Credit Union Geek

Marketing, Strategy, and The Force by Joe Winn

Tag: apple (page 1 of 3)

Apple Reinvents (Improves?) the Credit Card

Today, Apple held their seasonal keynote event, to highlight new services in a range of categories. You may get a kick out of their Apple TV+ lineup. Maybe you’re stoked about reading all your magazines on your iPhone with Apple News+.

But you’re here for Apple Pay improvements. We are talking about the banking world, right?

What is Apple Card?

In the most simple terms, Apple introduced a credit card. They’re calling it Apple Card. (PS – They partnered with Goldman Sachs. Remember talking about that?)

It’s a “mobile-first” card, in that you do most of your spending, tracking, and reward redemptions all within the app.

The entire platform lives within the native Wallet app in your iPhone. No more downloading a banking app just to pay the credit card bill.

Apple Card - Physical
Titanium. Seriously. (And no numbers to get stolen!)

You can track spending by category, merchant, and even view trends. Payments are simplified, with realtime interest calculations based on what you choose to pay. And rewards deposit daily (they’re calling it Daily Cash) into your Apple Cash account (we’ve spoken about this before).

And the physical card is shiny! (It’s made out of titanium!)

Fabulous metal aside, you care about what the card offers. And is it a threat to your institution?

Spoiler: Yes. Probably.

The Apple Strategy

With more than a billion active devices, any time Apple does something, it matters. Few companies have the ability to affect the behaviors of so many so quickly. I’m not even suggesting you try.

What they did with Apple Card is look at all the pain points within the credit card realm:

  • Applying
  • Tracking spending
  • Paying
  • Redeeming (and understanding) rewards
  • Understanding interest costs (and how to minimize)
  • Getting questions answered

Then they added a bit of Apple touch to align the offering with their mission:

  • Privacy
  • Security
  • Beauty (it’s subjective, sure, but the card is so pretty!)

The result is a mobile-first, simplified, and streamlined vision of a credit card.

Here’s how they addressed those pain points:

  • Application: Tap to apply. Done. It automatically issues the digital version, adds it to your Wallet, and that’s it. The physical copy gets mailed.
  • Tracking spending: The app color-codes spending categories, gives merchants their real logos, and uses machine learning (AI) to decrypt those obscure “IC SPEND A-MERCH 14312” charges (it was the Greek food truck, by the way). It will even show it on a map and link to it on Yelp!
  • Paying/Interest: Graphical wheel that you slide your finger around to see your payments change, along with the interest accrued. Financial education with a swipe.
  • Rewards: 3% at Apple, 2% using the digital version, 1% with physical card. Redeems automatically as cash every day (with notation) into your Apple Pay Cash card. Which you can spend at merchants, online, send to friends/family, and more.
  • Privacy: No merchant gets any details about you on any purchase.
  • Security: Every payment uses a one-time code (just like any other ApplePay transaction). Suspicious transactions appear as notifications (and can be approved or denied with a tap). A new card is sent out and no changes needed.
  • Support: Using Business Chat for iMessage, customers can simply text their question to the service. A person answers and helps them out. Through their normal messaging app.
  • Fees: They don’t have them. Any. At all.

Can Your Credit Union Compete?

That’s a great question. On the surface, no. You cannot create such a streamlined system with the tight integration between bank and provider.

However, all is not lost!

I’ve made a point to talk about partnering in many previous posts. It’s just as valuable (if not more so) today!

Your institution is good at the money part. You might also be great in the relationship area.

But, let’s be honest. You’re not awesome with the technology. It’s a constant effort to keep up with evolving expectations as it is, right?

Two People Talking Over Coffee

That’s why you need to partner with companies who specialize in these things. My last post talked about making member communication simple. That’s one of their pain points!

Another post addressed the issues with boring transaction sheets. Am I spending too much on hummus? (The answer to this is, of course, never!)

And the most cynical/sarcastic/actually realistic answer to this question:

Sure, because it only works for members with an iPhone. Look at all those Android users you can still attract!

Mobile First = Simple First

White iPhone in Hand

You’ll hear a lot of talk about how “mobile first” design is essential. That making services for a computer is immediately alienating your target audience. I’m betting the firms which sell you these platforms will be climbing over each other to talk about how their stuff is so mobile first ready.

It’s not wrong. There’s a lot of value to making sure your offering is accessible from where people are.

However, I want to be clear:

Mobile First doesn’t just mean you need to make sure it works on phones.

Mobile First means that your driving strategy is:

How can we make something so simple, so intuitive, so obvious that members can do what they want in a few seconds?

Apple stepped back and saw many of the traditional challenges in credit cards. Then, they built a system (with appropriate partners) to overcome these “yucky spots”.

Filament Bulb Hanging

It’s about looking at what the real problems are, and how you can address them.

If Edison had only tried to make a brighter candle, he would never have invented the light bulb.

To help illuminate (pun actually not intended, but enjoyed) your best path forward, I encourage you to Subscribe to my blog.

Image credit: Apple

Big Tech Firms Have A Plan…Do You?

Originally published on CUInsight.com

This post exceeds normal length expectations.  Estimated reading time is 5-7 minutes.  It’s worth it.

