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Digital Payments Hit Critical Mass: Survey

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BROOKFIELD, Mass. (10/21/13)--Digital payments have hit critical mass, with 60% of consumers surveyed making a payment at least once a month using a laptop or desktop computer,  30% paying via their mobile phone and 22% through their tablet.
 
The 2013 "How Americans Pay Each Other" national survey of 2,500 Americans, which evaluated person-to-person (P2P) payments or social payments, was conducted by Fiserv Inc. The Brookfield, Wis., financial services technology solutions provider has a social payment service called Popmoney.
 
The survey has implications for credit unions. Although P2P payments typically use cash and checks, a key finding was that most respondents were interested in a digital payment option from their financial institution. That would be another opportunity for credit unions to step in with solutions to consumers needs.
 
Eighty-eight percent of U.S. consumers surveyed sent money to someone else in the past 12 months. Of those, 56% used cash; 41%, a check; and 31%, an online method such as a bank-based P2P payment service or PayPal. 
 
The single most common way to exchange funds was giving cash in person (33% did so).  However, nearly one-third said they never have enough cash on hand to pay someone back. That number rose to 39% among 18- to 24-year-olds.
 
Of those surveyed, 79% said they would be open to using a digital P2P payment service from their financial institution.
 
"While digital payments are not common for things such as paying bills, there has not really been a practical way to send money to another person electronically," said Tom Roberts, senior vice president of marketing, electronic payments, at Fiserv.  "Services like Popmoney, which allows users to send or receive money using an e-mail address or mobile number, are changing that. Just as the ways people communicate with each other have become more digital, their payments to each other are becoming more digital as well."
 
Other key findings:
  • People most often gave or sent money to friends and family members, but age and gender play a role in who receives the payment and how the payment is sent. Roughly 41% gave money in the past year to friends, 41% to children, 36% to parents and 42% to other family members. Younger consumers were significantly more likely to give or send money to friends.
  • The money exchange between parents and children isn't a one-way street:  56% of Gen Y respondents and 35% of Gen X respondents said they have given or sent money to their parents in the past year. Women gave to their children, while men were more likely to give to friends, significant others, co-workers or roommates.
  • Splitting bill payments is the norm among U.S. households, with 46% reporting that one person pays the bills and others pay them back for all or part of the costs. Of those, 22% reported using a joint bank and 14% said one person pays some bills while another person pays the rest. Sixty-nine percent of those who share bill-payment responsibilities with a friend or roommate have one person pay the bills while others pay their share to that person, and 42% of married couples do the same. The number of married couples paying each other for bill payments was significantly higher among younger generations (64% among 18-24-year-olds and 57% of 25-34-year-olds).
  • People are uncomfortable requesting money owed to them. Nearly 50% said they have let people not pay them back because they didn't want to ask.
 

CU System Briefs (10/21/2013)

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  • EAST PROVIDENCE, R.I. (10/21/13)--Crystal Ferreira, 27, of Fall River, Mass., pleaded guilty on Oct. 4 to embezzling over $437,000 from an East Providence, R.I. branch of Columbus CU. She faces up to 30 years in federal prison. Her sentencing is scheduled to take place in January. A former supervisor at the credit union, Ferreira allegedly stole large sums of money from Columbus' vault, ATM, and cash shipments, beginning in May 2012. Ferreira allegedly admitted to the scheme during an East Providence Police investigation about an unrelated robbery. The FBI assisted local law enforcement with the investigation (eastprovidence.patch.com Oct. 18) ...
  • DES MOINES, Iowa (10/21/13)--Jon Sarvis is set to become the next CEO of TMG Financial Services, a credit card agent issuer that partners with credit unions, community banks, and member-based associations. The announcement was made by TMGFS board of directors chair Patrick S. Jury. Sarvis has been the institution's chief financial officer for the past six years. TMGFS services more than 70,000 card members and manages $140 million in assets ...
  • ALBANY, N.Y. (10/21/13)--The Credit Union Association of New York has promoted three employees. Allison Barna was named the head of the Albany-based trade association's member services team and charitable foundation, in addition to being named vice president of member services for the New York Credit Union Foundation. She was previously director of NYCUF/Community Development. Mindi Schwab was named CUANY communications director. She'll be overseeing communications strategies of CUANY, its affiliate companies and the foundation. She was previously a communications manager. Deborah Testa has been named CUANY marketing director, and will be overseeing marketing strategies of CUANY, its affiliates and the foundation. She previously served as a marketing manager for association services and has been with CUANY for 15 years ...
     
  • RALEIGH, N.C. (10/21/13)--Medical professionals, representatives from related charities and employees of the State Employees' CU in Wilmington, N.C. recently celebrated the groundbreaking of the SECU Family House at New Hanover Regional Medical Center. The 24-guestroom facility is expected to provide affordable accommodations for out-of-town patients and patient's families. Last December, SECU members and the SECU foundation announced a $2 million challenge grant for the Family House's construction ...

