TAMPA, Fla.–The good old-fashioned checking account—even if no one ever writes a check—remains a key driver of future card usage and relationships with members, according to a trio of experts.
That point was emphasized during a session at PSCU’s Member Forum by Kerri Anne Aarnosk and Tom Bennett, both strategic portfolio principals with PSCU’s Advisors Plus service, and Lidya Garcia, debit card product manager with Illinois-based BCU, who shared some insights from that credit union’s highly successful card program.
According to Bennett, PSCU’s research has found debit is preferred by 46% of CU members as their preferred payment form.
‘Choice & Variety’
“But consumers also want choice and variety,” he said. “If you look at what they’re using, 83% of those surveyed indicated interest in using debit in the next six months, vs. 77% of credit card, 54% for digital.”
PSCU’s research has further found that among its member CUs, same store sales volume growth via debit was up 11% in 2020, 19.1% in 2021, and 4.9% in 2022.
But the data point that deserves attention, according to Bennett, is that in 2020 PSCU member CUs saw some “very disparate” debit usage growth rates between the top quartile and the bottom, a gap that closed in 2021 and then reemerged in 2022.
“Seeing eroding growth and negative growth for a quartile of our customers is where we get worried,” said Bennett.
The Deeper Dive
Aarnosk said that a deeper dive showed that the velocity of checking accounts coming affects growth both positively and negatively. Those CUs in the bottom quartile were losing checking accounts, she said.
“You can see how important checking account growth is to growing and sustaining debit volume,” said Aarnosk.
What is really “shocking and disturbing,” according to Aarnosk, is the downward trend in checking accounts at credit unions since 2012.
“We were living off free checking, but in 2012 we had transformation with the challenger banks and the sophistication of mobile and digital platforms from the big banks,” she explained. “Big banks started changing their programs and removing overdraft fees, which has significantly impacted checking growth.”
Aarnosk said she believes the next quarter’s numbers will likely show a decline in checking at credit unions remains ongoing.
Why Checking & Debit Matter So
Checking and debit remain the “central hub” of the payments relationship with members, according to Aarnosk.
“Consumers with a checking relationship are more loyal and willing to give future loan business to their primary financial institution,” she said. “(Checking/debit) has high brand interaction and is an effective proof point. Consumers are touching your account multiple times throughout the day.”
Trend Accelerator
Bennett said the pandemic has accelerated some usage trends, especially around card-not-present transactions. Up until 2020-21, he said CNP was growing a percentage point a year, although without the pandemic, growth would have been much slower for CUs.
Bennett also stressed a point that was made by other speakers during the PSCU meeting.
“One out of every three transactions is tapped. If you’re missing that opportunity, it’s big,” he said. “If the member is not with you, then with whom? You can guarantee your members have a credit card with somebody and are probably looking for a contactless debit card, as well.”
Bennett said PSCU is “very optimistic around where debit is and where it is going. Tough times are good times for debit.”
He reminded again of the high preference consumers have for debit, and that the average card usage is 300 transactions per year.
One CU’s Story
Joining Aarnosk and Bennett during the breakout session was Lidya Garcia of BCU, which has seen$600 million in debit card growth since 2019, including 30% checking account growth. The two data points are closely related.
The PSCU reps saidBCU is a perennial debit and credit top performer among the CUSOs member CUs.
Garcia said BCU has found strength in focusing on its purpose, which is empowering members to find financial freedom.
“Going back to 2020, we had planned to launch tap-to-pay debit and credit cards. We executed a mass conversion and upgrade in 2021,” she explained. “It gave us a unique opportunity to reposition debit. We redesigned the plastic. We talked about the security, the convenience, digital wallets.
“Now in 2022, the growth in transactions has grown so much and our members are now comfortable with it, Garcia continued. “Last year, we also continued to onboard an exceptional number of members, 40,000. It’s so, so incredibly important to onboard them with a checking account. One very important feature for our members is overdraft protection and courtesy pay. So, we increased our grace balance from $20 to $100. It was a cut to our revenue, but we needed to do that to help our members make it from paycheck to paycheck.
“And, last year we launched the Lumin Digital digital platform. It offers controls and balance alerts and the ability to freeze or block a card.”
A Trend Develops
Garcia said that toward the end of 2021 BCU started to see usage decrease.
“It made sense; stimulus funds were getting spent,” she noted. “But we are fortunate we have a really penetrated credit card portfolio. Members were shifting from debit cards to credit cards. That’s fine, they’re staying inhouse. So, we looked at the members who prefer debit and why? We did internal segmentation analysis and worked with marketing to design campaigns around elevating their spend and also to win back business. It was test and learn all the time.
“What was so interesting when we looked at those members who just made a few transactions each month, we incentivized them and there was a lift over the control group even months after the promotional period had ended.”
Feeling the FOMO? We Can Help
The biggest, best and freshest news reporting in credit unions remains free in ’23! Each morning CUToday.info delivers its daily Fresh Today news update offering the latest headlines and breaking news right to your email, with the easy-to-read headlines format allowing you to click on the stories that interest you most in order to learn more.
If you haven’t yet signed up for the new email solution on which CUToday.info has partnered with ResponseGenius, you can do so here. Signing up requires less than one minute of your time—and it’s free!
Please note that after signing up you may need to go to your Spam/Junk folder and mark the morning headlines email as safe. CUToday.info does not provide its list of readers and emails to outside parties, and we will not be contacting you to sell you an extended warranty or sending you any links so you may cash in on an inheritance you didn’t know was coming.
And did we mention it’s free?
Please note and/or make your IT department or email administrator aware the emails will be coming from the domains CUTodayinfo.com and CUTodayinfoReply.com