I just read a scary article which should be required reading for all credit union staff, board and regulators. It describes a future which is great for consumers, but destroys 30% of credit union fee income during the process.
My trusty friend Dwayne Naylor of Langley FCU forwarded me the article The Future of Money which describes a cadre of crafty disruptors that aim to make the current payment systems obsolete.
Analysis by Callahan & Associates indicates upwards of 1/3 of credit union fee income comes from so-caled interchange revenue. < Gulp >.
Filene, working in conjunction with Members Development Company is about to commission a study on the future of payment systems. We’ve surveyed a handful of credit unions to get a handle on key areas of focus. After reading this article, I’d be curious to hear your thoughts on what the research should uncover.
Leave your comments below and thanks for your input. Time is of the essence.
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I read that article in Wired as well and I didn’t see anything too earth-shattering. To change the payments system you much change the enterprises (banks and CU’s) and the merchants. And TwitPay isn’t going to do that.
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I suggest you read the comments attached to the article you site. These “transactions of the future” are still just the means by which consumers tell their financial institutions to move their funds – the same as a check, a debit card, or a credit card. Someone has to take on the risk, and that someone is going to charge a fee for doing so.
If PayPal steps in and serves as the gateway to the financial institution, they take on the risk, as well as the ability to charge fees for their service, which, by the way, are MORE expensive than Visa or MasterCard. While PayPal may be more convenient for the consumer, it’s less convenient for the merchant (with PayPal’s ability to freeze funds for seemingly arbitrary reasons), they are unregulated, and they are more expensive. Exactly how is that going to reduce costs?
Yes, PayPal provides an alternative for merchants and some amount of convenience for consumers. But are they trusted? Should they be? Would expanded use of PayPal lower costs to consumers?
The article displays the author’s ignorance of the monetary system. I’d like to think that Filene doesn’t share in that ignorance.
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Clay and Robbie,
In my reading this article describes what could be. The solutions they discuss in this article are not best in class solutions, obviously. My reason for pointing out this article is the need for CUs to look ahead 5 or 10 years from now when some new technology or mash up of technologies take financial institutions out of the payments value chain. This could happen quicker as evidenced by Apple’s dominance of the music industry through iTunes.
For that reason, I’m curious to know what aspects of the payment systems landscape would be most beneficial for us to research.
Look forward to your thoughts.
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