emerging payments - co-op financial...

Emerging Payments:The Next Step in Providing MemberConvenience via Channel Expansion

Presented by CO-OP Financial Services

Today’s Presenters

DR.KATHYHERZIGER-SNIDERVice President, Product Development

AMANDASMITHSenior Manager, Technology & InnovationAMANDASMITHSenior Manager, Technology & Innovation

GRACEMANUELESenior Product Manager

Agenda

Introduction

Definitions

Marketplace

Recommendations

CO-OP Vision

CO-OP Current and Future Solutions

Q&A

Introduction

Definitions

Marketplace

Recommendations

CO-OP Vision

CO-OP Current and Future Solutions

Q&A

Introduction to the Situation

Introduction

• Kaleidoscope of options for access• Mobile devices are an extension of

consumer’s arms• Apps to “do” anything and everything• Payments - most sought after/most

fear-inducing mobile activity• For many online and mobile services

= convenience• No multi-institution, multi-functional

financial app yet

• Kaleidoscope of options for access• Mobile devices are an extension of

consumer’s arms• Apps to “do” anything and everything• Payments - most sought after/most

fear-inducing mobile activity• For many online and mobile services

= convenience• No multi-institution, multi-functional

financial app yet

Credit Unions are Positioned to Benefit fromMobile/Virtual Banking Revolution

ONLINE BANKING INNOVATION ACCESS

73% of credit unionmembers use online

banking at least 3times/year

60% of credit unionmembers rate theirfinancial institution

excellent for providinginnovative technologies

85% of credit unionmembers rated their

CU performanceexcellent for access toonline/mobile banking

services

Source: Consumer Pulse 2012

Top Convenience Activities

• Check balance or history

• Transfer money between accounts

• Transfer money to a friend belonging to another CU or a bank

• Deposit a check remotely

• Receive a text alert from financial institution

• Pay a bill digitally

Source: “Consumers and Mobile Financial Services,” Federal Reserve Board, March 2012

• Check balance or history

• Transfer money between accounts

• Transfer money to a friend belonging to another CU or a bank

• Deposit a check remotely

• Receive a text alert from financial institution

• Pay a bill digitally

Definitions ofEmerging Payment Components

What is P2P?

P2P payments consist of moving money between people and theirvarious types of sending and receiving accounts.P2P payments consist of moving money between people and theirvarious types of sending and receiving accounts.

INCLUDES

How does P2P Work?

facilitates movement offunds between the parties

ACHACH

Some Major Providers of P2P

What is a digital wallet?

…provide a view of and access toaccounts and payment tools. Theycan deliver real-time coupons,offers, and loyalty/rewardprograms.

…provide a view of and access toaccounts and payment tools. Theycan deliver real-time coupons,offers, and loyalty/rewardprograms.

Account Aggregation + Merchant Acceptance= Successful Wallet

Digital wallets start as account aggregators but the keyis how the wallet is used to interact with the merchantboth online and at the POS

Digital wallets require the intersection of accountaggregation and merchant acceptance for successDigital wallets require the intersection of accountaggregation and merchant acceptance for success

The goal is getting the card to the top for usage

How Do Other Channels Feed Your Wallet Strategy?

Consider:

MOBILE ONLINE

CLOUD SECURE ELEMENT

BRICK & MORTAR INTERNET MERCHANT

Current State of Wallets for CUs

• Currently there are no mature wallet products• Security is a concern with all wallets• Your cards can be enabled in multiple wallets• Conversely wallets can have many participants,

e.g. Google wallet• No current product solves “top of wallet” challenge

• Currently there are no mature wallet products• Security is a concern with all wallets• Your cards can be enabled in multiple wallets• Conversely wallets can have many participants,

e.g. Google wallet• No current product solves “top of wallet” challenge

Examples of Current Wallet Products

Other Types of Wallets

Other types of wallets do not require a swipe or tap.

These solutions are data-driven vs. card-driven.

Other types of wallets do not require a swipe or tap.

These solutions are data-driven vs. card-driven.

PayPal:The New Way to Pay In-Store

Home Depot now allows customersto pay at the register by entering aphone number and pin.

No cards required.


PayPal:The New Way to Pay In-Store

Home Depot now allows customersto pay at the register by entering aphone number and pin.

No cards required.


Square

• Credit/debit card linked to Square account• Open "tabs" at places you'd like to buy things• Phone connects with shop and shows your

name and picture at the register• When ready to buy give name to cashier• Cashier matches name and photo and

confirms transaction• You don't even have to take out

your phone or wallet

Square

• Credit/debit card linked to Square account• Open "tabs" at places you'd like to buy things• Phone connects with shop and shows your

name and picture at the register• When ready to buy give name to cashier• Cashier matches name and photo and

confirms transaction• You don't even have to take out

your phone or wallet

What is NFC?