Cloud Computing: Don't Delegate Security Responsibilities

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MADISON, Wis. (10/21/13)--There's no way to eliminate all risks involved with cloud computing, but those risks certainly can be mitigated, Rick Roy, senior vice president/chief information officer for CUNA Mutual Group, told Credit Union Magazine.

(This article, which originally appeared in the September issue of Credit Union Magazine, is adapted from the October issue of the Credit Union National Association's Director newsletter.)
 
For starters know the cloud provider: Is it a startup business or does it have a proven track record? Has it invested sufficiently in the security measures needed to protect sensitive data?
 
"Many companies have aspirations to be cloud providers of something--they might be software or hardware companies that feel the need to transform their own businesses because of this trend," Roy said. "Don't get into an arrangement with someone who aspires to do this but doesn't have a clue how."
 
Also, don't delegate responsibility for the relationship. Sometimes credit unions have a tendency to "hand the keys over to someone else so they don't have to worry about it," Roy said. "But you still need to worry and pay attention. There aren't too many autopilot solutions out there; they tend to need care and feeding."
 
This is where ongoing due diligence comes in. Roy comparedvendor selection to dating, when "everyone has their best foot forward. But once you're in the relationship, make sure, through ongoing dialogue and audit discussions, that the security standards continue and the vendor continues to protect your information."
 
Equally important is making sure the vendor continues to invest in its infrastructure so it provides a high level of service and availability, he added.
 
CUNA Mutual conducts a "formal business check point" each quarter with its cloud providers to examine the relationships, investments in infrastructure, new product releases, and other elements, Roy said. "It's definitely a business conversation, and security is part of that conversation." The company also administers a security-specific review and questionnaire annually to ensure all parties "are doing what they signed up for," he added.
 
Even a contract doesn't absolve credit unions from ongoing due diligence. "When it comes to data privacy, you're getting at the core of a trust issue between yourself and the member," Roy said. "It's the difference between a financial risk and a reputational risk. Don't underestimate the reputational risk of something bad happening--because your business is built on a foundation of trust. There's not enough contractual language on the planet to overcome that."

Minn. CUs For Kids Invited To State CMN Collaboration Forum

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MINNETONKA, Minn. (10/21/13)--Two Minnesota credit union leaders were invited to participate in a Children's Miracle Network Hospitals state fundraisers' collaboration forum.

The invitation signifies the importance of Minnesota Credit Unions for Kids (MnCU4Kids) as a state sponsor for the network, said the Minnesota Credit Union Foundation.

MnCU4Kids Co-chairs Marlo Hirl of General Mills FCU, Minnetonka, and David Engler of Hiway FCU, St. Paul, were among the invited guests.

The forum is a biannual event that brings together representatives from the Children's Miracle Network Hospitals premier corporate sponsors, including Credit Unions For Kids, WalMart, Costco, Ace Hardware, Super America, Dairy Queen, Marriott and RE/MAX.

Credit unions are the third largest corporate contributor to Children's Miracle Network Hospitals annually. Credit Unions for Kids has raised more than $100 million for hospitals since its inception in 1996.  In 2012, MnCU4Kids raised more than $200,000 through support from credit unions, their members, and local and national companies--such as CO-OP Financial Services--that work with credit unions.

Hirl noted the success of MnCU4Kids and the opportunity to share its successes and collaborate with others. "It's very valuable to hear from other fundraising organizations and to discuss events and strategies around the charitable work that we're doing to support Gillette [Children's Specialty Healthcare] and CMN," Hirl added.

N.C. CUs Discuss Elderly Abuse, New Reporting Guidelines

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RALEIGH, N.C. (10/21/13)--More than 80 representatives from credit unions and community banks here attended a North Carolina Credit Union League conference on the financial exploitation of senior citizens and how to prevent it (The Weekly Conversation Oct. 18).

The gathering, held at the Local Government FCU Conference Center in Raleigh last week, featured experts who spoke on an array of
A speaker addresses conference attendees at the North Carolina Credit Union League's conference on the financial exploitation of the elderly in Raleigh.  (North Carolina Credit Union League Photo)
pertinent issues, ranging from new state and federal reporting guidelines to help identify elder financial abuse  to regular schemes used to steal from vulnerable adults.

"This is certainly a timely topic," John Radebaugh, league president/CEO, said during his opening remarks. He noted that federal regulatory agencies recently issued guidelines to clarify provisions of the Gramm-Leach-Bliley Act that allow financial institutions to report suspected fraud and abuse of the elderly.
 
The first panel broke down new reporting requirements mandated by the state of North Carolina, and the best practices credit unions and community banks have implemented in response. By Dec. 1, the state's financial institutions are required to report suspected cases of fraud or abuse when the victim is a disabled adult or over the age of 65.

Attendees were also reminded of the reporting guidelines for the state's Adult Protective Services in general cases of elderly abuse and neglect, a new prosecutorial program designed specifically for financial exploitation, and common scams used to defraud the elderly.
 
