Key Learnings from 2020 and How Credit Unions Can Respond
An Unprecedented Year in Payments
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“Payments cut right to the core of the member relationship. We saw that in the early weeks of the pandemic when financially-struggling members reached out to their financial institutions for interest and fee relief; and now we’re seeing it manifest in the behavioral shifts within our members. Payments have become their lifeline to financial wellness, as well as a means by which we can offer them the safe, secure and frictionless service they’ve come to expect.”
2020 will be remembered as one of most transformative years on record for most industries, including the credit union industry. The events of the past year have underscored the importance of payments as both a catalyst for member engagement and a critical lifeline for financial wellness. The ways in which consumers have changed their payments behavior - from widespread adoption of digital and contactless payments to shifts between credit and debit - give credit unions deeper insight into how to best serve their members' needs.
Tom Church-Adams CO-OP SVP, Pay Products
With many Americans anxiously awaiting their $600 stimulus checks and the long-term rollout of a vaccine unknown, payments can offer your members the stability they need to support their lifestyles. And as we begin a new year, credit unions can use some of the lessons learned over the past 11 months to help center their payments strategy around deepening member engagement and designing a modern payments platform.
Year-Over-Year Credit/Debit Spending
(By Transaction $ Amount) | Source: CO-OP Credit/Debit Portfolio
Credit and debit spending plummets in the first few weeks of the pandemic.
+30% +20% +10% 0% -10% -20% -30%
Payments volume begins to decline at onset of the pandemic.
Credit drops 20% as members cut back on non-essential spending.
CU's begin taking advantage of payment relief programs for members.
Arrival of stimulus checks boosts debit spending in categories like online groceries, electronics and home improvement.
Members use debit to stock up on essentials to and digital goods.
Members shift over to credit for back-to-school shopping and DIY home projects.
With another stimulus package delay, members rely on credit for holiday shopping.
Shifts between credit and debit throughout the year highlight the big divide between how various member segments have been impacted by the pandemic.
“We might have anticipated that credit would consistently outperform debit this year, but that’s not the case. Instead you have certain member segments that increased debit spending when they received their stimulus checks and then immediately shifted over to credit; others tried to consistently keep their credit spending down as a precaution. It just goes to show that when it comes to credit versus debit, we can’t paint with a broad brush; members are going to spend differently month-to-month and it’s valuable for credit unions to understand these shifts.”
John Patton CO-OP Senior Payments Advisor
Credit unions and other financial institutions have long been awaiting widespread adoption of digital payments. This year they got their wish (and then some). According to a September consumer survey, 4 out of 10 U.S. consumers adopted contactless cards or mobile wallets in the months following the start of the pandemic. In addition, fully 30% of respondents to that survey have changed their primary method of in-store payments since COVID.*
The Big Moment for Digital/Touchless Payments Has Arrived
Credit unions in the CO-OP ecosystem experienced a similar trend this year. Comparing average monthly mobile wallet transactions (via Apple Pay, Garmin Pay, Samsung Pay, etc.) in the 1st half of the year to the second half of the year, total transaction volume increased 44 percent and dollar transaction amount increased 71 percent. Contactless payments similarly saw average monthly volume and dollar amounts grow 40 percent and 61 percent respectively in the 2nd half of the year compared to the 1st half.
1st Half of 2020
2nd Half of 2020
1st Half of 2020
2nd Half of 2020
Monthly Mobile Wallet Transaction Volume
Monthly Contactless Transaction Volume
"It's clear that digital payments aren’t going away, even when the pandemic recedes. Members are integrating these tools into their daily lifestyles. Before the pandemic, some members might have felt anxiety about pulling out their phone or a contactless card at the point-of-sale; now they’re gaining more confidence and that’s leading to increased usage.”
Beth Phillips CO-OP Director of Strategic Portfolio Growth
Integrate the digital solutions your members expect
As with any app or digital service, members are developing preferences for specific digital wallets and payment solutions. If you haven’t begun integrating mobile wallets or contactless cards into your payments offering, now’s the time! (Contact CO-OP to learn more about our streamlined integration solutions) If you do already offer them, look at which solutions are gaining the most traction and usage among your different member segments.
Aggressively promote your digital offerings
Now is the time to get aggressive with promoting your digital payment solutions. Utilize every channel – email, social media, and your website and service channels – to ensure that members fully understand the features and benefits of your digital solutions. The more they see them, the more likely they are start using them.
Lower the barrier to digital adoption
Eliminating the initial friction with digital adoption is critical for increasing usage. Features like digital card issuance (coming soon to the CO-OP ecosystem) and one-time-passcode (OTP) provisioning help get your members spending immediately, rather than waiting for their card in the mail.
3 Digital Strategies for 2021
(Hover over each box to expand)
Use Data as Your Roadmap to Payments Growth
When it comes to growing your payments portfolio, COVID-19 has shown us that focusing only on the top-line metrics like transaction volume and interchange revenue can lead you to overlook major opportunities. Credit unions must look for the stories within their payments data that they can use to build a deeper understanding and relationship with their members.
“The increase in ecommerce totals throughout the pandemic supports our belief that enabling digital payments for members is the path to growth. Encouraging members to have your card top-of-wallet for events like Amazon Prime Day and Cyber Monday leads to deeper penetration, usage and engagement with your credit union.”
One need only look at the results of Amazon Prime Day this year to quantify how big those opportunities can be. With a 51 percent jump in year-over-year credit and spending, the credit unions that had their cards top of wallet leading up to Prime Day not only generated greater payments revenue but also gathered a trove of important spending data about their members.
Todd Clark, CO-OP President & CEO
Read our 2020 Amazon Prime Day Analysis
Equally as important, is identifying the payments data you are not seeing and coming up with a strategy to fix that. For instance, if your card utilization rates are low or you are seeing certain member segments not represented in your portfolio, that’s a big chunk of data that you’re missing and is needed to make informed decisions. Credit unions can use self-service tools like CO-OP Insights Center to get that overall portfolio view and then drill-down into metrics like activation and card usage. They can then come up with campaigns and promotions to help improve those metrics or leverage the CO-OP SmartGrowth Team to help them create highly-customized, targeting campaigns.
Watch: How CO-OP Insights Center Helps You Analyze Your Credit, Debit, and ATM Data:
CO-OP Insights Center
CO-OP SmartGrowth Team
Looking Ahead to 2021
2020 was an unusual year for payments, yet it set an important precedent going forward: Payments continue to be at the intersection of financial wellness, member engagement, and growth. Credit unions should feel confident that this is a big opportunity for them. By delivering the payments products and services their members want and anchoring those solutions behind a platform built on insights, security and integration, credit unions have a strong opportunity to become their members’ Primary Financial Relationship.
Discover how CO-OP can be your path to payments.
A full ecosystem of payments products designed to help you become your members’ Primary Financial Relationship (PFR):