NFC technology allows for communication between two devices thatare in close proximity to one another.

NFC technology respects the traditionalcard issuer/acquirer relationships, whichkeeps financial institutions involved inthe payments value chain.

NFC technology allows for communication between two devices thatare in close proximity to one another.

NFC technology respects the traditionalcard issuer/acquirer relationships, whichkeeps financial institutions involved inthe payments value chain.

Near-Field Communications

The U.S. is nearly a decade behind the European Unionin deploying chip reader terminals at the point of sale

SLOW ADOPTION RATES

The future of NFC communications as a delivery channel for payments is heavilyintegrated and dependent on the merchant endorsement and enablement of the

technology as part of the payment checkout process

ONLY 3-4% OF PHONESHAVE NFC CHIPS

140,000 OF 7 MILLION MERCHANTSHAVE NFC READERS

Marketplace

Recent Developments

September 21, 2012Apple launched the iPhone 5 withoutan NFC chip, prompting many towonder aloud if they wereleapfrogging that technology

September 21, 2012Apple launched the iPhone 5 withoutan NFC chip, prompting many towonder aloud if they wereleapfrogging that technology

Recent Developments

September 27, 2012Bank of America announced it istesting Quick Response (QR) codesfor mobile payments, also bypassingchip technology

September 27, 2012Bank of America announced it istesting Quick Response (QR) codesfor mobile payments, also bypassingchip technology

Recent Developments

November 8, 2012Starbucks Using Square

Launched in 7,000 Starbucks stores

Plans to use “geofencing” to recognizecustomer as they near the POSterminal. Customer can pay withoutremoving a card or mobile device fromtheir pocket.

Linked to a debit or credit card,this app does not require reloadslike Starbucks app does.

November 8, 2012Starbucks Using Square

Launched in 7,000 Starbucks stores

Plans to use “geofencing” to recognizecustomer as they near the POSterminal. Customer can pay withoutremoving a card or mobile device fromtheir pocket.

Linked to a debit or credit card,this app does not require reloadslike Starbucks app does.

Recent Developments

Isis (the mobile carrier consortium)and Google are runningindependent pilots. Neither seemsto be getting off to a crisp start.

Recent Developments

Alternative to debit/checkingaccounts

Announced by Walmart andAmerican Express

Contains digital wallet featureslike P2P

Not FDIC insured

No fees

by

Alternative to debit/checkingaccounts

Announced by Walmart andAmerican Express

Contains digital wallet featureslike P2P

Not FDIC insured

No fees

Recent Developments

Mastercard/VisaPayPass and Paywave have beenaround for years

No real traction

Both companies developing walletproducts

Mastercard/VisaPayPass and Paywave have beenaround for years

No real traction

Both companies developing walletproducts

Recent Developments

3 Big Banks have teamed up

A Mobile P2P

Payments are powered by ACHby

MCX (Merchant Customer Exchange)

• Coalition of leading retailers announced in August 2012plans for a mobile commerce platform that works on anysmartphone

• Open to all branded credit and debit cards, proprietarycredit and loyalty cards.

• Merchants are looking to lower their transaction costs.

• Likely to involve multiple network channels for routing,real-time settlement and EMV compliance.

• Coalition of leading retailers announced in August 2012plans for a mobile commerce platform that works on anysmartphone

• Open to all branded credit and debit cards, proprietarycredit and loyalty cards.

• Merchants are looking to lower their transaction costs.

• Likely to involve multiple network channels for routing,real-time settlement and EMV compliance.

MCX (Merchant Customer Exchange)

EMV (Europay/MasterCard/Visa)

• Open-standard set of specifications for smart cardpayments and acceptance devices

• FIs, retailers and consumers collectively benefit fromthis migration

• Dynamic authentication with enhanced contactlessenvironment creates a reliable/rapid infrastructureneeded for seamless mobile payments*

• With EMV as the foundation, future innovations likebiometric verification and new payment types can moreeasily be implemented

• Open-standard set of specifications for smart cardpayments and acceptance devices

• FIs, retailers and consumers collectively benefit fromthis migration

• Dynamic authentication with enhanced contactlessenvironment creates a reliable/rapid infrastructureneeded for seamless mobile payments*

• With EMV as the foundation, future innovations likebiometric verification and new payment types can moreeasily be implemented

Source: MasterCard, April 2012 report

CO-OP’s View:Recommendations, Vision and Solutions

Getting CU Card to Top of Wallet

• Get experience, educate yourself and be informed

• Counsel members so they know to use your guide– NFC chip technology and mobile wallets in a state of flux– No clear leaders in the field

