomes from mobile banking, including greater awareness of their financial situation (62 percent); fewer concerns about managing their finances (41 percent) and a better understanding of the services offered by their bank (38 percent).” 

Now for the bad news for you.  Read this: “Milligan added: ‘At Citi, we launched over 1,000 digital features in the U.S. in 2017, a nearly 500 percent increase over the previous year, and we continue to reimagine the client experience through innovative capabilities that deliver ease and simplicity for our cardmembers. In recent months, we have introduced a number of features to further enhance protection and security, such as face ID sign-on for the Citi Mobile App on iPhone X and email notifications when we detect unknown attempts to access customers’ accounts.’” 

How fast are your vendors upgrading your apps?  Judging by the ones at my credit unions I’d say not frequently. 

Not nearly often enough.  Not nearly enough to keep pace with the likes of Citi and Chase. 

Can you say better about your apps? 

You need to be able to,  That’s the reality for today. 

When I talk with senior executives at many credit unions a common complaint about their apps vendors is that upgrades come too slowly.  It’s rare that I don’t hear that complaint. 

But just maybe it’s no longer good enough just to complain. 

Take action to make faster – richer – upgrades a regular reality. That’s how to survive today. 

By Robert McGarvey 

For Credit Union 2.0 

The press release headline had me at go: “D3 Banking Technology Survey Finds More than Two-Thirds of American Digital Banking Users are Frust.” 

Nah, I didn’t know what “frust” means either.  The Internet tells me a secondary slang meaning is frustrated.   

And, you bet, I too am frustrated with credit union mobile and online banking – and I’m not alone, per D3, and that should definitely worry credit union execs. 

I have accounts at two credit unions. Digital products at both are inferior to Chase, where I also have an account.  If I could have only one account – and if I weren’t a big believer in the credit union movement – it would be with Chase.  I hate to say that. But it’s true and, thankfully, I am not limited to just one account. 

Chase is forever improving its digital products. My credit unions aren’t (and, yes, I know they are locked into their vendors’ upgrade cycles – but why accept that?).   

Five years ago just having mobile banking was good enough.  20 years ago just having online banking, however feeble, was cause for a celebratory press release. In 2018 that definitely is not enough. 

Not even close. 

D3 proves that with its Harris poll that surveyed 1600 digital banking users (who had used it in the past 12 months) and they were quick to vent. Two in three – 68% – expressed frustration with their digital banking experience. 

Count me among them. Yesterday I logged in to change the PIN of my debit card.  No can do in my credit union’s mobile banking app.  I eventually called an automated line and accomplished the task and how 1985 is that? 

Why can’t I do a simple, mechanical task like changing a PIN on a mobile phone – and, really, do you think call centers do a better job of screening out fraudsters? Ask Microsoft co-founder Paul Allen about that.   

Nor is there evidence to suggest doing this via online or mobile banking is inherently riskier than via a telephone call. 

So why can’t I do it? 

A bottomline reality is that in 2018 an increasing number of consumers want – indeed demand – that their mobile banking app and online banking let them do anything they could do in a branch visit. 

D3/Harris did find that there are age differences in expectations about mobile banking – but the differences aren’t as big as you might have hoped for. Said D3: “The survey revealed that digital banking users ages 18-34 are more likely than those ages 55+ to be frustrated with their digital banking experience, as 73% of the younger group indicated that they have been frustrated with their digital banking experience over the past year, compared to only 61% of adults ages 55+.” 

Even tho credit union members skew older, it is safe to assume 6 in 10 of them are dissatisfied with their mobile banking experience. 

For sure, too, members demand a feature rich digital banking experience: “The survey also found that more than half of digital banking users feel it is important for financial institutions to provide mobile deposit (70%), P2P services (66%) and mobile account opening (51%) as part of their digital banking offerings,” relayed D3. 

Here’s the frightening kicker: “32% of digital banking users report that they are willing to leave their current bank or credit union for a better digital experience.” 

That is blunt: one in three members who use digital services say they just may shift financial institutions to get better services. 

