By Jeremiah Lotz
The COVID-19 pandemic has impacted the global economy and touched all of our daily lives. Among the various impacts to our industry, COVID-19 is changing the way that consumers transact – which means that credit unions must be prepared for the “new normal” moving forward.
Prior to COVID-19, 50% of low-dollar-value transactions at the point of sale were made using cash. With the heightened concerns around physical contact and the use of cash arising from the COVID-19 pandemic, contactless cards are now receiving an accelerated focus from consumers.
It is no longer a wait-and-see approach to contactless: Rather than a phased, natural approach to reissuing contactless cards to cardholders, now may be the time for credit unions to work with their payments processor to determine the best strategy to maintain top-of-wallet position.
A Safe and Secure Solution for Consumers
Contactless options are seeing increased usage as members shift away from cash and look to other methods of payment that limit human contact. A recent survey by Mastercard showed that 51% of U.S. consumers are now using some form of contactless payment, and that perceptions of safety and convenience have led nearly a third of respondents in the U.S. to switch out their top-of-wallet card for a card that offers contactless.
Even more importantly, recent data from PaymentsJournal indicates that 70% of surveyed consumers who are new to contactless payments report they will continue to use this payment method after the pandemic – a key indicator that contactless is here to stay in the post-COVID-19 world.
In addition to less human contact, contactless cards offer additional benefits to consumers. Point-of-sale transactions conducted with contactless cards are faster than those conducted by inserting a chip card, speeding up the purchase process at checkout.
As more and more merchants are accepting tap-and-go payment methods for in-store transactions (most of the biggest retailers have already enabled their near-field communication technology, including Chick-fil-A, Starbucks, Whole Foods and Walgreens), Visa reports that 95.5% of all point-of-sale devices being shipped are contactless-capable. There are also multiple layers of security built into the traditional credit and debit payments systems that make contactless transactions just as secure as traditional card transactions.
Accelerated Spend and Transaction Volume for Credit Union
Not only do contactless cards provide the best point-of-sale experience for members, their speed and convenience also help increase card spend, which could lead to new streams of revenue for credit unions as the impacts from COVID-19 continue to be felt across the U.S.
In other countries that have been issuing contactless cards for several years, most saw an increase of three to five transactions per card in the first year of contactless rollout. In the third year, they saw between 15 and 30 incremental transactions, or an average of 10% to 30% lift per card. Overall, in markets where contactless cards were launched, countries with economies similar to the U.S. experienced between a 20% and 30% lift in the number of transactions per card.
Making the Switch
Educating credit union members is a critical part of any contactless rollout plan. Given the COVID-19 environment, careful messaging is important – credit unions should position contactless cards as a safe and secure way to help, avoiding any unintended perceptions of upselling their members during these difficult times.
For some credit unions, tapping into the knowledge, expertise, scale and value of a CUSO partner like PSCU might be a first step in establishing a contactless card offering. One of PSCU’s key initiatives is enabling contactless moves for many of its credit unions over the next 18 months. In 2019, PSCU distributed more than 500,000 contactless cards to its owner credit unions. This year, the company expects to produce more than three-million new contactless plastics and deliver them to more than 100 credit unions to support natural and mass reissuance strategies.
Another key component of the contactless equation is mobile payments, as contactless card adoption typically leads to increased use of mobile wallets. PSCU also supports and enables tokenization for digital wallet payment including Apple Pay, Google Pay and others. When discussing your credit union’s contactless strategy and communicating your contactless offering to members, mobile payments are an important piece to consider.
A ’Necessary Offering’
While many credit unions may have viewed contactless as a potential payment option for members in the past, it has now become a necessary offering. As consumers become comfortable with using contactless cards and shift their behaviors in a post-COVID market to less physical contact, they will align with the financial institution that offers them that opportunity. If their credit union does not offer it, their top-of-wallet choice may shift to another financial institution. The time is now for credit unions to prioritize an accelerated focus on contactless.
Jeremiah Lotz directs PSCU's initiatives to empower the company's owner credit unions with innovative and engaging payment solutions. Lotz leads an experienced team dedicated to delivering PSCU's credit, debit, prepaid, fraud, mobile banking and online bill payment services. He also manages the strategic relationships PSCU forges with leading payments technology providers to ensure Owners have access to world-class platforms and solutions that build profitability and loyalty.