B2B Payments

Why Collaboration Is Credit Unions’ Payments Innovation Advantage

One of the biggest differences between a bank and a credit union (CU) is that unlike a for-profit bank, a CU is owned by its members.

It's a model based on the concept of collaboration and cooperation, two ideals that have become instrumental in the financial services arena's payments innovation efforts.

Yet CUs are also typically local institutions servicing close-knit communities, so taking on a leadership role within the global payments innovation ecosystem may not seem like the most natural fit.

As a CU for the United Nations community, however, United Nations Federal Credit Union (UNFCU) holds a unique, global perspective into the role that these financial institutions (FIs) can play to support payments innovation on multiple fronts.

Speaking with PYMNTS, UNFCU Chief Member Operations Officer Bill Thomas explored the opportunity for CUs everywhere to wield their experience as collaborative entities to support the broader finserv landscape's own efforts to drive progress in areas like cross-border and faster payments.

CUs' Global Payments Opportunity

For many FIs today, particularly in the context of the pandemic, digitization of services like payments is vital to continuing to provide members and clients with the tools they need when they aren't able to physically visit a branch.

As a CU with a global reach, UNFCU held digitization at the top of its priority list even before the pandemic, according to Thomas.

"Most of our members are not located in locations where we have physical offices or a presence," he explained, "so that digital channel has always been important, whether through call centers, digital banking, or other ways."

That global reach also had the CU prioritizing global payments innovation from the get-go.

Most recently, it resulted in a partnership with B2B cross-border payments solution provider Thunes, which enables UNFCU to implement the FinTech's technology to streamline and accelerate cross-border payments by connecting FIs with mobile wallets. Thomas noted that Thunes was able to broaden the choice for UNFCU members when it comes to how they move money across borders — a critical component for any global FI.

"As a global financial institution, we need to look at payments in the context of how they're used around the world," he said, noting that while card rails are a popular means of moving money in markets like the U.S., in markets like Kenya, mobile payments are the norm. Understanding the unique needs of each market — as well as each context of a transaction — is critical.

"There's a big difference between a large, multimillion-dollar trade finance cross-border payment, and a personal remittance," added Thomas. "There's no one-size-fits-all solution that covers the span of everything."

Leadership Through Collaboration

With traditional banks increasingly embracing the opportunity to collaborate with FinTechs in a symbiotic relationship, Thomas noted CUs can hold a leadership position in driving industry tie-ups.

"Credit unions, by nature, are collaborative," he said, noting UNFCU struck a previous cross-border payments FinTech partnership with Earthport, now Visa Direct, in 2014. "That was at a time when other financial institutions were not necessarily looking to partner with FinTechs to help them achieve their objectives."

Less obvious, however, is how the average CU — i.e. one that doesn't have a global reach — can participate in ecosystem efforts to drive payments innovation in areas like real-time and cross-border transacting.

As the U.S. accelerates its own efforts to promote payments innovation through initiatives like the Faster Payments Task Force, of which Thomas was a member, as well as the Faster Payments Council, of which Thomas remains a member of its cross-border payments working group, there is an opportunity for CUs to promote the spirit of collaboration as government entities, banks, FinTechs, and other industry stakeholders make progress.

Indeed, said Thomas, CUs can play a role in this development, but there's a caveat, he said.

"Because a lot of credit unions are community-based, they don't necessarily have the need for cross-border payments like UNFCU," Thomas noted. "But then I look just up north at Canada, and Canadian credit unions have done an incredible job of helping to innovate and develop payment rails within that country. So, I think the collaborative, cooperative spirits that credit unions have can definitely support innovation."

As more jurisdictions develop national faster and real-time payment rails, their focus will increasingly expand across borders to explore how these infrastructures can ultimately intersect with each other to drive cross-border payment efficiencies. And while many CUs may not have the need for global payments capabilities, their position as collaborators can play a key role in aiding that initiative.

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NEW PYMNTS DATA: HOW WE SHOP – SEPTEMBER 2020 

The How We Shop Report, a PYMNTS collaboration with PayPal, aims to understand how consumers of all ages and incomes are shifting to shopping and paying online in the midst of the COVID-19 pandemic. Our research builds on a series of studies conducted since March, surveying more than 16,000 consumers on how their shopping habits and payments preferences are changing as the crisis continues. This report focuses on our latest survey of 2,163 respondents and examines how their increased appetite for online commerce and digital touchless methods, such as QR codes, contactless cards and digital wallets, is poised to shape the post-pandemic economy.

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