CU Wallet, a mobile payments technology provider, and Connect Financial Software Solutions have launched a mobile wallet application that is being marketed to credit unions nationwide.
Since its announcement last month, more than 30 credit unions, with 4 million members and $52 billion in assets, have signed up to offer members the technology. Las Vegas-based One Nevada Credit Union and Clark County Credit Union are among participants.
“The idea here is for credit unions to control their own destiny in this space,” Paul Parrish, executive vice president and CFO of One Nevada, told the Las Vegas Business Press. “We’ll plug it into our mobile banking app.”
Parrish expected One Nevada to launch a pilot program using the mobile technology by the end of the first quarter. The credit unions that have signed up handle 40 million debit transactions per month.
Wayne Tew, president and CEO of Clark County Credit Union, said his company is exploring the introduction of a mobile wallet. Tew said the credit union has given CU Wallet some “seed money” to get the project off the ground.
“We are waiting to see that they do,” Tew said. “We are waiting to see if they can compete with Google and ISIS.”
Google Wallet is a free digital wallet that securely stores your credit cards, debit cards and offers. The Google Wallet app lets consumers tap and pay to check out if they have an near field communication-enabled Android device. ISIS is a similar system introduced by AT&T, T-Mobile and Verizon.
The strategic agreement includes Connect Financial Software Solutions, a Salt Lake City-based company that supplies credit unions with online banking, mobile remote deposit capture and other custom applications.
Parrish said credit unions will be able to use the technology to gain insight into members’ needs, offer incentives and broker deals with business partners using the app. Local and national retailers and billers will partner with CU Wallet for connection to credit union members through the application.
“As mobile wallets become more prevalent, credit unions run a real risk of becoming a back-end commodity,” said Grant Parry, president of Connect FSS. “Survival in the mobile age is about scale, in other words, the number of consumers that a financial institution can bring to a partnership with a merchant.”
Parry said individual merchants don’t have the necessary scale, but collectively they are in a position to significantly shape the payments landscape.
Direct merchant transactions will occur via a Quick Response, or QR, code-based system with account data stored behind a cloud-based firewall. The application will have a “pay” button, which would open the camera feature on the phone.
Parrish said the One Nevada app works on both Apple and Android phones.
“It is now quite apparent that having a robust mobile payments strategy is critical to the long-term success of credit unions,” Parrish said.
The camera would scan the code displayed by the retailer. A One Nevada or Clark County Credit Union member would choose a method of payment, confirm an amount and enter a PIN. CU Wallets is considering adding NFC technology as merchants add near-field communication terminals.
“It hasn’t really taken off with merchants,” Parrish said. “PayPal and Google wallet have been introduced. Our members could use those, but they’re not meant to be offered to credit unions.”
The Google Wallet never launched the wave of mobile payment platforms powered by NFC.
“It’s really an unknown in the market other than at Starbucks and a few other places,” Tew said. “I think mobile wallets are coming and we want to be a part of it.”
Parrish said a Google product is not something offered by One Nevada. He said Google may offer a mobile wallet, but what they want it to be in the middle of the transaction, and in the middle of all that data.
Parrish said what if Google got data on 10 million transactions at Home Depot and 1 million from Lowes, they could look at those to tell either company what consumers are buying and what deals are working.
“There is still a high degree of uncertainty among merchants, financial institutions and members,” Parrish said. “Visa and Mastercard are going to try and mandate an NFC system.”
Parrish said QR codes only need a software upgrade, not the expense of new hardware.
By providing a credit union-branded mobile wallet app, credit unions are positioned to meet the immediate demands of an increasingly mobile membership, attract a new generation of members, and generate new, sustainable streams of revenue.
Tew said it is an effort to avoid a loss of interchange fees that the credit union earns through credit card and debit card transactions. He said interchange fees are a modest part of Clark County Credit Union’s revenue.
“That is a concern of ours,” Tew said. “We don’t want to be left out of the market.”
NCUA: Q3 LOAN GROWTH BEATS PRIOR YEAR
Total loans outstanding at federally insured credit unions grew by 6.8 percent in the year ending Sept. 30, according to a report of state data complied by the National Credit Union Administration.
That was an increase of 2.5 percent compared with the previous year. Nevada was second in the country in terms of decline in loan growth at 1.7 percent.
Membership increased in 43 states and territories but declined in nine states, the NCUA said. Nevada ranked 49th posting a 0.9 percent decline.
Utah and Washington had the highest return on average assets in the third quarter. Nevada was ranked fourth with a ROAA of 109 basis points.
“Nationally, the annualized return on average assets at federally insured credit unions was 80 basis points during the first three quarters of 2013,” the NCUA said in its 12-page report. “ROAA was 86 basis points during the first three quarters of 2012.”
In terms of credit unions with positive net income, Nevada ranked 14th at 82 percent, compared with the national average of 72 percent. Nevada was 51st in delinquency rate at 1.8 percent, a modest increase of the 1 percent national average.
Nevada (162 basis points) had the highest annualized net charge-off rate in the country (U.S. 57 basis points), while annual asset growth was 36th at 3.5 percent, and deposit growth was 37th at 3.1 percent.
The NCUA survey found nationwide annual asset growth was 4.3 percent, and deposit growth was 4.2 percent.