The future of banking looks bright!  New possibilities, new technologies, all while serving an ever-expanding portion of the population!

Oh, you’re from a credit union.  That introduction wasn’t meant for you.  I was talking to the big tech firms, the front-runners in creating banking solutions of tomorrow.  What?  Are you saying Jeff Bezos isn’t one of my readers?  Psh, you don’t know that.

Credit unions aren’t paving the way.  Nor are they pioneering the ability to serve the underbanked.  Seriously.  Many are doing great things, that’s for sure, yet the fundamental change is originating from tech firms.  And they’re not doing it alone (more on that later).

Let’s take a look at a super-simplified cross-section of society, with a focus on traditional banking options.  Where does the credit union industry fit?

  • For the lowest-income and credit challenged (or no credit), they have few choices.  A lack of financial knowledge and access to banking resources leads them predominantly to payday lenders or check-cashing stores.  This situation, frankly, sucks.  People are paying hundreds of percent (or more) in interest (or substantial fees) for access to their money.  It’s really expensive to be poor.  When I deposit a check, I get every penny.  Is that really fair?
  • Individuals with sufficient credit to open an account can (and do) go to banks, but many choose a credit union, due to their lower fee structure.  Those who choose a credit union tend to carry a higher credit card balance, with more cards and higher total debt. However, and this may be due to lower interest rates, more individualized (and thus forgiving) relationships, or some other factor, they are less likely to become delinquent in their debts.
  • Higher-income individuals and businesses are more likely to be with the large banks.

So big tech firms are looking for the path of least resistance into the banking world.  It starts at the economic bottom, by offering necessities at far lower rates than the existing solutions.  Then, they offer better programs than those that people have today, focusing on convenience.  Finally, the companies want to become the lenders of choice for a wide range of needs.  By already having successful business strategies, all this can be done at much lower margins than a dedicated banking institution could possibly reach.  For example, Amazon barely makes any money on their Kindle or Echo devices (they might even sell at a loss), because they know users will purchase far more once they have them.

The following is a discussion of selected large tech firms changing the banking landscape.  Each are planting their own flag in the financial world of tomorrow.  Will all be successful?  Only time will tell.  For aesthetics and readability, each company’s actions are accessible by clicking the name.

Where are the greatest opportunities?  And how can a business decision help people the most?

PayPal

PayPal believes the answer to both those questions lies in that first economic category.  As a pseudo-banking institution already, they have held money in online accounts for use on purchases for many years.  This money could not be withdrawn at an ATM, nor used at a physical POS.  Until now.  PayPal now offers a debit card that includes many of the same features your credit union cards have.  Want to pay for dinner?  No problem.  Withdraw money at an ATM?  Sure.  Deposit physical checks?  Grab your phone and take a picture.  All with no monthly fee, no minimum balance requirement, and a ~1% fee for deposited checks.  PayPal is making it clear this account is not for everyone.  It’s mainly for those who you would call “unbanked”.  In fact, their COO even said that if you already have a banking relationship, “this isn’t an account for you.”  They believe as the digital economy continues to grow, the largest opportunity is in those who aren’t currently “banked”.

So PayPal is positioning themselves for enormous growth, while engaging an underserved portion of society, and minimizing economically stressed people’s reliance on high-fee payday lending.  Sounds like the credit union mission, doesn’t it? It should, and not in the least because their CEO keeps saying this at CU conferences.

Other tech firms are taking a different route.

Amazon

Take Amazon.  They want your checking accounts (allegedlyprobablylikely).

Why would your members want to switch to Amazon for their checking?  It’s not like it would be any different.  Except it could (according to surveys) be a fee-based account ($5-10 per month) that provided a series of perks.  Perks like ID Theft Protection.  Or Cell Phone Damage Coverage.  Perhaps it would be integrated into Prime membership.  We don’t know.  But 66% of people surveyed said they would consider paying or definitely sign up for that account, if it existed.

If only your credit union could do something like that today…But I digress.

It’s not like Amazon is inexperienced in banking concepts.  In 2011, they began small business lending to sellers on their site.  They are now lending more than $1 Billion per year.  And it’s invite only.

Recently, Amazon has also expressed interest in serving the “unbanked” of the US and abroad.  Look at them, taking on the jellies!  Ok, PayPal.  They’re taking on PayPal.

Venmo

“So you owe me $14.53 for dinner.  Cool?  Just Venmo me the money when you get a chance.”

Venmo grew so quickly that you can be forgiven if you are still recovering from the windblown hair as it blew past.  Think of it as a peer to peer payment platform.  It began as a way to send money through text messages, but quickly changed into its own cross-platform app.  Users link existing debit cards/bank accounts and send or receive money through the service.  In the time it took you to read this paragraph, you could have gotten reimbursed for gas, sent your portion for drinks last weekend, and gotten the money from another friend for the tickets to that awesome concert.  They handled nearly $7 Billion in transactions in Q1 2017 alone.  Oh, and PayPal bought them in 2013.  So giving them their own section is almost cheating.

