By: Tom Pierce, Chief Marketing Officer, PSCU
The uncertain economic outlook has been at the forefront of consumers’ minds throughout 2022. Despite monthly interest rate increases to help curb inflation, prices have risen across the board, leaving many consumers concerned about their personal finances. The state of the economy, along with income level, has influenced consumers’ payment preferences between credit and debit. And, despite strong interest in emerging payments and trends like cryptocurrency and the metaverse, there has been low adoption by consumers, which also could be influenced by the current economic climate.
For the fifth year in a row, PSCU set out to gauge the current state of payment preferences among credit union members and other financial institution customers (“non-members”) in the 2022 Eye on Payments study. In this annual research, PSCU explores the factors influencing consumers when it comes to their choice and usage of different payment methods and how these factors may vary among different life stages and economic events. The study also provides key takeaways for credit unions to consider when making decisions and optimizing offerings to adapt to the evolving preferences and needs of their members to better serve them now and in the future.
In this second installment of our five-part blog series from our 2022 study, we explore the impact the economy and income levels have on consumers’ payments preferences, as well as highlight the status of various emerging payments.
Income Level Influences Payment Preference
Income is impacting how consumers choose to pay. Respondents with an annual household income under $75,000 have a strong preference toward debit (52%), as opposed to those in a higher income bracket (32%). Credit is preferred by 46% of respondents with an average or above average household income, compared to only 23% of those with below average income. Those with a below average household income (59%) reported paying more now with debit cards than they did a few years ago. Those with an average household income of $75,000 or above prefer credit, with 59% reporting paying more with credit cards now than a few years ago.
These trends could be explained by consumer views on the economy. In our study, 76% of respondents with a lower annual household income agree or completely agree they are concerned about personal finances due to the current state of the economy. The economic uncertainty may also be influencing the continued use and interest in Buy Now, Pay Later (BNPL) installment payments as well. Sixty percent (60%) of those who know their financial institution offers a BNPL solution report using it. While some respondents did not know if their financial institution offers an installment payments solution, 32% indicate they would be likely to use it if available, which is a 39% increase from last year. Younger Millennials are the demographic most likely to use BNPL, with 55% reporting they are likely or extremely likely to use it. This is an increase of 57% from the previous year.
Emerging Payments Adoption Remains Low
While interest in cryptocurrency continues, only 19% of respondents reported actually investing in or holding crypto. Twenty-six percent (26%) of respondents said they are likely or extremely likely to use cryptocurrency as a payment method as more merchants begin accepting it. As expected, younger generations expressed more interest in learning about cryptocurrency, with Millennials holding or investing crypto more than other generations. Respondents with an average or above average household income have a greater interest and have more experience with cryptocurrency than those with below average income. Of those respondents who do hold cryptocurrency, the majority are invested in Bitcoin.
While most respondents (78%) have not yet engaged in a metaverse experience last year, of those who have, 73% purchased, monetized or sold real or virtual products or services. Millennials are the most likely generation to participate in the metaverse, similar to crypto.
Regarding NFTs, just over a quarter (26%) of respondents are interested in learning about them from their financial institution, skewing heavily toward Millennials and those with average or above average household incomes. There is also still a significant educational opportunity surrounding emerging payments, as nearly half (44%) of all respondents say they don’t hold cryptocurrency because they don’t know what it is or how to use it. One in four (26%) of respondents would be likely or extremely likely to take advantage of educational classes or resources on these topics if offered by their financial institution.
Key Takeaways
The founding philosophy of credit unions is the business of financial well-being. In the face of the unpredictable economy, credit unions have a unique opportunity to differentiate themselves from other financial institutions by focusing on improving the financial health of their members.
By utilizing data and community connections, credit unions can implement the following actionable strategies to help their members’ financial wellness:
- Send surveys to gauge members’ financial health.
- Market balance transfer campaigns.
- Offer behavior modification alerts.
- Provide counseling and education around newer payments offerings, like BNPL, to help members avoid the associated risks when these new payment types are used in excess.
- Leverage data and engagement to create connected experiences customized to each individual member and their needs.
Financially healthy members are more likely to be satisfied with their credit union as their primary and trusted financial provider. People feeling more financially secure, especially if that is due to their income level, might also feel more comfortable taking risks on emerging payment trends like crypto, NFTs and the metaverse.
Yet, despite the buzz cryptocurrency and other emerging payments trends receive, there are still a lot of unknowns. Cryptocurrency has evolved rapidly over the past decade and due to the recent market volatility, only time will tell what its future holds.
As credit unions currently cannot hold digital assets on their balance sheets until further regulations or legislation is established, it is important for credit unions to educate their staff and members on the opportunities and potential pitfalls that are associated with playing in the cryptocurrency, NFT or metaverse spaces. Take advantage of resources like PSCU’s cryptocurrency microsite, which hosts of wealth of information and materials specifically curated for credit unions and their staff, to stay informed on behalf of your members.
As economic uncertainty continues, credit unions can provide a line of defense to help protect their members’ financial health. Offering financial wellness and emerging payments education and resources can help members make payment decisions in the best interest of their financial wellbeing.
Take a look at more key findings and takeaways by downloading the full 2022 Eye on Payments study now – help your credit union effectively market to members and achieve growth and success.
In his role as SVP, Chief Marketing Officer, Tom Pierce is responsible for leading and executing PSCU’s marketing and communications strategy. Pierce has successfully led marketing teams for more than 30 years, with the latter half of his career spent in the payments industry. Prior to joining PSCU, Pierce served as Chief Marketing Officer for Cardtronics, a global ATM organization serving the retail and financial services industries, where he directed a global marketing team in the development and execution of strategic marketing and communications initiatives.
