October 13, 2008
By Nick Connors
The last week has been a tough one for the stock market. As the Dow continues to fall, individuals are feeling the pressure as their portfolios shrink, and many will be forced to adjust their spending habits. This change in spending habits is affecting how credit unions are looking at their debit card programs. A Clear Shift in Consumer Spending Preferences Debit cards are becoming an increasingly important component of the average consumer’s spending pattern. According to the most recent data from the Federal Reserve, more consumers are continuing to shift away from writing checks. As recently as 2003, 45.3% of all non-cash transactions were still completed using checks. However, in just three years this percentage fell to 32.8%. As consumers move away from checks, other methods of payment have benefitted from this shift in trends. One of the key areas of growth has been in debit signature and PIN transactions, which together accounted for 27.2% of all non-cash transactions in 2006. This is up from just 14.5% three years prior. There are many reasons for this surge in debit card transactions. The first of which is the increased acceptance of debit cards at merchants. Today nearly all merchants accept payment through debit cards, whether it is at fast-food restaurants, grocery stores, or sports venues. This has allowed more individuals to shift away from carrying checks in the assumption that their debit card will be an accepted method of payment wherever they end up. Another key factor in this growth is the speed and convenience that comes along with debit cards. In a rush, or moving through a long line, it is much easier to swipe a debit card than to write out a check. Card companies have also begun to encourage this perception. You need only look as far as Visa’s recent ad campaign, where the one individual who chooses to pay cash or write a check causes the entire line of card-friendly consumers to come crashing to a halt. Meeting the Needs of Gen Y One of the most important reasons credit unions should focus on debit card trends is the usage of debit cards by Gen Y. Members of Gen Y were raised on the debit card, and therefore you would be hard-pressed to find a Gen Y-er that carries a checkbook for their daily spending habits. A generation known for its focus on speed and technology, the debit card fits easily into what attracts Gen Y to a financial institution. A second benefit of the technological focus of Gen Y is the coupling of debit cards and online banking. This generation also has a higher adoption rate for online banking, and debit cards easily tie into this strategy. Debit card transactions are posted quickly to members’ online banking sites, allowing for an easier method of tracking purchases and spending habits than is available for those that rely on cash for their transactions. To avoid NSF feeds, some tech savvy Gen Y-ers have even been known to check their balances using their mobile phones before swiping their card to verify that they have enough funds in place for the transaction. Positioning Your Credit Union As market changes make tracking your spending more of a concern for members, we may see individuals moving away from cash transactions. Credit cards are also an issue as many members are already facing high credit card bills or poor credit as the tightened credit market impact is felt on an individual level. This will drive many members, especially those in the younger demographics, to use their debit cards with increasing regularity. As credit unions look for ways to deepen member relationships, provide key services to their members in these times of turmoil, and drive sources of non-interest income, the debit card is positioned to be a major focus for many credit unions heading into the final months of 2008.
7/26/2012 04:07 PM
waste 1 :(
7/26/2012 04:00 PM
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