Before the pandemic, 72 percent of credit unions were ramping up digital services for consumer cards, according to PYMTS Credit Union Tracker®. 48 percent had an interest in notifications and alerts, while 42 percent were interested in instant issuance to digital wallets.
That all changed with the pandemic as consumer spending and saving behavior transitioned to being more conservative. This also resulted in consumers favoring debit cards over credit cards.
“Many CUs’ credit innovation plans ground to a halt when the health crisis began, however,” according to PYMNTS’ Credit Union Tracker® done in collaboration with PSCU. “More than 40 million U.S. consumers filed for jobless benefits between January and July, and even those who have remained employed are significantly altering their spending. Credit products often carry debt and fees, and consumers are generally less inclined to use such solutions when they are on uneven financial footing.”
Not surprisingly, consumers are making more use of contactless payments. These are payments that include digital wallets (used with mobile phones) and cards that can be tapped or waved over a payment point. Credit unions that continue to enhance their contactless consumer experience will have an advantage over those credit unions that don't.
Consumers are certainly still spending. PYMNTS said that credit union member spending at Amazon is up 94 percent on debit cards and 55 percent on credit cards, year-over-year during the pandemic.
The consumer spending trend to debit is expected to be temporary. It is more a result of consumers moving away from any potential fees and expansion of debt. As jobs come back, credit should regain its crown as the top spending choice by consumers.
The latest BEA (Bureau of Economic Analysis) data shows a steady decline in consumer savings rates since July 2020:
- October 2020 13.6
- September 2020 14.6
- August 2020 15.1
- July 2020 18.6
This despite personal income and disposable personal income both decreasing. The decrease in savings rates may be linked to consumers using savings to fund their spending.