By: Tom Pierce, Chief Marketing Officer, PSCU
Virtually no aspect of the economy has remained untouched by COVID-19 — and the impacts continue to evolve the payments landscape at a rapid speed. The pandemic has changed our world dramatically and has been a major driver for consumer payment choices and purchasing behavior in 2020.
Welcome to part one of our blog series on Eye on Payments 2020. PSCU’s 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. Through this research, PSCU explores the factors that influence consumers when it comes to their choice and usage of different payment methods, and how these factors may vary among different life stages and economic events. For credit unions, the study shows how you can better meet these preferences and needs to drive member experience and growth.
This year, COVID-19 has driven consumer behavior in ways few experts could have predicted. In this first blog from our 2020 study, we’ll highlight changing consumer payment choices and purchasing behavior as a result of COVID-19, and share some of the ways financial institutions can prepare for consumer expectations – both now and in the “new normal.”
COVID-19 Accelerates Shift to Online Shopping
Seventy percent of survey respondents 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. In line with this finding, the number of respondents who said they shop online at least a few times a week increased by almost 50% since the pandemic started.
Before the pandemic, only 23% of credit union members shopped online at least a few times per week; during the pandemic, this increased to 34%. In comparison, only 12% of non-members shopped online at least a few times per week before the pandemic, increasing by 33% to just 16% during the pandemic.
Interestingly, while the frequency of online purchases has increased among all age groups, older audiences indicated the fewest changes in their payment preferences over the last year. Prior to the pandemic, nearly half of Baby Boomers (48%) said they shopped online at least a few times per month. During COVID-19, this number has risen by 27%.
Online Grocery and Streaming Subscription Growth
Respondents reported increased usage of online platforms and mobile apps to order ahead for grocery or food pick-up or delivery, with most respondents indicating they expect to continue using these channels post-pandemic. Of note, credit union members reported an increase in going online or using a mobile app to order ahead for grocery pickup or delivery at least a few times per month, from 33% pre-pandemic to 42% during the pandemic.
Similarly, subscriptions to streaming services increased from 61% in 2019 to 70% in 2020. Most people lean toward debit (34%), credit (49%) and credit union or bank account withdrawal (22%) to pay for streaming services.
Cash Back Still Dominates Rewards, While Cash Usage Declines
When it comes to rewards, cash back remains the first choice, with low interest rates ranking above travel rewards in popularity during the pandemic. When asked which rewards or benefits encouraged them to use their primary card more often before COVID-19, cash back and travel were most commonly selected as most preferred, at 63% and 37%, respectively. When asked which rewards or benefits encouraged them to use their primary card more often as a result of COVID-19, the responses most commonly selected were cash back (60%), low interest rate (32%) and travel (29%).
Not surprisingly, cash usage has decreased across all types of purchases and payments situations due to COVID-19. More than one-third of respondents see cash as something they only use for smaller purchases, with more than half reporting they typically use cash for purchases less than $10. In addition, only one quarter of respondents view cash as physically safe.
Surge in Card-Not-Present Transactions
When the survey was fielded in July, many states had started to reopen after months of shelter-in-place measures, only to later slow or halt reopening plans due to escalating coronavirus cases. At that time, nearly one-third of survey respondents had already suffered a job loss, furlough or reduced pay or hours as a result of COVID-19.
According to PSCU data comparing Owner credit union members’ payments behavior and activity on a same-store basis year-over-year in July, more people were conducting purchases through card-not-present channels. We’ll explore the recent surge in contactless, mobile wallet and digital banking adoption in part II of our blog series – stay tuned!
While many financial institutions were quick to adapt to changing economic factors and consumer behavior as a result of COVID-19, they now need to look beyond the pandemic to meet customers’ evolving demands. While some may never feel comfortable stepping foot in a branch again and choose to conduct routine activities exclusively via digital channels moving forward, others may prefer to go back to branches when they feel it is safe.
It is important for financial institutions to ensure that all channels work together seamlessly to provide customers with the experiences they are seeking out today and into the future. Services and solutions need to reflect and be adaptable to changing consumer needs, wants and expectations across all channels and among all touchpoints.
Want to learn more? Download the full Eye on Payments 2020 study now! Explore the key findings and takeaways that your financial institution can leverage to effectively market to customers and achieve enduring growth and success.
In his role as SVP, Chief Marketing Officer, Tom Pierce is responsible for leading and executing PSCU’s 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. Prior to joining PSCU, 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.