Payments' tech wave provides a feast for community banks and credit unions
Community banks and credit unions remain best suited to provide a local connection, forming a beneficial bond with their customers and communities. 2019 will be a year of significant progress in modern banking, a time when regional and community institutions leverage payments to create a strong competitive edge.
While outside influences will continue to challenge the role and relevance of traditional banking, expect community banks and credit unions to defend their ground with competitive differentiators.
Advancements in payments are powering local institutions’ ability to deliver greater value, giving customers more control and providing enhanced digital experiences. For instance, card-funded bill pay enables customers to enjoy the best of all worlds – the convenience and familiarity of bill pay services from their financial institution with alternative payment options that offer rewards.
Adding self-service controls to cards is another highly desirable solution that deputizes cardholders in the fight against fraud, creating the peace of mind that results in increased card usage.
New payments offerings on the horizon promise meaningful advantages for institutions and their customers. A confluence of market conditions will catalyze significant adoption of contactless cards this year. Multiple major cities are deploying tap-and-go payment systems.
Today more than half of all card-present transactions take place at contactless-enabled locations. Most contactless transactions are under $30 in the important everyday spend categories, making a compelling case for cash replacement. Harnessing the familiarity of using a card and the speed of tap-and-go checkouts, contactless cards act as a vital bridge for adoption of future digital payment methods.
Real-time payments also present new opportunities. The industry has been preparing for years, and it is past time to take a wait and see posture; regional and community banks should be thinking about how they can differentiate their product portfolio with real-time capabilities.
Small businesses will enjoy advantages beyond speed, including improved cash flow thanks to “good funds” and efficiencies relating to reductions in exception processing. Instant loan funding, immediate bill pay and enhanced treasury management capabilities are among the promising use cases. The full potential of real-time payments’ always on, tailored solutions will not be fully realized until 2020 and beyond, but preparation taken in 2019 will set the early market winners apart.