No cash, checks or cards accepted… just your phone.

Near my home, there’s a little hole-in-the-wall Mexican restaurant that was one of our favorite hang-outs back in high school.  The walls are decorated with large photos of Tony, the owner, and celebrities like John Wayne, Ronald Reagan and others of that generation.  The food is only mediocre, but it’s a local institution.

As long as I have gone there, it’s been a cash only operation.  Period. No checks. No credit cards.  A few years ago they installed an ATM with a fat withdrawal fee in the lobby, and the cashier would curtly direct you to it if you asked about other forms of payment. Last month I went in for lunch and, to my surprise, they now accept credit and debit cards!  Talk about late adopters!

Over the years, our economy has shifted from cash to check to plastic.  Credit and debit card transactions now far outpace all other payment forms.

There is another shift afoot that is moving very quickly, that could replace all others: Payments from a mobile device. The Federal Reserve  discovered that 12% of cellphone subscribers had already used some type of mobile payment and onc recent study predicts they will outpace other payment methods by 2020.  http://tinyurl.com/btczvsw

We all recognize the downside to merchants with traditional payment methods.  Cash causes security concerns, checks bounce, and credit/debit cards cost transaction fees.  Payment from a mobile phone solves all of these problems.  There’s no cash to handle, the payment goes right into the merchant’s account and the customer or mobile network pays any fees.

As for convenience, we may leave the house without a credit card or cash, but never without our cell phone.  It’s become the permanent accessory.

Mobile payments and mobile wallet are not the future.  They have arrived.  At Starbucks you can use your iPhone to pay for your triple soy latte and biscotti.  Last fall, Sprint rolled out a mobile payment technology that links to Mastercard, Visa, American Express and Paypal.  Verizion and t-Mobile recently announced a $100 million joint development for mobile payments.  http://tinyurl.com/8257hh9  In some countries, they skipped over the checks and plastic and went directly from cash to mobile phone payments.

While this change won’t happen overnight, it will happen more quickly than most people expect for one reason: The adoption rate of mobile technology.  Two years ago a Morgan Stanley analyst predicted that by 2015 more people would connect to the internet with a smart phone or tablet than a desktop or laptop computer.  She was wrong.  That benchmark was hit this year.

Think about the shift that mass adoption of mobile payments will bring as it replaces checks, cards and cash, and the effect it will have on your credit union.  Why would you need ATMs, drive up systems or even tellers?  What would a branch look like?  What technology will you require?

We hear a lot about new technology and gadgets these days, but what counts is how people adopt these innovations and how it impacts your business.   Before you build another branch, install another ATM or hire a new teller, consider the sign that will (not ”may”) appear in the Mexican restaurant “We do NOT accept cash, checks or plastic.”