Living In An On-Demand World

05/15/2024 07:16 pm

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By Ray Birch

ST.  PETERSBURG, Fla.—Credit unions are being advised to pay closer attention to a number of digital innovation trends this year.

Velera, formerly PSCU/Co-op Solutions, has outlined several such trends the company is paying close attention to—including open banking, digital instant lending and AI. It also has some advice for credit unions that want to keep pace.

Trend One: Fast Digital Credentials

The first trend of importance and one CU leaders need to be keenly aware of, according to Scott Young, SVP-emerging services with Velera, is consumers are now demanding their digital credentials or approvals in minutes.

“Digital instant lending--why is that important? We live in an on-demand world and in the culture of immediacy,” Young told CUToday.info.  “So, going from applying, to being approved, to getting those card credentials in your digital wallet and being able to use it within five minutes. It’s not just the instant decision on the loan being fast, now it’s being able to access the funds immediately.”

Young also expects instant payments to ramp up significantly with FedNow, as the use cases for instant payments service have become much greater.

“With FedNow coming online there probably is a lower hurdle of entry into the instant payments world,” Young said.

Young noted that many more FIs have become enabled on FedNow, with the number easily surpassing 100 in early April and, as CUToday.info reported earlier, the Fed expects to get to 800 participating FIs this year.

Trend Two: Instant Payment

“This will start driving much more usage of instant payments this year,” he said. “The first is A2A, the ability to move money from one account to another. A good example of that is a stored value wallet. We actually had a credit union turn on FedNow the day after the Super Bowl and some of their members were sending their betting winnings to their draft accounts.”

Young said the gig economy will be on the leading edge of instant payment usage, with the ability to caim earnings instantly with all the appropriate deductions already having occurred.

Scott Young

“I was recently in an Uber and watched the driver actually claim his payroll during my ride,” Young said.

Young said it was very interesting to watch first-hand how instant payments are changing the payments landscape.

“I was pretty slick to watch that,” said Young.

Trend Three: Small Business Payments

Young pointed to another use case for instant payments, this time on the commercial side of the business.

“Maybe for small businesses that really are working on cash flow,” he said. “If you think about the accounts receivable/accounts payable function. With instant payments, I can now wait up until the time it's appropriate for me to make a payment, and then knowing that payment is going to be instantaneous—and not having to do it in advance, waiting for ACH, next day or even wire transfer.”

Trend Four: Passwords

The fourth trend cited by Young that deserves the focus of CUs is the movement toward a secure, but not heavily burdensome password environment.

“As a society we are continuing to deploy technologies to try to ultimately get what we call a password-free environment,” he explained. “We all have faced the issue of having to remember passwords and then sometimes we’re wrong. Then we have to do a password reset, etc.”

It's a process everyone finds burdensome.

“So, how do we apply technology and innovation toward the ability to get to a trusted, password-free environment?” he said. “We're starting to see the introduction of passkeys by major retailers and major online providers. I think passkeys are going to take off and really marry your identity to your login credentials.”

Passkeys are an easier and more secure alternative to passwords. They allow users to sign in with just a fingerprint, face scan, or screen lock, for example.

Gaining Momentum

“We have also seen behavior biometrics starting to gain a lot of momentum last year with companies that can monitor the cadence of how you type, the direction you type on your favorite phone, if you're cutting and pasting…Basically creating a behavioral identity of how you use your devices. And, when that strays from how you normally use your devices, it rolls out a red flag and requires you know either take an authentication step or perhaps freezes your screen, just to make sure you are the person making the transaction and not a fraudster.”

Trend Five: Open Banking

A trend that has been embraced more readily overseas but which is growing in the U.S. is open banking, and Young expects to see its appeal and usage in this country to markedly grow in 2024.

With standards now being set by the CFPB and efforts to secure APIs by the FBI, open banking is moving to somewhat of a standardized approach, Young said.

“I think some people might be leery of open banking. On the credit union side, I don’t want somebody coming in to poach my members,” he said. “However, if we flip the table on that and say this is an opportunity for credit unions…That innately if there's value in the price and services that we provide, and I trust we do have valuable products and services, then the opportunities for us to gain new  members via open banking is there, and even level the playing field a bit in financial services.”

Trend 6: Several of Them

Young said Verera, even as it continues to work through the integration following the merger, is keeping its eyes and ears open when it comes to distributed ledger technology, cryptocurrency and AI.

“Generative AI is such an efficiency play,” Young asserted. “From a financial services perspective, we are exploring gen AI use cases. I like to call it the kindling to a fire. It's a great way to get started with AI…You can write policies and procedures. You can write marketing campaigns. You can write code for development, and then go back through for a quality assurance check. Make no mistake, the efficiency gains are vast.”