• Select a trusted partner that has your best interest in mind

• Get experience, educate yourself and be informed

• Counsel members so they know to use your guide– NFC chip technology and mobile wallets in a state of flux– No clear leaders in the field

• Select a trusted partner that has your best interest in mind

Getting Started

• Create a multi-channel member strategy that includes– Mobile, Online, Wallets, Rewards, Loyalty

• Strengthen your relationship with your members to avoiddisintermediation of the member from the CU

– Maintain your relationships while providing emerging paymentstechnologies members desire

– Assess and fill any gaps to get back to basics with typical cardactivation and usage

• Create a multi-channel member strategy that includes– Mobile, Online, Wallets, Rewards, Loyalty

• Strengthen your relationship with your members to avoiddisintermediation of the member from the CU

– Maintain your relationships while providing emerging paymentstechnologies members desire

– Assess and fill any gaps to get back to basics with typical cardactivation and usage

What CO-OP Offers

• Connectivity between you and your members viatrusted CO-OP Connect

• Real-time Good Funds model– Meets member expectation of immediacy; on-demand culture

• Options to meet your needs– One-size-fits-all approach does not work for you and your

existing infrastructure, nor for your members

• Connectivity between you and your members viatrusted CO-OP Connect

• Real-time Good Funds model– Meets member expectation of immediacy; on-demand culture

• Options to meet your needs– One-size-fits-all approach does not work for you and your

existing infrastructure, nor for your members

Solving the Top of Wallet Challenge

• CO-OP Total Revelation is the perfect analytics tool tohelp you really understand your members’ preferencesand usage patterns

• Use data to drive usage of your cards in wallets– Offer double points for wallet usage

• CO-OP Total Revelation is the perfect analytics tool tohelp you really understand your members’ preferencesand usage patterns

• Use data to drive usage of your cards in wallets– Offer double points for wallet usage

CO-OP’s Vision for P2P and Digital Wallets

Create a payments network that operates online, and in .

Make it easy for members to to their accounts.

to deliver maximum merchant locations for POS transactions.


Work with credit unions to ensure the card is .

Create a delightful user interface for a .

Allow credit unions to in CO-OP’s wallet or anyone else’s.

.


Afford with existing mobile and home banking apps.

end users’ privacy and financial data.

Provide a for credit unions and their members.

Current Solutions Offered by CO-OP

MasterCard Paypass and Visa Paywave NFC– Pilot programs launched 3 years ago and still running– Merchant enablement is very low

“Pay Anyone” transfer function– Supported in eCom Bill Payment product

CO-OP branded cards in digital wallets– Amazon and Apple top the list

Me2Me account transfer– Pilot program for all CUs connected to a CO-OP switch

MasterCard Paypass and Visa Paywave NFC– Pilot programs launched 3 years ago and still running– Merchant enablement is very low

“Pay Anyone” transfer function– Supported in eCom Bill Payment product

CO-OP branded cards in digital wallets– Amazon and Apple top the list

Me2Me account transfer– Pilot program for all CUs connected to a CO-OP switch

Future Solutions from CO-OP

• Wallet with Account Aggregation

• Transact between my credit union accounts

• Transact between my accounts and yours within credit unions

• Remote Deposit Capture

CO-OP’s Phased Approach: Phase I

• Wallet with Account Aggregation

• Transact between my credit union accounts

• Transact between my accounts and yours within credit unions

• Remote Deposit Capture

Sprig: Available 2012

CO-OP’s Phased Approach: Phase II

• Pay Anyone• Standalone P2P available to integrate with

your current solutions.• Standalone Remote Deposit Capture• Wallet partnerships that add value and strengthen

relationships• Mobile alerts

• Pay Anyone• Standalone P2P available to integrate with

your current solutions.• Standalone Remote Deposit Capture• Wallet partnerships that add value and strengthen

relationships• Mobile alerts

Polling

1. Do you current have a P2P Solution?

2. If not, are you planning to implement one in the next 12 months?

3. What is your primary area of interest regarding wallets?a. Getting to top of walletb. Understanding integration issuesc. How to avoid disintermediation (big data)d. How to keep up with emerging technology while keeping costs downe. Learning about wallet options available to my membersf. Validating my credit unions current or planned offering in this spaceg. None of the above

1. Do you current have a P2P Solution?

2. If not, are you planning to implement one in the next 12 months?

3. What is your primary area of interest regarding wallets?a. Getting to top of walletb. Understanding integration issuesc. How to avoid disintermediation (big data)d. How to keep up with emerging technology while keeping costs downe. Learning about wallet options available to my membersf. Validating my credit unions current or planned offering in this spaceg. None of the above

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