ST. PETERSBURG, Fla.—Credit unions are facing two major payments issues: Interchange revenue is taking a big hit during the pandemic, and consumers are not likely to change their new spending behaviors for well over a year.
Combined, those two trends should have CUs ready to make changes to their credit and debit strategies, said Cindy McGinness, manager of digital channels at PSCU.
What’s hitting interchange revenue the hardest—in addition to consumers simply swiping their cards less as they stay at home—is the move away from high-dollar credit card purchases that generate a big chunk of interchange, explained McGinness during PSCU’s Virtual Member Forum.
“The spending mix has changed,” said McGinness. “No longer are people spending money with the high-interchange merchants, such as travel. People are still going to the grocery stores and spending larger amounts, but other than that…”
McGinness said PSCU is working with its owner credit unions to help them adjust to the new behaviors, working to prioritize payment solutions that reduce physical contact at the point of sale.
“Now is a great time to begin to change cardholder habits,” said McGinness. “It takes 30 days to change human behavior; now is the time for credit unions to get on board and adopt all of the ‘pays.’”
A Need for Alignment
McGinness emphasized the importance of recognizing the big threat to interchange and adjusting strategies to align with the new spending behaviors.
“A new report shows 43% of consumers don’t expect to get back to their previous payments habits for more than a year,” she said.
What that means is credit unions should do things like make it easier for cardholders to provision their plastic into their digital wallet offerings, a process PSCU is currently addressing.
“We are piloting this with Google Pay and Samsung Pay is right behind it,” McGinness said.
McGiness also spoke to how PSCU has helped its credit unions shift to contactless plastic, issuing more than three-million tap-and-go cards to CUs and their members in the last 18 months.
“This is really a great time for credit unions to dig into their plastic strategy and see how contactless plays an overall role in that strategy,” she said. “There are a lot of different things to consider, such as current card stock, marketing opportunities, member demographics and investment resources…Also, should you do a mass reissue, or issue new cards as cards expire? You need to understand which is the right strategy for you.”
The Big Topic
A topic of conversation among payments experts during the pandemic has been whether a greater use of contactless plastic will finally lead to a much greater use of mobile wallets. As CUToday.info has extensively reported, the adoption of digital wallets has never reached initial expectations, as consumers see little advantage of pulling out their phone over their card. However, now that has changed with the pandemic, said McGinness.
“Contactless plastic and the pays mirror each other—they are tap to pay,” she said. “Now the question will be what is most convenient for each consumer at the time they pay. But I think, overall, this will lead to an increase in the use of the pays, which we have been waiting for for a long time.”
McGinness added that grocery store purchases will likely be the best to monitor now, to determine how the payments winds are shifting and what consumers may ultimately decide to use at the point of sale.