Is it Time for a New Mobile Payments Approach?

According to the Nielsen Digital Consumer Report, two-thirds of U.S. consumers own a smartphone. People are now using mobile devices for just about everything, and their expectations are high. A report by IBM revealed that consumers expect transactions to be easier on mobile devices than they are offline or on a desktop computer. This creates great opportunity for credit unions to engage with members, increase loyalty and build their brand.

In the payment card world, all but the very largest credit unions typically outsource their card issuing and transaction processing requirements to third-party service providers or processors – due to their relatively small size, it is not practical or financially viable to perform these tasks in-house in the manner adopted by most issuing banks. The mobile channel brings new challenges and risks, but also a significant opportunity for credit unions to take control and perhaps consider performing some tasks in-house. They can create a more responsive environment using proven off-the-shelf packages that the vendor community is already supplying to issuing banks to facilitate mobile payments.

In the popular approaches to mobile discussed here, hardware security modules play a significant role. They overcome the security vulnerabilities and performance challenges typically associated with software-only cryptography. The following sections describe each solution, demonstrating how credit unions can use an HSM infrastructure to deliver secure offerings for each while managing risk, helping to reduce fraud and, most significantly, overcoming any inherent weakness of standard mobile devices.