For many years, consumers have had three main options to choose from when they needed to make a purchase or payment: cash, check or debit or credit card. But recently, a fourth option is available to and adopted by increasingly more people: mobile pay.
It's true that mobile pay adoption rates have been relatively low thus far, and that cash is still considered by many to be the easiest and most secure form of payment out there. However, that dichotomy may soon change.
According to a recent study by IEEE, approximately 70 percent of technology enthusiast respondents indicated that they believe mobile payments will be secure enough to overtake cash and cards by the year 2030. IEEE also noted that more than half of respondents believe digital currency will gain increasingly more popularity in the years to come.
Because of this changing landscape of payment preferences, credit unions and retailers alike must in the near term adopt the trends that will gain momentum soon. By establishing themselves in the mobile pay arena now, they will be able to have gained the trust of many members and consumers later on.
Mobile matures around the world
The prediction that mobile will eventually be America's payment choice of the future is in line with what other countries are seeing. According to Payments Source, almost 40 percent of Danish citizens use Danske Bank's Mobile Pay, which allows users to make mobile payments in stores, online and directly to other people. The country has predicted that it could go completely cashless as early as this year.
Across the North Sea, the United Kingdom is seeing similar trends. According to CoinTelegraph, a news source reporting on current trends in finance and payments, fewer than half of all transactions made in the U.K. in 2014 were with cash, representing a fall of 4 percentage points in just a year. Meanwhile, more than 44 percent of online payments were completed on mobile phones.
Additionally, The Co-Op, a U.K. retailer, estimates that around 65 percent of all transactions at its 2,800 locations will be made using mobile phones by the year 2025, according to NFC World+. Currently, approximately 11 million contactless payments are made at the store's many locations every month.
Upgrades to be made
While trends show mobile payments are sure to grow to be more common than cash in the next few years, there are still some issues to be worked out among U.S. financial institutions, retailers and consumers. For example, Payments Source explained that trust between consumers and retailers and financial institutions needs to improve, as does consumer privacy and security.
Security is one of the main reasons that many consumers are wary of mobile pay. Data breaches at some of the most popular stores have caused distrust among consumers.
Once trust and security are increased, though, the only thing standing in mobile pay's way is habit. But before mobile is a customer's go-to payment method, there need to be enough retailers that accept payments made this way, and a prime app or technology that becomes the standard. Only then can mass adoption occur, a necessary step for mobile payments to overtake cash and cards.
Credit unions must be ready
During this transition, it is important that credit unions adopt mobile pay sooner rather than later. Bringing mobile pay to their collection of services it offers both individual and business members early goodwill, helping to build loyalty and trust for later on. Offering it to business members especially will help them advance their business to make it more popular among those customers that prefer using their mobile wallets over their cash and cards.
According to Forrester, about 57 percent of consumers are interested in using a mobile wallet, and many of them would like to see a rewards program connected to it. Currently, few mobile payment platforms offer a rewards program. Integrating one could be a good strategy for a credit union looking to offer a mobile wallet option that is different and more appealing than what its competitors provide.
Offering a mobile payment platform won't just benefit a credit union's members. Aside from greater retention, the credit union can also use the information gained from the usage of the platform to gain additional consumer insight, which can then be incorporated into marketing campaigns.