Besides, there’s a newer service that aims to do the same thing, but with a twist…

Apple

Your credit union probably supports Apple Pay.  By that I mean your debit and credit cards can be added to Apple Pay on members’ iPhones, iPads, Watches, and Macs.  It’s a brilliant payment system that I use regularly (there’s nothing like paying for groceries with your watch…except not paying for groceries).  I love the simplicity and security of the process.  I don’t love how slowly merchants are adopting the new payment terminals (and then enabling the NFC tech in them to support it).  Ugh, different discussion.

Last year, Apple Pay got an upgrade.  With Cash.  Previously, Apple Pay only worked where a normal debit/credit card could…POS, ie. paying at a merchant.  It was useless for P2P payments like Venmo supported (and PopMoney, to speak CU service lingo).  Apple Pay Cash links a debit or credit card to a digital stash of cash (you like that?) that you use to send/receive money right through iMessage.  Yes, recipients have to be fellow Apple users, but, sheesh, it’s easy.  Heck, it works with Siri.  No data is available on usage, but given it’s built in to hundreds of millions of devices, I’d say it’s only bound to grow.

To establish these potential checking and/or savings accounts, fund these digital wallets, or receive deposited checks, none of these companies are making themselves a bank.  Instead, these companies partner with an established bank, or multiple banks.  Why?  Think of your preparations when the NCUA examiner is inbound.  Enough said.

For example, for PayPal’s new debit card, they use a bank from Delaware for debit cards, another out of Georgia for check scanning, and a few banks in Utah for lending.  Note these are all small banks…is opportunity calling for your credit union?

Amazon is in talks with JP Morgan Chase and Capital One for their checking program.  Venmo uses your existing banking relationships.  Apple Pay Cash uses a Discover debit card powered by Green Dot Bank, a fin-tech which also provides their own reloadable debit card with no minimum balance, no overdraft fees, and no credit check, while still offering things like bill pay.

I feel like I’ve talked about partnering to enhance your strengths while addressing your weaknesses.  Ah, well, no worries.  We’re all here now.

So the big tech firms all have a strategy to attract the banking customer of today and for years to come.  What’s your plan?

PS – You may notice I excluded Zelle, the P2P platform of choice for American banks.  It was developed by Early Warning Services out of Scottsdale, AZ, a company formed and owned by 7 banks, with 70 more in the process of joining.  It’s their answer to Venmo, and is built in to all their mobile apps.  It connects more than 50% of checking accounts in the country and growing.  So why didn’t I mention such a large disruptor?  Because they’re not a disruptor; they’re a service of the existing banking industry, responding to the popularity of the other platforms.  You still have to pay attention to them, though.  Competition is competition.  So I ask again…what’s your plan?

Apple Pay & Your Credit Union in 2019

Updated 3/26/19 with renamed Apple Cash, Apple Card details, and cleaned up formatting.
Updated 11/13/17 with latest info on Apple Pay Cash.

Yesterday, Apple hosted their annual Worldwide Developer’s Conference Keynote. Of their big public events, this is my favorite, as it discusses the technologies they’re pursuing, rather than simply the newest iPhone. And are they pursuing.

Apple Event Highlights

There are great sites to read up on the highlights (ArsTechnica is my favorite). From iOS 11 to macOS High Sierra (yes, they actually called it that) to innovations with augmented and virtual reality platforms, they’ve showed their hand for the next year.

The “Apple-ification” of Banking

But there was something else featured which should concern you more than their upcoming in-home speaker: Payments. After years of requests, Apple has added peer-to-peer payments to ApplePay.

Specifically, within Messages. Come the release of iOS 11 in the fall, you’ll be able to send or receive money while in a message conversation with anyone. It will use your credit and debit cards linked to your ApplePay account.

Of course, these are yours, right? Remember how important it is to get your cards top of wallet, both in the back pocket and digitally!

Value of Direct Payments

This new world of direct payments can be an enormous opportunity for your credit union. Think of all the times people share small cash payments. A few dollars for lunch, a bit more for gas, or any number of possibilities.

Position your digital card properly and your members can be earning rewards for those, as well as reaping you interchange income (Unless they’re using the Apple Card, which isn’t through your institution. In that case, you already lost).

Regardless of how much you make when members use your card, being the one they use is essential.

Your Member Just Became an Apple Customer (For Banking)

Of course, there is also a threat. What if a person doesn’t have (or want to use) a debit/credit card? Well, there will now be an ApplePay Cash account (As of 3/26/19, it’s just Apple Cash). That’s right, ladies and gentlemen, Apple just became the face of your cards (and institution)! Careful, or it could start to steal your members as well. My suggestion? Work with it. Encourage members of all ages and financial situations to use it for seamless payments to and from family, friends, even businesses (maybe they can’t qualify for an account with free bill pay?).  Convenient for your member, profitable (and sticky) for you.

Embrace Tech!

Technology can seem scary for embedded industries. Instead of ignoring it (remember how Siri can now handle bill payments?) and hoping doom doesn’t befall your world, brainstorm how you can lead alongside.

It’s always about best serving your members.

Image credit: https://philoforchange.files.wordpress.com/2013/07/mon1.jpg

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