It’s not unusual for legacy financial services providers to shrug off Bitcoin and virtual currencies. There’s a tendency to view virtual currencies as something only attractive to a small segment of the financial consumer base. And while that may be true, the digital transformation of financial services that is underlying virtual currencies is a very real trend that must be addressed.
There are also indications that virtual currencies like Bitcoin that are powered by blockchain and distributed ledger technologies are headed for the mainstream. Recently, Burger King announced it would be testing Whoppercoin on a distributed ledger platform. It doesn’t get more mainstream than fast food burger chains!
Virtual currency, just one more way to pay
Cash, cards and mobile payments are not likely to disappear. If they do, it will be a very long time from today. Most of us having these discussions now will not survive to see the end of cash.
Even if the use of physical cards is displaced by wearables and other smart devices, the need for immediate access to funds will remain. As will access to credit. As will a strong ally in the fight against fraud. The card networks, their partners and the world’s financial institution issuers provide these things today, and consumers continue to rely on them for safe, convenient transactions.
While we are living in exponential times, we also have to consider the U.S. payments infrastructure. What it lacks in maturity, it certainly makes up for in complexity. The mobile wallet providers, not to mention the faster payments advocates, are experiencing the particulars of our legacy payment systems as we speak. It’s a monumental challenge to get even the first domino to fall on a new form of payment, let alone achieve ubiquity.
“Flip of the switch” access to emerging payments tech
Because of the chaotic payments environment and all of the unknowns it presents, we’re advising our financial institution clients to open as many doors to consumers as possible. There are a growing number of really cool ways to pay. While the eventual winner (or winners) of the digital payment race jockey for position, consumers will be along for the ride. They’ll want their trusted financial institutions to help them stay safe while test driving some of these hot-rod payment vehicles.
To support those financial institutions, partners like CO-OP Financial Services are taking on a lot of the risk. CO-OP is partnering with fintech, building APIs, establishing linkages and giving financial institutions access to some of these digitally transformed methods of payments, like Zelle, and more recently, FitBit and Garmin wearable payments.
What this does is establish an ecosystem in which financial institutions can very easily “turn on” (and turn off) new payment technology as it emerges, with the flip of a switch.
Payments are the PFI indicator
One thing credit unions and banks may consider is viewing payments through a primary financial institution (PFI) lens. Consumers are no longer benchmarking their banking experiences against other financial institutions. They’re comparing those experiences to the ones they have with Apple, Google, Facebook, Uber, Airbnb, PayPal.
These brands and plenty of others are offering up seamless, friction-free platforms for getting otherwise complex tasks done easily. And they are looking to solidify long-term relationships with consumers. To them, the payments experience is a wide-open door to that relationship. And that’s because payments are often rife with friction. Eliminating that friction is one of the main reasons Lyft and Uber, and of course, Amazon, have won favor with consumers. Credit unions and banks must focus on their payments strategy as if success will make or break the customer relationship – because it just might.
Sometimes small is best
There are distinct advantages smaller credit unions and community banks can leverage to win favor with digital consumers.
First is scale. Because many smaller financial institutions are serviced by aggregators and belong to a number of networks, they are often attractive to startups and fintech looking to scale their solutions quickly. This may include those steeped in the virtual currency realm.
Second is agility. Locally owned and managed, there is less bureaucracy standing in the way of innovation within credit unions and community banks. There may be some stasis thanks to passionate, tenured leaders, but that can often be overcome with a message about member- or customer-centricity.
When teams can demonstrate the target market is looking for new ways to pay, most leaders –especially those grounded in providing great service to their local communities– will hear their smart people out.
