The nearly year-long pandemic has rapidly changed how consumers are making payments, with emerging methods such as contactless solutions increasing in popularity. Touchless payments are quickly becoming the method of choice for consumers, with one January 2021 study indicating 38% of United States consumers use contactless at every possible opportunity when making transactions.
Those opportunities may still be rarer than consumers would like, however, as the financial institutions (FIs) and credit unions (CUs) responsible for supporting contactless cards or such methods struggle to keep pace with this rising demand. Many CUs have had to readjust their innovation strategies to put the spotlight on touchless payments, according to recent data from PYMNTS’ Credit Union Innovation Playbook: Card Trends Edition. Only 39% of CU executives surveyed said they planned to launch contactless card offerings in the months prior to the pandemic, for example. Bridging the divide between the number of consumers asking for touchless cards and the number of CUs that can provide them is becoming more important, as more consumers increasingly use contactless solutions such as mobile wallets and tap-to-pay cards.
In the latest “Credit Union Tracker®,” PYMNTS examines why it is key for CUs to upgrade their innovation strategies to meet new demands for convenience and safety and why contactless payments may become critical components of these strategies. It also analyzes some of the remaining barriers that may stand in CUs’ way when it comes to adopting these solutions and how those challenges can be met.
Around The Credit Union Landscape
Interest in contactless payments has been ticking upwards for several years, but the ongoing pandemic has given touchless payment adoption a massive push forward. Fifty-six percent of all payment cards are expected to be contactless by the end of 2022, in fact. CUs are taking such predictions seriously, with Utah-based Goldenwest Federal Credit Union recently launching touchless cards for members, for example. One payment services provider also noted that the ongoing pandemic is leading more of its FIs to make use of its contactless EMV cards. It is clear that offering these solutions or innovating payments to meet the contactless trend is becoming more important for financial entities.
That 2022 prediction is inching closer to reality according to recent data showing touchless transaction uptake has continued to advance in early 2021. CU service organization PSCU recently found that paying with contactless methods and mobile wallets — as well as eschewing cash payments — has increased year-over-year within the first month or so of 2021. Debit-based touchless payments made up 8% of transactions the week ending February 2, 2020, while they jumped up to 19% the week ending January 31, 2021, for example. Consumers are also adopting both tap-and-pay solutions and mobile wallets to make transactions at a higher rate, according to PSCU data. CUs should be keeping a close eye on such solutions as the year continues.
This growing preference for contactless and digital banking solutions is also not limited to tech-savvy millennial or Generation Z consumers. Another recent PSCU survey found that one-third of baby boomers — consumers age 55 and older — stated they are now using mobile banking technologies. Baby boomers have also adopted online shopping at higher rates since the start of the global health crisis: Forty-eight percent of this generation stated they had made online purchases prior to the pandemic, a figure that rose by 27% in its aftermath. It is clear that providing swift digital payment solutions is becoming essential to keep consumers of all age brackets and demographics satisfied with the payment and banking experiences.
For more on these and other stories, visit the Tracker’s News & Trends.
How The Pandemic Accelerated Contactless Card Plans At Navy Federal Credit Union
The pandemic had a sweeping impact on how consumers shop and how they make payments, accelerating the demand for contactless cards. This represents a key shift in an area CUs and FIs have both been watching closely for some time — contactless cards represented a “chicken and egg” situation for financial entities prior to the pandemic, explained Tynika Wilson, senior vice president of debit card and fund services for Navy Federal Credit Union (NFCU) in a recent PYMNTS interview. For consumers to use contactless cards, merchants’ point-of-sale (POS) systems first had to be upgraded to accept them — but in order for those systems to be upgraded, consumers had to want to pay with these cards. The pandemic has created more of a demand for this, however, meaning CUs no longer afford to forego offering this capability.
Deep Dive: Why Credit Unions Cannot Sleep On Offering Contactless Payment Options
Contactless payments have become increasingly popular since the start of the global health crisis, with one March 2020 study finding that 38% of consumers stated they needed contactless options as basic features for their payment cards. This represents an 8% increase compared to the number of consumers who said the same in 2019. Businesses and merchants have leaped upon this trend as well, but while some CUs have caught up, many others are falling behind the contactless payment curve. Catching up may prove critical to keeping consumers satisfied for the long haul, however. To learn more about why CUs may be struggling to adopt and offer contactless payments and how they can innovate their payment offerings, visit the Tracker’s Deep Dive.
About The Tracker