CU Wallet is one of several financial tech firms that have sprung up in Los Angeles over the last few years making a foray into the burgeoning mobile payment sector. After all, roughly 30 percent of all U.S. retailers accept some form of mobile payments.
Formed late last year, the company has developed a mobile wallet that financial institutions can incorporate into their existing mobile banking applications. So, for example, a customer of a credit union might have downloaded that lender’s app that could accept and incorporate CU Wallet’s product.
In fact, CU Wallet has focused on selling its application to credit unions – hence its name – and announced last month that since its launch it had signed deals with 65 institutions across the country representing more than 7 million members. It has targeted credit unions rather than banks, which are generally larger and have the resources to develop similar applications in-house.
An added feature of CU Wallet’s product is that it will offer a lower-cost alternative to credit card-processing costs if a credit union customer chooses to pay by direct debit from his or her account.
“Swipe fees,” charges assessed by Visa Inc. and MasterCard, cost the nation’s retailers some $50 billion a year, second only to labor as their greatest annual expense. The fees vary but can be 3 percent to 5 percent or more of the retail price.
“Wal-Mart and Target hate each other, but they hate Visa and MasterCard more,” said Paul Fiore, founder and chief executive of CU Wallet of Woodland Hills. And the retail industry is excited, too.
“There’s an opportunity now for mobile technology to provide competition to the payment market that nothing else has been able to do for decades,” said Brian Dodge, executive vice president of communications and strategic initiatives for the Retail Industry Leaders Association in Arlington, Va.
CU Wallet’s product would work like most mobile wallets. If you don’t have one yourself, you might have seen a barista at a Starbucks scan the smartphone of the person in front of you rather than taking cash or a credit card. The payment in this example would be routed through the standard credit card system – and Starbucks would pay a swipe fee, or a percentage of the retail price. But payments made through CU Wallet’s mobile wallet would potentially bypass credit cards and chop Starbucks’ fee by half or more, according to Fiore.
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