5 ways COVID-19 is influencing how credit unions must approach digital and payments

Wishful thinking has led many to hope that the COVID-19 pandemic would be a memory by now, but the reality is that the pandemic is still significantly impacting the economy and how all of us carry on day-to-day. In March, our firm conducted a survey to assess how the pandemic was impacting financial institutions’ operations. Last month as the virus was reasserting itself across the United States, we conducted a second survey to investigate specifically the evolving consumer landscape in digital transformation and payments.

Analysis of this second survey uncovered five key findings of how consumer banking patterns have evolved through the pandemic:

  • Digital growth, as expected, is well above the pre-pandemic norm. 62% of responding financial institutions noted an increase in digital users of between 10 and 25% with the highest concentration of institutions clustered in the 10-15%. range. Another 11% of respondents stated this growth exceeded 25%. Nearly three-fourths of respondents reported more activity in their digital user base, which is not surprising given the temporary closure of many branch locations across the U.S.
  • When asked about changes in how consumers pay for purchases, nearly half of the institutions reported decreases in credit card activity. At the same time, a correlating 49% saw increases in debit card usage. This result aligns with the Federal Reserve report showing outstanding U.S. credit card balances falling below $1 trillion for the first time since 2017. Debit card transactions will likely continue to increase as credit card issuers reduce lines of credit and close some cardholder accounts.
  • Confirming many early speculations, 65% of responding financial institutions stated increases in Card Not Present transactions, and 76% reported the same for mobile payments. No respondents saw declines in either of these areas. In addition, 49% of respondents noted a decrease in cash withdrawals. These trends were impacted by both the increased consumer participation in the “delivery economy,” as well as a concern about the pandemic making the use of cash unsafe.
  • More than one-quarter of respondents noted an increase in transaction values across all payment types, while 22% noted a decrease in transaction values. Understanding these dynamics will be critical over the next 12 months when negotiating high-stakes agreements with payments vendors.
  • Asked to rank their focus in five areas, survey participants saw “Expand/Improve Digital Channels” as their most critical initiative going forward, with nearly two-thirds of respondents rating it their top priority, confirming the results of the earlier survey’s findings in this area. Even if some consumers revert to old habits once more branches across the U.S. open, the importance of the digital channel has been etched in the mind of any consumer trying to manage their daily financial needs.  If there is a subtle message concerning digital in these results, it is that digital now must be a focus that reaches across the financial institution. Future needs will not be satisfied by simply improving mobile and online banking.

Though we may all be tempted and even fall prey to wishful thinking concerning the end of the pandemic over the coming months, it is important to free ourselves from this practice and consider that business as usual has left the building with no return expected.  As is the case with most organizations regardless of the industry, the priorities set by credit unions for 2020 have undergone a “sea change” that has already capsized many businesses.  To adapt, survive and thrive, credit unions must rethink how to deliver services and value to members by looking at their front office and back office areas with a new set of eyes.  This is not easy to do and within the coming months and years, those that accomplish this task will be obvious by their presence in the marketplace.

Michael Carter

Michael Carter

Michael Carter is the executive vice president of SRM (Strategic Resource Management), an independent advisory firm serving financial institutions. Web: https://www.srmcorp.com Details