Which channels are consumers using most, and what does this mean for credit unions?
Today’s consumers are faced with more options than ever when making payments or conducting transactions. Gone are the days when physical cash, checks and cards were the only choices available. Now, consumers can decide between one of these or a host of other options, including a credit or debit card (whether physical or issued digitally), contactless card, mobile wallet, wearable, a buy now, pay later program, a person-to-person payment app—the list goes on. But which options are credit union members and other consumers turning to the most, and what does it mean for credit unions?
For the sixth consecutive year, PSCU set out to gauge payment preferences among credit union members and other financial institution customers, including how they evolved over the past year. According to PSCU’s 2023 Eye on Payments survey, nearly four in 10 respondents (37%) report they want to use a mobile wallet at the point of sale or when paying for something at a retail location. With 43% of credit union members—up from 35% in 2019—reporting they are likely to use a mobile wallet in the next six months to pay for goods and services, this trend seems to be here to stay. In fact, the number of respondents reporting they never use a mobile wallet has decreased from 57% in 2022 to 48% in 2023, underscoring this upward trajectory.
In addition, for the first time, tap-and-go payment options—including contactless cards, mobile wallets and wearables (like smart watches) —were more preferred than inserting an EMV chip at the point of sale. More than half (53%) of respondents report they would rather tap-and-go than insert a chip into a point-of-sale device (38%). Mobile wallet (14%) has also officially outpaced swiping a magnetic stripe (9%) at the point-of-sale device.
These preferences and behaviors are partly driven by younger generations. At least 28% of respondents 42 and younger say they use their mobile wallets at least a few times per week (34% of Generation Z, ages 18-26, 35% of younger millennials, ages 27-34, and 28% of older millennials, ages 35-42). In fact, mobile wallets rank as the third most preferred way to pay (13%) for Gen Z, more than doubling in preference since 2021 (6%) and surpassing cash (12%) for the first time. Younger millennials have also reached double digits, with 10% reporting they favor mobile wallets to pay for items.
To top it off, this year’s survey revealed the biggest divergence between Baby Boomers (ages 59 and above) and Gen Z, from where they choose to shop and conduct banking activities, to how they decide to pay and more. Ninety-six percent (96%) of Baby Boomers prefer to use a tried-and-true payment method like debit cards (42%), credit cards (38%) or cash (16%). Although debit is also most preferred among Gen Z (49%), this group leads the way in preference for mobile wallets and P2P payment accounts (6%). In addition, only 16% of Gen Z respondents prefer credit cards. When asked if they tend to pay more with a variety of payment methods than they did a few years ago, 80% of Gen Z agreed they do compared to only 42% of Boomers, the lowest among any generation.
The Takeaways for Payments
Enabling and offering tap-and-go options, especially mobile wallet solutions and integrations, has become table stakes for credit unions. What might have seemed like a passing trend has now become a go-to option for many consumers. Digital is here to stay and credit unions must ensure their tools and technologies are meeting—or ideally exceeding—member expectations.
Most credit unions already know their members expect personalized, connected experiences. However, credit unions can take this a step further by personalizing offerings to meet members’ needs in different life stages. While digital-first younger generations are always on the hunt for the latest and greatest innovations, older cohorts gravitate toward reliable, time-tested methods. To truly understand a credit union’s target audiences and provide the right solution best suited to each member or potential member, utilize the data your credit union already has available.
It all comes down to providing credit union members with the options they seek, then continually looking for ways to optimize, elevate or enhance those offerings. Keeping products fresh, relevant and aligned with consumer demands is critical to retaining current member relationships and establishing new ones.
SVP/Chief Marketing Officer Tom Pierce is responsible for leading and executing PSCU’s marketing and communications strategy, including brand development and sentiment, public relations, go-to-market strategy, market research and events. Pierce has successfully led marketing teams for more than 30 years, with the latter half of his career spent in the payments industry. Before joining PSCU, a CUESolutions provider, Pierce served as chief marketing officer for Cardtronics, the largest global ATM operator, and held senior marketing roles at FIS, Metavante and Wausau Financial Systems.