Credit Union – January 2023 | PYMNTS.com

• Most Consumers

Now Tap Mobile

Payments
P. 04

• Cash Wanes

As Debit Rises
P. 10

• Unpacking

Consumers’

Payment

Preferences
P. 14

• CU Executives

Target

Innovation
P. 22

January 2023

Credit Union Tracker® Series

Credit Union Members

Demand More Digital

Payment Options

DECEMBER 2022
Credit Union

Tracker® Series

Read the previous edition

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Acknowledgment
The Credit Union Tracker® Series is produced in collaboration with PSCU,
and PYMNTS is grateful for the company’s support and insight. PYMNTS
retains full editorial control over the following findings, methodology and
data analysis.

What’s Inside

04 Consumers Crave Payment Choice Amid Economic

Uncertainty
In a time of economic uncertainty, consumers are increas-
ingly demanding payment choice and innovation. A majority
are now banking on their mobile phones, making this offering
a necessity for CUs.

10 Cash Use Dips As Preference For Digital Grows

More consumers are going cashless as digital payments and
card usage grow. Meanwhile, debit continues to outpace
credit cards.

14 The Factors Shaping Consumers’ Payment

Preferences
Consumers of all ages want payment flexibility and digital
solutions, but these features are must-haves for a new gen-
eration of consumers, including a majority now leveraging
BNPL. Learn how younger generations are different and how
CUs can respond.

20 CU Execs Set Sights On Payments Innovation

With consumers flocking to digital payment channels, CU
executives seem to have taken notice and are investing in a
range of payment innovations.

22 An Insider On Staying Ahead Of Members’

Digital Needs
Sumeet Grover, chief digital and marketing officer at Alliant
Credit Union, describes how the CU is keeping up with —
and staying ahead of — member demand for innovative
and varied payment solutions.

26 Credit Unions Turn To Mergers And Partnerships

To help drive innovation and meet member demand for new
products, credit unions around the country are announcing
new partnerships and mergers.

28 Personalization On The Horizon

As CUs keep innovating their payments offerings, person-
alization will play a bigger role.

30 About

Information on PYMNTS and PSCU

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Need To Know

Consumers Crave

Digital Payment

Choice Amid

Economic Uncertainty

61%

Share of consumers using a greater
variety of payment methods

54%

Portion of consumers making
payments or banking on their
mobile phones

As a new year begins, consumers face an uncertain economic future.
Inflation remains high, despite the Federal Reserve raising interest
rates five times in 2022. Interest rate hikes can tamp down infla-
tion by slowing the economy, but they can also trigger a recession.
In PSCU’s recent

Eye on Payments survey, 87% of respondents voiced

worries about the economic outlook, and 74% had concerns about
their personal finances.

It is no surprise, then, that consumers want choice and flexibility.
PSCU found that 61% of consumers are using more payment meth-
ods than they had before. Digital, and especially mobile, is displacing
cash, with 54% of consumers now making payments or banking on
their mobile phones — up 15% since 2019. Meanwhile, the portion of
Americans not making a purchase with cash in a typical week has
shot up to 41% from 29% four years ago.

A recent survey from PSCU reveals how
consumer preferences are changing.

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Need To Know

Consumers’ interest in

digital and mobile payments

is growing rapidly.

Across the board, consumers are using digital channels as
never before. Fifty-nine percent of respondents in PSCU’s

Eye on Payments survey reported using digital payment solu-
tions such as Venmo, Zelle or PayPal at least periodically
— up 40% from 2019. Similarly, the number of respondents
who reported using mobile wallets to pay in-store in the
past 60 days rose 35% between 2019 and 2022.

Credit union (CU) members, in particular, are interested
in having even more digital payments and banking tools.
A PYMNTS and PSCU survey found that 66% of CU mem-
bers want more payment capabilities. Mobile payments are
especially popular, with 53% of CU members saying they
were interested in mobile banking capabilities, up from
47% in 2021.

Share of CU
members who want
more payment
capabilities

Share of members
interested in
receiving mobile
banking services

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Need To Know

CUs cannot afford to ignore

digital payments choice.

