MADISON, Wis. (6/5/13)--Credit unions are being urged to figure out how they will fit in with mobile point-of-sale (POS) payments--before it is too late, according to a May 28 article in The Financial Brand.
The payments space traditionally has been dominated by credit unions and banks. However, financial institutions already are facing competition from new players in the e-commerce and mobile point-of-sale fields.
While checking accounts still are consumers' key payment mechanism, nearly 15% of online consumers have made a mobile POS purchase in the past 30 days, according Rob Rubin, a partner and head of the banking practice with Novarica and author of the article.
PayPal, for example, has captured 57% of the mobile POS users market because it has courted merchant service providers that provide retailers with POS systems. And Starbucks Corp. has its own mobile payment app to accept payments and allow customers to load money in an account to use at a POS.
How big a threat are these competitors? Starbucks's mobile card volume has reached 4.5 million payments a week--which it calls a "seismic change" in how consumers use mobile phones and social media (PaymentsSource.com May 29). The coffee company plans to expand its rewards system to grocery stores. It already is distributing bags of coffee with an attached tag that the consumer uses to earn stars.
"This is just the beginning of integrating card loyalty, social and mobile, in multiple channels of distribution," Starbucks Chairman and President/CEO Howard Schultz told the Sanford C. Bernstein Strategic Decisions Conference May 29.
In 2009, Starbucks began its dedicated card app that worked in 16 stores. In 2010, it deployed the system in 1,000 stories built within Target retail stores before rolling the system nationwide.
The net effect of consumers' ability to load money to use at a POS is a disaggregation of features consumers once associated with their checking provider, said Rubin in The Financial Brand article. "This represents a tremendous risk for banks and credit unions because it whittles down the value of 'primary banking relationships'--essential to growing relationships and revenues," he wrote.