Mark Vipond, CEO of D3, observed that that’s the real issue here is “the number of American digital banking users – 32 percent as found in our survey – who are willing to leave their current banking relationship for a better digital experience. As new types of technology continue to be introduced, financial institutions are going to need a strategy built on technology that allows them to innovate and introduce new features and functionality faster than they have to date.” 

That’s the reality. Today consumers benchmark your app and website against Amazon, Netflix, Google and the other top digital services – and, sadly, at all but a handful of financial institutions the digital products are mediocre at best. 

What’s the solution: commit, today, to improving your digital offerings just about daily, certainly weekly.  Word of advice: smart credit unions are committing to continuous improvement of their digital offerings.  The era of a once or twice a year update is over.   

The path to credit union extinction is paved with complacency. 

Particularly with Millennials, credit unions have key positive attributes – they are local, they are community-minded, they generally are intimate scale, and they aren’t “big business.” All good. But will Millennials suffer a poor digital experience to do business with a credit union with bad online and mobile offerings? 

Most credit unions seem to be betting that indeed Millennials will. 

I don’t think they will. 

Do you? 

By Robert McGarvey 

For CU 2.0  

New research out of Javelin, sponsored by identity specialist Jumio, makes plain multiple facts and the central one is that digital banking rules and it does so across generations.  It’s not just a Millennial thing anymore. 

Another key takeaway: most financial institutions – eyes on you – stumble in many key places, particularly in deploying mobile banking. This is eroding member loyalty: they will sometimes simply flee to another institution. 

And security concerns continue to be a bother for many users, according to the Javelin research. Despite the fact that generally a mobile banking session over a cellular network is much more secure than one over an online network.  No matter. A lot of users remain very worried about safety and digital banking and the smart institutions are addressing these fears. 

What all this means is that mobile banking – increasingly the channel that matters in banking – is where credit unions have to double down on efforts to compete with the money center banks and the fintechs that continue to nibble at the user base of smaller, legacy institutions (talking about you, Amazon).   

Al Pascual, SVP, Research Director and Head of Fraud & Security at Javelin Research elaborated: “To capitalize on the growing demand for mobile banking as millennials grow in spending power, financial institutions must simplify user experience and address ongoing concerns around security and fraud.” 

Dive deeper into the report and the results can surprise.  For instance, although 76% of Millennials now regularly use digital banking, 77% of Boomers do – and, yep, that says Boomers have greater acceptance of the channel. 

But Millennials are way ahead with mobile banking. 62% use it monthly, compared to 34% of Boomers.  Also, claimed Jumio, “millennials report stronger satisfaction with nearly all aspects of mobile banking, compared to Generation X and Baby Boomers.”  

Millennials definitely have fewer gripes about mobile banking.  25% of them express concerns with the channel, compared to 33% of Gen X and 35% of Boomers. What kinds of concerns? 28% grumble about “hidden fees,” while 53% complain about ease of use. 

The study uncovered valuable findings when it focused on abandonment issues – why do we just close out when midway into a task in a digital banking session?  36% said they did so because “the process [was] taking too long.”  20% complained about authentication “being too time consuming.” 

Waste a consumer’s time – and the consumer is the judge of this, not a cautious credit union manager – and they will blow you off.  Just that fast. 

Here’s the kick in the head: “One-third of consumers respond negatively to their FI after abandoning a mobile banking activity,” reported Jumio. Understand: 7% decided to open an account at another financial institution.  And 13% shared their grumble about the experience with family and friends. 

That’s word of mouth you don’t need. 

In this regard, the Javelin research shows that account opening tools must cater to Millennials, mainly because they are the leading cohort when it comes to adding new accounts and services. Their chief complaint: it takes too long.  The antidote: speed it up. 

And make it easy to complete the tasks on a mobile device. That is becoming a crucial battleground. 

When it comes to authentication, Millennials in particular prefer biometrics, especially eye scans and facial recognition, according to the Javelin data.  Farther down the list are legacy modes such as QR codes.  Very probably institutions that want to stay on the cutting edge of Millennial acceptance need to roll out multiple biometric modalities. 

