Two things to do now
Going into 2020, a fairly promising economic outlook was in play, driven by two important indicators: The U.S. GDP growth rate was holding steady and the unemployment rate was trending favorably at a 50-year low. At the same time, there was a slight softening in card spend and a slow, steady rise in credit card charge-offs at credit unions, according to The Nilson Report and National Credit Union Administration, respectively.
Then March 2020 hit, along with COVID-19, marking a turning point for the U.S. economy. Before COVID-19, weekly unemployment filings were in the low 200,000 range for a long period. During the five weeks from mid-March through late April, stay-at-home orders and non-essential business closures caused more than 26.7 million Americans to file an initial unemployment claim. This spurred a shift in the way in which consumers spend their money and transact. Overall, credit card spend volume was down by almost 33% year over year in March and April, while debit was down by almost 20% year over year.
Both credit and debit have been improving as of June, with this trajectory projected to continue into the second half of 2020. Debit spend volume has resumed positive year-over-year growth and has benefitted from stimulus payments, while credit spend volume growth continues to be negative, but with marginal improvements in late May and June.
Given the current economic and social landscapes, what should credit unions do now to ensure future success?
Provide the Products and Services Members Want
Now is an optimal time to launch or support new products and services likely to thrive in the post-pandemic world. Contactless cards are poised to see an increase in usage as members continue to shift away from cash and look to other methods of payment that limit human contact. A recent survey by Mastercard showed that 51% of U.S. consumers are now using some form of contactless payment and that perceptions of safety and convenience have led nearly a third of U.S. respondents to switch their top-of-wallet card for one that offers contactless capability.
Another key component of the contactless equation is mobile payments, as contactless card adoption tends to lead to increased use of mobile wallets. An additional tap-and-go option, mobile wallets enable credit unions to provide their members with the flexibility of paying for purchases when and how they want—whether through mobile phones, smartwatches or other wearables—again leading to top-of-wallet status.
Before COVID-19, shifting consumer preferences were already becoming apparent in the digital space as consumers of all generations adopted online banking, downloaded payment apps on their mobile phones and changed the way they interact daily with their credit unions. As fewer people visit branches, credit unions have an opportunity to enhance and elevate their digital banking strategy, offerings and solutions. When developing a strategy to connect the physical branch to the digital experience, credit unions need to understand and define member journeys and personas in both channels and identify how their members want to interact at every stage to avoid gaps or friction. Remote deposit capture is a key component to incorporate, as this is one of the most coveted aspects of digital banking. Direct deposit, P2P (peer-to-peer payments) and recurring payments have all also experienced an increase in usage and interest from consumers as a result of COVID-19.
Get The Right Products and Services Into Members’ Hands
Educating consumers about how to use payment methods, emphasizing their convenience and ease of use, as well as what makes them safe and secure, will be key. Credit unions can teach members how and why to utilize mobile wallets, contactless and digital payment methods, helping to fuel these types of transactions and keep pace with the big banks. A credit union’s website is one of the most important communications tools in its arsenal and one of the primary tools members will use when shopping for new payments solutions—as well as where they will go to help educate themselves on why and how to utilize these new solutions. Credit unions should ensure their websites are optimized and up-to-date, including all of the information a member might need, right at their fingertips.
While marketing your products and services to current and potential members should continue, the approach will likely vary from one credit union to another. Some credit unions may find themselves in a “stable” scenario where they remain on solid financial footing with members largely unaffected by COVID-19. Others might be in a more “protective” situation, catering to a membership that has been adversely impacted by the pandemic. Each unique situation will determine what products and solutions should be put in front of members and how. Partnering with a credit union service organization like PSCU and its industry-leading team of experts at Advisors Plus can help credit unions determine what makes sense now and in the future, assist with creating growth campaigns and optimizations, and help credit unions overcome their business challenges and grow.
As we begin to emerge from COVID-19, credit unions should first consider what products and services best meet their members’ wants and needs. Next, determine how to market these products and educate members to not only achieve the coveted top-of-wallet status, but also remain members’ trusted banking partner.
Norm Patrick is VP of Advisors Plus Consulting at CUESolutions Silver provider PSCU, St. Petersburg, Florida. Advisors Plus was established in 2004 as the consulting arm of PSCU. Together, PSCU and Advisors Plus’ products, financial services solutions and service model collectively support millions of credit, debit, prepaid, online bill payment and mobile accounts at PSCU’s Owner credit unions; protect over 2 billion transactions annually from fraud; and optimize credit union performance and growth. With nearly 25 years in the financial services industry, Norm founded the Debit & Checking practice area in 2007 based on his experience in managing one of the largest debit card portfolios in the U.S. For more information, visit AdvisorsPlus.com.