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2022 Eye on payments: Part V — five-year trends highlight changes in the approach to payments

For the past five years, PSCU has set out to gauge the state of payment preferences among credit union members and other financial institution customers (“non-members”) through annual research. Each year, PSCU has explored 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 results of the study each year also led to key takeaways for credit unions to consider when making decisions and optimizing offerings.

When results of the 2022 Eye on Payments study are compared to the 2018 Eye on Payments study, the five-year trends reveal changes in the ways members approach payments. We explore some takeaways of these five-year trends in this final installment of our five-part blog series from our 2022 study.

Choice and Convenience Influence Payment Methods

When we first started to conduct this annual research, mobile payments were in their infancy – and not yet widely adopted by over half the population. In 2018, the percentage of credit union members that prefer using mobile wallets remained low, despite their fast transactions (12%), convenience (11%) and ease-of-use (10%).

Then, the popularity of digital payments — like mobile wallets — rapidly accelerated during the COVID-19 pandemic, which occurred two years into our annual research.

Fast forward to today, and the number of members reporting a mobile wallet as their most preferred way to pay has tripled since 2018. Four in 10 also reported they were likely to use a mobile wallet to pay for goods or services in the next six months. Millennials are the most proficient users of mobile wallets, turning to this payment type on a monthly (31%) and weekly basis (21%).

When asked what payment methods respondents would be likely to use in the next six months, 83% said debit card, 77% said credit card, 54% said digital payment solutions, 38% said mobile wallet and 38% said a store-specific payment app. More than half of respondents planned to use a digital payment solution like Venmo, Zelle or PayPal in the next six months. Digital payment solutions, like mobile wallets, are here to stay.

Debit Is Preferred, but Credit is Actually Still King

In 2018, credit was the preferred payment method, with 61% of respondents reporting being the most comfortable using credit cards across the majority of retail purchase locations, and 60% claimed credit cards were more convenient to use than other options. Debit cards were a close second preferred payment method, especially at routine retail locations for small purchases.

The 2022 study revealed, for the fourth year in a row, that debit remains the overall preferred way to pay – with credit union members favoring debit cards (46%) slightly more than non-members (42%). Moreover, debit cards are the clear payment choice for every purchase type, ranging from full-service restaurants to local retailers, pharmacies, grocery stores and more. This shift could be attributed to members more conscious of their budgeting and spending habits due to the uncertain economy.

Yet, 2022 data shows there is a difference between what members are reporting as their preferred payment method compared to what they are actually using. While debit may be the preferred way to pay, when asked what type of payment method respondents had actually used in the past 60 days for in-store purchases of any kind, the same percentage of respondents (68%) report using debit and/or cash, followed closely by credit at 63%. When asked what payment method they are most likely to use in the next six months, nearly the same percentage reported they would turn to credit (76%) as debit (80%). Could this be a result of financially strapped members having to pay via credit for purchases they would not be able to afford otherwise? Given the current economic climate, credit unions should consider offering more financial wellness education to members.

Additionally, all respondents report they turn to credit cards for major purchases and cash when paying for services or purchases under $10 — trends that have remained consistent since 2018.

Emerging Payments

The first form of cryptocurrency, Bitcoin, was created and launched in 2009, with the coin’s mysterious creator originally revealing the blockchain system that would be the backbone of the cryptocurrency market in 2008. Yet, cryptocurrency only really took off among the general public in past couple of years. As such, PSCU does not have data on cryptocurrency and such emerging payments in the 2018 study.

In the 2022 study, respondents report interest in cryptocurrency, with 26% saying they are likely or extremely likely to use cryptocurrency as a method of payment as more merchants begin accepting it. At this time, Millennials are investing or holding cryptocurrency more than other generations. While the payments space is currently in a crypto winter – with further uncertainty brought about by the recent collapses of Silicon Valley Bank and others concentrated in this space –  cryptocurrency, NFTs and the metaverse look like they are here to stay.

It will be interesting to see what shifts in payments will occur five years from now. Regardless of the shift in expectations, it is important for credit unions to be mindful of how those trends are reflected amongst your own members. For example, respondents continue to be concerned about privacy and security. It is important to inform members on what your credit union is doing to protect them, while at the same time educating members on how they can protect themselves, especially with emerging payments technology.

By focusing on their preferences, you will be able to better fuel your members’ financial health and success, meeting their expectations and providing the personalized service your credit union is known for. Discover more key findings, takeaways and five-year trends by downloading the full 2022 Eye on Payments study now.

In his role as Chief Marketing Officer, Tom Pierce is responsible for leading and executing PSCU’s marketing and communications strategy, including brand development and sentiment, public relations, go-to-market strategy, market research and events. 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, the largest global ATM operator, and held senior marketing roles at FIS, Metavante and Wausau Financial Systems.

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