Another, key piece of advice from the research is: “Put security first (and make sure your customers know it).”   

“But… weave security into the customer experience in smooth, fast, intuitive ways.” 

Don’t make security into hurdles members have to jump – how many routinely forget passwords? – but do let members know that security protocols are always there, always protecting them. They want that reassurance even if they don’t want the hassles of dealing with in your face security challenges (what street did your father live on at age 6?).   

Sift through the Javelin findings and there is much to cheer credit union leaders. There is no way they can compete with money center banks in terms of branches – but they don’t need to.  What a credit union needs is top grade digital experiences, online and mobile, that include easy account opening and build in seamless security that will protect members. 

None of that is easy. 

But it all is doable at credit unions that embrace the digital mandate. 

By Robert McGarvey 

 For CU2.0  

A new report from RemoteDepositCapture.com makes plain that mRDC now is a must for credit unions.  Declared the report: “mRDC is no longer a competitive differentiator, but instead a ‘must-have’ offering Financial Institutions need simply to remain competitive.” 

Without mRDC you just may not be competitive. That’s a stinging reality. 

This claim, incidentally, is underscored by a separate report, led by the Federal Reserve of Boston, that claimed 73% of the institutions it surveyed already offer mRDC and another 18% “plan to offer.”  Just 9% don’t have mRDC on their dance cards. 

Small credit unions are very much included among the adopters. Said the Fed: “ Even among the smallest respondents, 78 percent support or plan to support mRDC within two years “ It defined “smallest respondents” as < $100M in assets. And just 22% of them have no plans to offer mRDC. 

Big institutions are all aboard. Among institutions with assets >$1 billion, the Fed said 92% already offer mRDC and only 3% have no plans to follow. 

mRDC has become a must have.  That’s a key reality in today’s new reality where we have entered the era of mRDC 2.0. Now the focus is on new uses, more usage by members, and there also is a wholly new kind of thinking around mRDC fraud and how to combat it. 

A lot has happened to mRDC since 2009 when USAA debuted mRDC.  A handful more joined the chase in 2009-2010. But then the race was on at full speed inside most CUs to offer mRDC. 

Initially many credit unions grumbled about the fees associated with mRDC – fees charged by third party processors – but, by now, most larger institutions have simply decided to suck up the added costs, which incidentally usually are much, much lower than the costs associated with a paper check deposited at a branch. 

That’s a fact: mRDC saves a credit union money.  While expanding the convenience and utility of the account to members who now can make deposits while dressed in their PJs and sitting at the breakfast table.  That is cool and it ultimately is why mRDC usage will remain popular as long as paper checks circulate and these days about 17 billion of them get written in the US annually.  That number continues to slip down but it will be years before checks vanish (and aren’t we all waiting for the long predicted death of cash?). 

Face it: checks are hanging around and so will mRDC because it just is so much better than driving to a branch or to an ATM. 

John Leekley, CEO of RemoteDepositCapture.com, said many institutions have gotten increasingly more skilled at their mRDC offerings. 

A plus: Leekley pointed to data that shows a 35% year over year increase in mRDC transactions which means more checks are getting deposited this way. 

Are more fraudulent checks also getting deposited? Roll back the clock and that was a huge fear among many credit union execs, some of whom stalled when it came to rolling out mRDC.   

Today’s take is very different, said Leekley, who indicated that his survey found that “the vast majority (74%) of respondents indicated they had no losses directly attributable to mRDC.” 

That means zip. 

The big fear still revolves around duplicate deposits – depositing the same paper at multiple institutions – but the numbers don’t show there is a threat of any real magnitude. Leekley’s report goes on: “Exclusive to RemoteDepositCapture.com, the industry’s mRDC Duplicate Loss Rate in 2016 was just 0.035%, or 3.5 in every 10,000 items. To put this in perspective, according to the Federal Reserve, the industry’s overall return item rate was 0.4%, or approximately 40 out of every 10,000 checks deposit.” 

