Direct deposit – The “magic” behind debit growth

The past two years have seen unprecedented changes in payments. Debit has come to the forefront, with sales volume growth in 2020 (+11%) and 2021 (+19%) well outpacing the historical trend of approximately 7%. A multitude of factors are driving this, including concentrated spend by consumers in “everyday” categories like groceries and household supplies that are historically the domain of debit. However, an additional factor was the influx of liquidity through three rounds of government stimulus and relief programs, in addition to other means of support. PSCU’s data shows that during each period of disbursement, debit growth as much as doubled in the following month. Most of the stimulus came into checking accounts via direct deposits, while much of it left as debit card transactions.

While the data confirms the value of direct deposit, our work with credit unions reveals a significant opportunity to deepen utilization, as the number of members using this service lags comparatively. While slightly dated, a 2016 survey from the National Automated Clearing House Association (NACHA) revealed that 82% of U.S. workers ─ crossing age, income and other demographic categories ─ are paid by direct deposit via Automated Clearing House (ACH). A recent study by Javelin suggests that the penetration rate of direct deposit at large financial institutions (Bank of America, Chase, and Wells Fargo) averages 77%, with some over 80%. We typically see less than 50% at credit unions.

Intrinsically, there are additional benefits to direct deposit. Surveys reveal that direct deposit is a leading factor in primacy, with “where my paycheck is deposited” being a key factor in denoting “primary financial institution” (PFI). PFI leads to engagement – and engagement leads to ongoing opportunities to serve the financial needs of members.

So, what should credit unions do?


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