The card-not-present chronicles: As members shift to e-commerce, a new debit card frontier emerges

We are in the midst of a sea change with how members shop and view their payment options as more turn to shopping digitally. It is a game changing opportunity for retailers and a bellwether for financial institutions to ready their infrastructure for increases in e-commerce and online transactions.

A credit union’s ability to help facilitate a seamless online shopping experience to its customers is one of the most potent competitive differentiators in the current COVID-19 work from home economy. Credit unions that fail to rethink their e-commerce strategy will fall behind and lose market share along with a long standing impact on their growth and profitability.

A case for debit cards and the importance of optimizing your debit e-commerce strategy

The top three use cases for debit cards have traditionally been face-to-face interactions – in a recent study, customers use their debit cards primarily to get cash from the ATM (72%), to pay for things in store by PIN (69%), and to pay for things in store by signature (52%). When consumers shop online (also known as card-not-present or CNP), they tend to reach for their credit cards rather than debit because they perceive credit as a “safer” option. Debit cards are in fact a safe option to use online with embedded features like continuous fraud monitoring and Visa’s Zero Liability Policy, however consumer perception remains misinformed. In addition, the experience of making purchases online tends to be worse than using a debit card in store with over half of credit unions typically declining more than 10 in 100 transactions. Consumer dormancy and spend attrition increases anywhere from 2-7x after a decline and when met with this situation, many consumers unfortunately are left with a lasting impression. This is a significant opportunity for awareness and education with more than 80% of purchase volume coming from debit cards for many credit unions.

What can be done?

Credit unions need to adapt their debit card programs to better serve their members and their evolving behaviors towards CNP use cases. Members are rethinking their daily habits in the wake of the pandemic including where and how they spend, it is imperative to take a holistic approach to improve and implement tactics that will foster trust across your debit portfolios and optimize the online debit shopping experience.

Follow along with The Card-Not-Present Chronicles, a monthly series exploring the top five areas of focus credit unions should be thinking through and implementing to drive debit card usage and a positive e-commerce experience for their members. The series will take a deep dive into:

  • Assessing the performance of your CNP program, identify opportunities, and formulating a strategy to drive growth
  • Authorization strategy and its impact on customer experience and retention
  • Mass marketing and education campaigns to educate customers about the benefits of using their debit card online
  • Targeted marketing campaigns infused with advanced analytics to help drive adoption and spend
  • Reward and incentive structures that issuers can put in place to support their debit programs

The next article will dive into the critical first steps that credit unions can take to assess the strength and performance of their card not present program. This will help credit unions understand and better appreciate their current state, before they start formulating a plan to improve their card not present program.

Doug Leighton

Doug Leighton

Doug Leighton is Founding Partner at Tahoma Advisors. Web: Details