What’s next for mRDC? Most credit unions now appear to want to get more consumers depositing more items with mRDC. 

Leekley also indicated many institutions are giving a re-think to mRDC deposit limits. Traditionally, some institutions set very low limits, to manage exposure to fraud. But, said Leekley, more effective and more consumer friendly approaches involving smart use of big data are taking hold.   

Many institutions also are looking to increase business use of mRDC, added Leekley, who said this was a big frontier for many.  Exactly how will be a huge topic of discussion and exploration this year but know this: now is the time for you to begin to seek to push mRDC usage into new arenas. 

It’s a good tool, it works. Let its success fuel your institution’s.  

By Robert McGarvey for Credit Union 2.0

Two stats jump out of a PSCU and Javelin report entitled “The Credit Union Guide to Opportunities in IoT, Biometrics and E-commerce.”  Credit union members love their smartphones -80.9% own one. That’s roughly comparable to big bank customers – 88.4% of them own a smartphone. 

Where credit union members falter however is in mobile wallet usage. 46.3% of big bank customers have used a mobile wallet – such as Apple Pay – in the past 90 days. But just 10.8% of credit union members have. 

In the past week 3.7% of members have used a mobile wallet. 19.3% of big bank customers have. 

Those stats have to scare you. Credit union members have smartphones. They just aren’t using them to pay. Big bank customers are 4x more likely to pay by phone. 

Why are credit union members so slow to adopt mobile wallets? It’s all the more puzzling when so many big retailers have embraced Apple Pay and that typically also means Android Pay and Samsung Pay too. It’s now easy to go a day without ever using plastic cards, from coffee in the a.m. at Starbucks using its app through stocking up on dinner groceries at Trader Joe’s or Whole Foods with Apple or Android Pay. 

But there just aren’t many inside credit unions. 

Mobile wallet adoption is also fueled by an increasing number of online and in app merchants that have begun to accept Apple Pay or PayPal. That means a wary consumer doesn’t have to input credit card info and for some of us it’s a plus to just pay with Apple Pay.  

PSCU and Javelin said that the relatively low credit union usage of mobile wallets compared to big bank customers leaves credit unions “vulnerable.” 

So it is worrisome that comparatively few credit union members use mobile wallets. 

Partly this anemic usage is because credit union members skew older and the demographics that have most jumped on mobile wallets are younger.  

Another factor: few credit unions have actively marketed mobile wallets to their members. Initially, when Apple Pay debuted, as credit unions rolled out the tools they blew trumpets to announce they had the latest technology. But now many are silent. Plainly they would rather tout other products to their members, in part because mobile wallets such as Apple Pay cost a credit union money while many other products – such as a credit union’s own credit cards – make the institution money. 

That’s understandable but also short-sighted. Mobile wallets are the future of payments and an institution that plans to hang around needs to be at the forefront of surging consumer usage. 

Look again at how much more mobile wallet usage there is at the big banks. The disparity with credit unions is frightening. 

At least some big banks have further fueled mobile wallet usage by doling out perks to customers who use them. Chase for instance has promoted mobile wallet usage with a promotion that adds a bonus point for every dollar spent with mobile wallets on some credit cards.  

Wells Fargo also has offered sweeteners to mobile wallet users. 

What’s a credit union to do? Definitely, think about offering promotional bonuses to encourage usage. 

But there are free tactics too. Start by reminding members of the wallets supported by your institution. Make it easy for a member to find this out. DCU in Massachusetts does this well. Study its pages.  

Navy Federal, the first credit union to offer Apple Pay, is another to study.  

Then do as PSCU and Javelin advise: “The key challenge for credit unions will be persuading their members to load their mobile wallets with the credit union’s debit and credit cards instead of those from another banking institution.” 

How to get there? Ask – and keep asking. 

It’s not easy to get a member to change a credit card preference that has been entered into a mobile wallet. Many have a faint memory of what card is associated with Apple Pay. 

Ask and ask again.