The COVID-19 pandemic has not only impacted the international economy, but it has also affected all of our daily lives. Among the various ramifications to our industry, COVID-19 is changing the way that consumers transact, meaning credit unions must be prepared for what the “new normal” might look like moving forward.
Before the onset of COVID-19, cash accounted for half of low-dollar-value transactions at the point of sale. With the heightened concerns around physical contact and the use of cash arising from the pandemic, contactless cards are now receiving more interest from consumers. Credit unions can no longer take a wait-and-see approach to contactless. Rather than a phased, natural approach to reissuing contactless cards to members, now may be the time for credit unions to work with their payments processor to determine the best strategy to maintain top-of-wallet position.
Contactless is Safe, Quick and Secure
As members shift away from cash and look to other methods of payment that limit human contact, tap-and-go, contactless options are experiencing increased usage. A recent survey by Mastercard showed that 51% of U.S. consumers are now using some form of contactless payment, and that perceptions of safety and convenience have led nearly a third of respondents in the U.S. to change their top-of-wallet card for a card that offers contactless. It also seems that contactless is here to stay in the post-COVID-19 world. A recent survey by PaymentsJournal reports that 70% of consumers who are new to contactless payments plan to continue using this payment method even after the pandemic.
In addition to less human contact, point-of-sale transactions conducted with contactless cards are faster than those conducted by inserting a chip card, making the purchase process at checkout quicker and more efficient. More and more merchants are also accepting tap-and-go payment methods for in-store transactions, with most of the biggest retailers having already enabled their near-field communication technology, including Chick-fil-A, Starbucks, Whole Foods and Walgreens. In fact, Visa reports that 95.5% of all point-of-sale devices being shipped are contactless-enabled. There are also multiple layers of security built into the traditional credit and debit payments systems that make contactless transactions just as secure as traditional card transactions.
The speed and convenience of contactless cards has also been proven to help increase card spend, which could lead to new streams of revenue for credit unions as the impacts from COVID-19 continue to be realized. In other countries that have been issuing contactless cards for several years, most saw an increase of three to five transactions per card in the first year of contactless rollout. In the third year, they experienced between 15 and 30 incremental transactions, or an average of 10% to 30% lift per card. Overall, in markets where contactless cards were launched, countries with economies similar to the U.S. experienced between a 20% and 30% lift in the number of transactions per card.
Another key component of the contactless equation is mobile payments, as contactless card adoption tends to lead to increased use of mobile wallets. An additional tap-and-go option, mobile wallets offer credit unions a chance to provide their members with the flexibility of paying for purchases when and how they want – whether through mobile phones, smart watches or other wearables – which is leading to top-of-wallet status.
Making the Switch
Educating credit union members is a critical part of any contactless rollout plan. Given the COVID-19 environment, careful messaging is important – credit unions should position contactless cards and mobile wallets as safe and secure ways to help, avoiding any unintended perceptions of upselling their members during these difficult times.
For some credit unions, tapping into the knowledge, expertise, scale, and value of a CUSO partner like PSCU might be a first step in establishing a contactless offering. One of PSCU’s key initiatives is enabling contactless moves for many of its credit unions over the next 18 months. In 2019, PSCU distributed more than 500,000 contactless cards to its owner credit unions. This year, the CUSO expects to produce over 3 million new contactless plastics and deliver them to more than 100 credit unions to support natural and mass reissuance strategies. PSCU also supports and enables tokenization for digital wallet payment including Apple Pay, Google Pay, and others.
While many credit unions may have viewed contactless as a potential payment option for members in the past, it has now become a necessary offering. As consumers become comfortable using contactless cards and mobile wallets and shift their behaviors in a post-COVID market to less physical contact, they are likely to remain with the financial institution that offers them this opportunity. If their credit union fails to do so, consumers’ top-of-wallet choice is likely to shift to another financial institution. The time is now for credit unions to prioritize contactless offerings.