Speakers included representatives from the Conference of District Attorneys, the Consumer Protection Division of the Attorney General's Office, the federal Consumer Financial Protection Bureau, and a special agent with the State Bureau of Investigations' Financial Crimes Investigation Unit.

After the federal government published criteria for financial institutions reporting financial exploitation of senior citizens, National Credit Union Administration Chair Debbie Matz urged credit unions to ensure that their staff members are "trained on the potential signs that might trigger a report of elder abuse or financial exploitation" (News Now Sept. 25).

"Elder abuse involves the illegal or improper use of an older adult's funds, property or assets," she wrote. "Older adults can become targets of financial exploitation by family members, caregivers, financial advisors, home repair contractors, and scam artists."

She urged credit unions to review their own policies "to ensure they are consistent with state law and the interagency guidance regarding reporting requirements when a financial institution suspects elder abuse or financial exploitation."
 
In addition to the league's gathering, Champion CU, based in western North Carolina, hosted an elder fraud and financial exploitation conference on Oct. 10 in Canton.

U.K. Proposes Tax On Payday Lenders To Fund CUs

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LONDON (10/21/13)--A member of the British Parliament has unveiled plans to tax payday lenders and use the money to fund low-cost alternatives such as credit unions.

British Labor Leader Ed Miliband said his party aims to raise enough cash to double the US$20.8 million the government now provides each year to the fund to expand credit unions (Standard Oct. 17).

Credit unions are being touted as alternatives to the high-cost payday lenders by the Archbishop of Canterbury, who has waged war on payday lenders by forming a credit union during the summer for clergy and urging others to support credit unions.

Payday lenders in Great Britain have been widely criticized for exorbitant interest rates that can reach 5,000% a year. The party has already proposed a cap on credit.

Speaking at a credit union in South London on International Credit Union Day Thursday, Miliband said the prices families pay keep rising faster than wages they are paid. As a result, the payday loan market has doubled in the past four years. Nearly one-third of the loans are to cover gasoline and electricity bills, he said.

U of Illinois ECU Vies for School's Endorsement

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CHAMPAIGN, Ill. (10/21/13)--When the University of Illinois Employees CU submits its request for proposal to become the exclusive banking partner of the University Illinois in first quarter of 2014, E.J. Donaghey, UIECU president/CEO, hopes to stress the difference between credit unions and banks to university officials. TCF Bank, the university's current partner, has made that task a bit easier for Donaghey and the credit union.  
 
The U.S. Public Interest Research Group analyzed complaints submitted to the Consumer Financial Protection Bureau (CFPB) and found that TCF Bank customers are the most likely to complain about their banking experience (Chicago Tribune Sept. 17). Wayzata, Minn.-based TCF ranked No. 1 nationally, with 24.9 complaints per billion dollars of deposits. That's nearly three times the ratio of the No. 2 bank, Sovereign Bank in Boston.
 
Donaghey has worked with students who have been less than pleased with the TCF banking experience. He told the story of one student who was hit with $400 in inactivity fees when she returned home to India for a couple of months. "And TCF will not reverse those fees," Donaghey said.
 
The CFPB has opened an inquiry into the deals between universities and big banks (ABC News Sept. 5). Banks often see students as little more than "dollar signs in backpacks," said Rohit Chopra, CFPB student loan ombudsman and assistant director.
 
Donaghey believes his credit union offers an alternative to that approach. "Part of our offer to the university will be that because we are a cooperative, because we are a credit union, we are going to provide low-fee accounts and we're going to be more flexible," Donaghey said. "We currently have a plan in place where we provide on-campus financial literacy. We'll certainly emphasize that we will give students a second and third chance, whereas these banks really do gouge students because they assume Mom and Dad are going to pay the bills."
 
The credit union established a strong link to the University of Illinois Alumni Association (UIAA) when it won the contract to provide a Visa-branded card to the association's 625,000 members. The contract replaced the alumni association's relationship with Bank of America.
 
According to an annual report on college credit cards, submitted in October by the CFPB to Congress, UIECU opened the largest number of new college credit card accounts during 2011 (News Now Nov. 28, 2012)
 
During 2011, the credit union opened 3,452 new accounts, which moved it up four notches to the top spot. That compares to 779 new accounts it opened in 2010, when it ranked fifth in the nation. UIECU's affinity card is marketed to the university's alumni, fans and credit union members, but not students.
 
The UIAA sought a financial services partner with a "clean" image in the wake of the Wall Street meltdown when it partnered with the credit union in 2010, said Greg Robinson, UIECU's chief operating officer.
 
"A lot of our success in earning the alumni association's business was saying, 'Here's how your members will be taken care of,'" Robinson said.  "The same holds true in this RFP process. We can tell them, 'This is how we're consumer friendly. This how we built our fee structure. Not because we're changing to accommodate students, but because this is how we've built this credit union over the years.'"