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Southwest Lending Conference: Mobile Wallet Plays for FIs
Monday, May 23, 2016 6:20 AM

Lee Wetherington

The Southwest Lending Conference in Oklahoma this week has provided a wealth of great information for credit union staff involved in all aspects of lending. In Thursday morning's session, Lee Wetherington wowed the crowd with his entertaining presentation "What's in Your Wallet—Mobile Plays for FIs."

Wetherington says we're seeing massive fragmentation of mobile pay because of the multitude of mobile wallet options. He gave an update on mobile proximity payments and compared Apple Pay to Android Pay and Samsung Pay, among others.

Right now, he said, Apple Pay is the safest way to make card transactions—even safer than EMV cards. Apple Pay was the first to deploy "issuer tokenization." A token is a numeric substitute used in place of the card's primary account number (PAN).

Smartphones have changed the shopping landscape. Wetherington notes that 63 percent of mobile banking users have checked their account balances on their phones before making a large purchase, and 53 percent decided not to purchase an item as a result of their account inquiries. He also notes that 47 percent of smartphone owners comparison shop with their phones while they're at a retail store, and 69 percent changed where they purchased something as a result.

Wetherington also touted the superiority of Samsung Pay because of its magnetic secure transmission loop (MST). The MST loop produces an electromagnetic pulse that tricks the payment terminal into thinking the purchaser physically swiped their magstripe card when they haven't. If the terminal is capable, the Samsung Pay option is super quick and safe.

Samsung Pay allows NFC and MST mobile payments on Galaxy S6, S6 Edge, S6 Edge+, and Note 5. It does not support in-app purchase/payments. Samsung collects no fees from issuers and issuers pay no tokenization fees to Visa or MasterCard.

For Samsung Pay tokenization, issuers must sign up and enable cards, but can leverage existing tokenization with MasterCard and Visa. The Host Card Emulation (HCE) approach to NFC means the tokens are generated in the cloud (and 10 stored on phone). The technology leverages fingerprint identification, similar to Apple Pay.

Wetherington says consumers prefer their primary FI to provide mobile wallets, but they will use the most convenient provider with whom they have a good relationship—or, no embarrassing usage history, such as card declines, which encourage consumers to avoid future use of that card.

The criteria for choosing a mobile payment play, in order of importance, are:

Highest:  security level, usability, and cost of the solution.

Medium: end-to-end solution availability, control over the solution, and mobile device availability.

Lowest:  location of the solution provider, scheme endorsement, and maturity of the solution (provider)

About the Lending Council
The Lending Council was launched by the Texas Credit Union league (now Cornerstone Credit Union League) in 2001. Currently, the Council has 261 members. Council membership is open to paid staff or volunteers from league-affiliated credit unions. Potential members may join by visiting the Lending Council web page.