As humans, our brains are wired to notice, process, and remember emotional information more than non-emotional information. Over the past six months, we have been exposed to a barrage of negative and fear-inducing data on a daily basis, triggering an emotional response and making it more likely for us to retain and keep this information top of mind. This has led to increased anxiety on top of everyday stressors like budgeting and paying bills that existed before the onset of COVID-19.
The global pandemic has had a dramatic impact on consumer spending and the payments industry. Spending plummeted as shopping, traveling, and restaurant dining all came to a standstill in March. The job market was crippled and many consumers swiftly moved into survival mode, stunting money movement in the process.
As branches closed and consumers feared for their health, consumers were forced to go digital as the industry experienced a rapid acceleration of online spending, digital banking, and usage of contactless cards and mobile wallets.
The Current Digital Landscape
PSCU has been tracking the spending habits of members from its owner credit unions across numerous different payment types, sectors, and regions since early March to understand how the pandemic is impacting behavior. Not surprisingly, card-not-present (CNP) transactions have seen a notable increase from 2019.
For credit CNP as of mid-September, purchase volume has increased by 51.3% and transactions are up by 40.9% when comparing year-over-year weekly transaction data on a same-store basis among PSCU’s owner credit union members.
For debit, PSCU has seen an increase of 40.9% for purchase volume with 28.2% of transactions as CNP. Purchase mix has held steady and is up 5 percentage points for both credit and debit, while transaction mix is up 8.1 percentage points for credit and 6.9 for debit year over year.
Many consumers quickly learned how to utilize digital banking online and through mobile apps to continue transacting and interacting with their credit union. Whereas they may have previously made an in-person trip to a branch, many began conducting these same activities from the safety of their homes. In fact, according to J.D. Power research, use of mobile banking apps reached 72% of customers at the four largest U.S. banks in April 2020, up nearly 10 percentage points from 2019.
Contactless “tap-and-go” transactions via dual interface cards also experienced an increase in usage, according to PSCU data, as many credit union members moved away from cash and looked to alternative methods of payment that limit human contact.
Debit contactless transactions as a percent of card-present activity on contactless debit cards grew from around 8% in mid-January to 13.9% in mid-September. At the same time, contactless credit transactions also grew from 6.5% to 9.9% of card-present activity on contactless credit cards.
Mobile wallet (i.e. “Pays”) transactions and purchases for both credit and debit cards has surged compared to 2019 as well. Debit mobile wallet purchases are up 73.4% year over year, while credit mobile wallet purchases are up 55% year over year.
Looking Ahead To The Future
While uncertainty is a common thread right now, credit unions have an opportunity to help their members feel confident in their financial stability and outlook. Mobile and digital offerings should lead to decreased levels of stress as they allow members to continue conducting routine banking activities how they want, when they want and through whichever channel they prefer.
The ability to manage and pay bills and the option to utilize new or emerging payment forms are important for credit unions to provide members. Additionally, the capability to apply for, access, and manage accounts through a mobile device is key.
With research indicating members are likely to stick with digital banking post-pandemic, it is critical that credit unions actively promote their digital services as a means for access and member engagement, as well as ensure new products that are introduced to members also allow for digitization.
The credit union philosophy of “people helping people” rings truer now than ever as credit unions have an opportunity to empower members by providing financial tools in the palm of their hands, giving them the support and services they need during a time of need and in the future as they navigate the post-COVID world.
Cindy McGinness is Vice President, Digital Experience at PSCU. Cindy directs PSCU's initiatives to empower the company's Owner credit unions with innovative and engaging digital solutions. She leads an experienced team dedicated to delivering PSCU’s B2B and B2C solutions in the mobile and online channels, in addition to online bill payment services.