Is your credit union where it should be on your journey to digital transformation?

April 27, 2020

The competitive landscape for credit unions is expanding with the entrance of indirect competitors ranging from retailers such as Amazon and Walmart to fintech companies such as Facebook and Google. Plus, digital banks such as Chime will further modify the banking landscape in the next few years. Juniper Research is forecasting a 54 percent increase in digital banking between now and 2024 as younger consumers opt for digital over traditional financial institutions.

As a result, the legacy payment card experience we have grown accustomed to may be vulnerable to becoming disconnected from the credit union, and top-of-wallet status among cardholder members could be in jeopardy.

Since the earliest days of the digital movement, credit union executives have looked at their own digital transformation as a necessary strategy to attract new members and stay relevant with existing ones. With membership demographics similar to those of large banks’ customers, credit unions compete for top-of-wallet status among members who increasingly use various digital and mobile wallet options.

To remain competitive in the increasingly fragmented card industry, ask yourself:

  • Are you where you need to be on your digital transformation journey to advance your members’ experiences?
  • Are you implementing the “digital-first” solutions required to attain and retain top-of-wallet status with your cardholder members?
  • Are you seeing an increase in ‘funding transfers’ to alternate digital or mobile platforms?

Tokenization: the starting point for digital transformation

Used for card-on-file recurring payments, on e-commerce sites such as Amazon for one-click checkout and near-field-communications (NFC) wallets such as Apple Pay™, tokenization provides the foundation for secure, frictionless digital payments. Implementing it must be the first step.

Tokenization protects card data by replacing a card's primary account number (PAN) with a randomly-generated sequence of numbers that can be used for mobile wallet purchases, streamlined eCommerce checkout or converted from payment credentials on file for recurring/subscription payments. Tokenization makes it impossible for fraudsters to “read” the card data they attempt to steal from payment databases.

Tokenization contributes to better experiences for your cardholder members:

  • It enables merchants and retailers to remove the friction and risk that your members may experience with digital payment choices.
  • It extends the ecosystem around payment credentials to the token level. For merchants who maintain the token data rather than payment card data, the token can easily be replaced, updated or removed for lifecycle events by the token vault ecosystem. As a result, your cardholder members are no longer burdened with reloading or updating card number data following physical card replacement.

There are a variety of use cases for tokenization and your credit union. FIS urges you to get involved and, at a minimum, align with and educate your teams on the benefits of tokenization for Card on File and eCommerce. This will allow merchants to remove the sensitive payment data from their databases and secure your cardholders’ payment credentials, reducing risk and liability for your credit union.

Get Serious about your Digital Image

Despite a slow start compared with other countries, the United States mobile payment market is rapidly increasing – according to eMarketer, by 41 percent between 2018 and 2019 – as consumers become comfortable with the technology. It’s time to determine how you extend your brand digitally to your cardholder members. Options to consider include:

  • Extending your brand and driving volume through Apple Pay™, Google Pay™, or Samsung Pay™. Simple to implement, this option provides credit unions with a safe, secure payment method for their members to transact digitally with their branded card.
  • Customizing your current credit union’s digital experience by integrating digital features such as card on/off or dispute reporting
  • Implementing a ready-made, standalone digital wallet experience with the support of scalable third-party app partners who integrate with an API hub to enhance the member experience

Digital presence: enable key features

Key features that integrate with a digital app in a way to drive brand loyalty and increase card usage across digital channels are available through our FIS API hub. Examples of APIs from FIS Code Connect include:

  • Card controls. Self-service card management features such as on/off, lost/stolen and card activation empower cardholder members.
  • Alerts on purchase and account activity
  • Digital card issuance, which enables payment card credentials to be delivered securely to a mobile or online application
  • Apply and buy, which provides cardholders with an easy and seamless way to apply for and get credit on the spot

As cardholders continue to rapidly migrate towards digital payments – in-person and e-commerce – it’s critical to adopt a “digital-first” mindset – one that provides your members with a safe, secure and easy way to pay. We want your payment card to be their preferred choice of payment.

About the Author
Connie Davis, SVP, Digital Commerce, FIS
Connie DavisSVP, Digital Commerce, FIS

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