By: Tom Pierce, Chief Marketing Officer
Amid the COVID-19 pandemic, consumers of all generations are looking for new ways to transact for everything from grocery shopping to retail purchases to dining out. In addition, with health and safety remaining top of mind, people are seeking forms of payment that limit physical contact. Contactless cards and other touchless options have filled this need.
Welcome to part two of our blog series on Eye on Payments 2020. Our third annual consumer payments study examines payment preferences among credit union members and other financial institution customers (“non-members”) across the U.S. and how they evolved over the past year.
In our first blog from our 2020 study, we highlighted changing consumer preference choices and purchasing behavior as a result of COVID-19. Today, we’ll explore how the pandemic has accelerated contactless payment adoption and usage, along with an increase in mobile wallet usage and digital banking.
Surge in Contactless Penetration and Usage
As consumers look for “clean” forms of payments that limit human contact, there has been a 72% year-over-year increase in survey respondents that report having a contactless card. In addition, 57% of respondents said they used a contactless card at least a few times per month before the pandemic; this number increased to 65% during the pandemic, and 69% anticipate continuing to use it post-pandemic. Consumers from Generation Z and millennials are the most frequent users of contactless card technology.
Respondents reported using contactless cards most frequently at essential businesses like grocery stores and pharmacies, with usage among credit union members higher across the board than non-members. In line with this finding, 73% of credit union members reported they make decisions about how they will pay for something primarily based on which is the most physically safe at the point of sale.
Nearly 50% of consumers surveyed agreed with the statement, “I prefer to use a contactless card.” On the other hand, of those respondents who have a contactless card, 25% don’t use it because they don’t know what it is or how to use it.
Increased Use of Mobile Wallets and Digital Banking
In 2019, 32% of respondents were likely or extremely likely to use a mobile wallet over the next six months. In 2020, this increased to 38%. Usage of mobile wallets among credit union members increased by 40% – up from 15% in 2019 to 21% in 2020 – when asked if they had utilized a mobile wallet in the 60 days prior to completing the survey. In fact, more credit union members (49%) report using a mobile wallet than non-members (28%). Similar to contactless cards, of those who have a mobile wallet, 44% don’t use it because they don’t know what it is or how to use it, while 31% don’t use it because they feel it is not secure.
At the same time, mobile phone banking continues to trend up. Respondents who said they typically make payments or do banking via their mobile phone grew by three percentage points, with credit union members reporting higher usage than non-members (57% versus 35%).
Credit union members also reported increased usage of digital payment methods – such as Venmo, PayPal and Zelle, among others – as their primary payment method, rising from 8% in 2019 to 17% in 2020. In fact, over one-third of credit union members ages 23-30 (younger millennials) use digital payment methods as their primary method of payment.
Key Takeaways
More and more consumers are taking to digital channels to conduct transactions and interact with their credit unions, with usage among credit union members higher than non-members. In order to keep pace with member demand and compete with other financial institutions, it is key for credit unions to continue innovating in the digital space, especially as artificial intelligence and biometric technology advance. Credit unions should keep a regular pulse on what their members want and expect when it comes to innovation, rather than innovating just for the sake of it. Leveraging third-party partners can be hugely beneficial once credit unions have formulated their strategic innovation priorities.
While the number of respondents with contactless credit or debit cards has risen dramatically, credit unions not currently offering these options should prioritize issuance whether through mass or natural reissue. This is also an opportunity for credit unions to teach members how to utilize alternative payment methods, as well as explain the benefits and security features of each.
In part three of our blog series, we’ll take a closer look at the primary drivers behind consumers’ purchasing decisions – convenience, ease of use, and speed – as well as the importance of security.
Want to learn more? Download the full Eye on Payments 2020 study now! Explore the key findings and takeaways that your credit union can leverage to effectively market to members and achieve enduring growth and success.
In his role as SVP, Chief Marketing Officer, Tom Pierce is responsible for leading and executing the marketing and communications strategy. Pierce has successfully led marketing teams for more than 30 years, with the latter half of his career spent in the payments industry. Previously, Pierce served as Chief Marketing Officer for Cardtronics, a global ATM organization serving the retail and financial services industries, where he directed a global marketing team in the development and execution of strategic marketing and communications initiatives.
