By Ray Birch
ST. PETERSBURG, Fla.—There has been a dramatic acceleration in moving to contactless plastic during the pandemic, but are all credit unions on board with the shift? One payments expert says—surprisingly—a large number are not, and that has him concerned.
The reason for the worry: CUs could fall behind in the rapidly evolving cards market if they do not begin reissuing its cards with the tap-and-go option.
“I don't want to paint all credit unions with a broad brush, but there's certainly a large group of credit unions that pulled back on contactless during the pandemic,” said Brian Scott, SVP and chief growth officer at PSCU.
As many analysts have stated, including PSCU President and CEO Chuck Fagan, contactless plastic has become huge in the minds of consumers as the pandemic has continued to maintain its grip, and may even leapfrog digital wallets. Experts have also stated the NFC-enabled cards will are also the bridge to the eventual high adoption of digital wallets by consumers.
“COVID-19 has fast-tracked innovation as consumers have rapidly adopted digital and contactless forms of payments,” Fagan observed during the CUSO’s 2021 Virtual Member Forum earlier this year.
So, why have some credit unions pulled back on reissuing cards as contactless? According to Scott, they continue to have concerns over the future of the economy, the future of their own CU’s members, and the future of the credit union itself. Scott said PSCU noticed the pullback as the pandemic began to take hold across the U.S. in March of 2020.
“It was a monetary decision. They wanted to save money,” he said.
Surprise
Scott told CUToday.info he was very surprised at the reaction by some credit unions.
“The reason, I believe, is that contactless plastic costs more to reissue. It’s simply more expensive than a standard chip card,” said Scott. “There was just so much uncertainty in March about what was going to happen with COVID. Members were going through hardships. You saw credit unions setting aside a lot of money in loan loss provision allowances. I think it caused them to pull back a little bit on spending—and there went the extra costs associated with issuing contactless.”
On the other side of the financial services market, the major banks all stepped up their issuance of tap-and-go cards during the health crisis, noted Scott.
“The big banks—Chase, Citbank, Wells Fargo … the vast majority now have over 75% of their customers using contactless,” explained Scott.
That is a big concern for credit unions that have not kept pace with the tap-and-go shift, pointed out Scott, saying top-of-wallet status is at risk.
“This is a clean payment option that consumers are wanting more of. They want more of the touchless…I don't want to put my card in and leave it in the terminal. I just want to be able to tap and go,” said Scott.
Advertising Raises Awareness
Scott said the emphasis on contactless from the big banks is clear just from their advertising, which only serves to raise awareness of what a bank may offer and a credit union may not.
“You're starting to see a lot more tap-and-go commercials from Visa, Chase and from other big banks about the convenience of this option,” said Scott.
Scott said credit unions had been doing a good job of keeping pace with the shift to contactless before the pandemic hit. As PSCU reported earlier this year, the CUSO helped CUs deliver more than 6.8 million new contactless cards last year alone.
Brian Scott
Scott said he believes credit unions, now that the economy is getting back on its feet, are reconsidering their contactless position, adding that many CUs were paying attention to the new plastic during the health crisis. Fagan previously reported that 64% of all cards ordered from the CUSO this year have been contactless.
The ‘Great Accelerator’
But during the pandemic was not the time for any credit union to back off on issuing contactless, emphasized Scott.
“COVID was the great accelerator,” said Scott about the move to digital banking and the move to touchless payments. “It's like pouring gasoline on a fire. Contactless plastic usage about doubled right before the pandemic and contactless transactions have taken off since. So, if you're not in this space, your members are going to find a place to get that type of payment. That’s what consumers want. For those credit unions that are not part of this shift, they will likely face issues with their cards down the road.”