By Robert McGarvey
For CreditUnion 2.0
Feast on a frightening metric: PayPal, an Internet company from the start, now is worth more than venerable American Express. Its current market cap is north of $80 billion and, meantime, it is busy fighting multiple wars, against Apple Pay at point of sale, Square in cash transfers, and Chase and Citibank backed Zelle in peer to peer payments.
Here’s the question for you: are you better off fighting PayPal or seeking partnership?
Traditionally senior credit union management has viewed PayPal as an archenemy – one executive once told me with a smile that he knew Satan walked in our midst and it is called PayPal. That made a sort of sense because at the time around five years ago PayPal was seen as a barrier in p2p plays taking root at credit unions and it also chipped away at point of sale transactions that credit union execs believed should be theirs.
Many have seen PayPal as intent on disintermediating credit unions and banks.
But maybe it’s a time for a rethink.
Especially at credit unions.
PayPal may well be in a take no prisoners war with the money center banks – it has to see Zelle as a dagger aimed at its heart – but credit unions just may appeal to PayPal as potential partners that in fact help it spread its p2p tools, also perhaps its POS tools.
There also is a history of credit union – PayPal partnerships. And lately PayPal has buried its hatchet with Mastercard and Visa, working with them to provide essentially instant transfers of PayPal cash balances into associated bank and sharedraft accounts. PayPal even offers these super fast transfers for a fee of a quarter, significantly less than Square charges for similar.
It’s on the move too. A few months ago it debuted tools that let Skype users send money within the Skype app. Right in that conversation, you can fire off $50 or $100 to help that relative. Convenient.
Remember, credit unions and their traditional vendors have not excelled at the tools – especially p2p – that make PayPal (and its golden child, Venmo, which handled $17.6 million in transfers in 2016). And the digitally savvy credit union – a credit union with a plan for longterm success — will want to have p2p tools that members actually use.
It’s not just Millennials that love p2p. It’s also the parents and even grandparents of Millennials who send money via p2p.
Future-thinking credit unions have seen the PayPal value for years. As far back as 2012, Tech Credit Union announced a technology that let members tap a few buttons on an ATM screen and send money to just about any US mobile phone number. A few months later, Tech CU rolled out Send Money Powered by PayPal that lets Tech CU members send money to a mobile phone number or email address in some 60 countries worldwide, via Tech CU mobile or online banking.
Many more credit unions now have ties to PayPal. Alliant for instance. Peninsula Credit Union. California Coast Credit Union. Wescom Credit Union. America’s Credit Union. Mountain America Credit Union. Pacific Marine Credit Union.
Even giant PSECU recently added PayPal to its offerings.
The list goes on. There are many, many credit unions that partner with PayPal.
The Michigan Credit Union League even has a piece on “Why Credit Unions Should Not Fear PayPal.”
(PayPal did not respond to a request from this reporter for detailed information on its many credit union partners.)
Bottomline: for millions of consumers PayPal is a trusted, known way to shift money around. It’s a good p2p tool for credit unions to consider offering to members and, yes, a tab can be built into many mobile banking apps.
Won’t some consumers think about ditching the credit union and doing all financial services with PayPal? Not many, especially not if the credit union has done a good job selling itself and its uniqueness as a member–owned, member-centric institution. Besides, PayPal just doesn’t offer the range of services most credit unions do – and there is no indication it wants to achieve full bank status in the U.S. Does it want to battle Facebook, Google, Apple? Yep. But that is the fintech, nonbank arena and it’s there that PayPal wants to be a heavyweight.
By all means, keep watchful of PayPal if you choose to partner with them. But know that there are things it does extraordinary well – p2p payments for instance – and it is difficult to see how many credit unions could realistically hope to rival PayPal there.
And your members may in fact be jazzed when you tell them they can use PayPal within the mobile app.
That’s a lot better outcome than losing them to Chase and Zelle.