With consumers clamoring for more digital payments, it is
important for CUs to respond. Consumers are all too willing to
switch providers if this interest is not met. According to PYMNTS
data, 29% of financial institution (FI) account holders would
switch FIs in search of more innovative product offerings.

The costs for failing to offer innovative payment options can
be great. According to one prediction, 4.6% of global payment
revenues, equating to $89 billion, could be at risk for FIs that
lag in providing new payment options in the next three years.
Therefore, CUs that do not meet consumers’ digital demands
risk losing out to FIs that do.

Because consumers

are willing to switch

providers in search of

payment innovations,

CUs cannot afford to

sit back.

29%

Share of FI account holders who

are willing to switch accounts for

more payment innovation

4.6%

Portion of global payments revenue

at risk for FIs that are slow to offer

new payment options

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News And Trends

Cash Use Dips As

Preference For

Digital Grows

A recent Pew poll found that the share of Americans who
reported not using cash to make any purchases in a typ-
ical week has skyrocketed to 41% in 2022 from 29% four
years ago. Only 14% of consumers reported using cash for
all or nearly all purchases, continuing a steady decline
from previous polls.

Supporting these findings, a recent report from the Federal
Deposit Insurance Corporation found that the percentage
of households without a checking or savings account fell
to 4.5% in 2021 — the lowest unbanked rate since the
survey started in 2009.

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News And Trends

Consumers still rely on

legacy payments despite

newer alternatives’

popularity

Debit cards are more

popular than credit cards

Cash is far from being written off altogether, accord-
ing to a recent global survey from Accenture. The
study found that 66% of more than 16,000 consum-
ers in 13 countries used cash to make purchases,
64% used debit and 48% used credit, indicating just
how popular legacy payment methods remain.

At the same time, the report revealed how the use of
modern payment methods is growing. Fifty-six per-
cent of consumers used digital wallets, while 10%
used account-to-account (A2A) payment apps. As
many as 42% of respondents predicted that biomet-
rics will be in wide use by 2025.

A recent survey from FinanceBuzz found that United States
consumers are leveraging debit cards more than credit
cards. Nearly seven in 10 Americans reported using debit
more than credit, with respondents making purchases with
debit cards 14% more often in the past month than with
credit cards. The preference for debit was even greater for
Generation X, with 73% of Gen Xers using debit cards more
frequently than credit cards.

68%

Share of Americans who

report using debit cards

more than credit

14%

Increased likelihood of

consumers’ use of debit

rather than credit in the

past month

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PYMNTS Intelligence

Unpacking The

Forces Shaping

Consumers’ Payment

Preferences

Speed, convenience and ease of use are driving interest in a grow-
ing variety of payment options and digital technologies. Consumers
have become accustomed to seamless digital solutions while
shopping, banking and conducting their daily affairs, and inno-
vations that can provide or improve on these experiences are in
top demand.

Contactless payment options are a prime example. Because con-
sumers find the tap-and-go nature of contactless to be quicker
and more convenient than inserting cards into readers, contactless
use has proliferated. PSCU found that the number of CU members
using contactless cards increased 14% in 2022, with 82% of those
who had a contactless card saying they used it at least a few
times a year. When asked why, users reported ease of use, conve-
nience and speed as the top three reasons.

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PYMNTS Intelligence

81%

Share of Gen Z respondents
who use their phones to bank
or make payments

54%

Share of consumers of all ages
who use their phones to bank
or make payments

Younger consumers are more likely to

use digital payment solutions.

Younger consumers drive

digital demand

Though there is interest in digital payments choice across the
board, younger consumers are by far the most interested in
this innovation. According to a recent survey, 38% of millennials
reported using mobile wallets to make a payment in the past
month, compared to 31% of Gen X and only 22% of baby boomers.

PSCU’s most recent

Eye on Payments survey yielded similar find-

ings, with 75% of younger millennials reporting use of their
mobile wallets a few times a year. The survey also found that
81% of Gen Z respondents used their phones to make payments
or conduct banking, compared to only 54% of the entire popu-
lation. This should come as no surprise, as younger generations
are the most familiar with — and reliant on — new technology.

Younger consumers are also the most interested in buy now, pay
later (BNPL) solutions. PSCU found that 55% of younger millennials
are likely or extremely likely to use a BNPL program, an increase of
57% from 2021, making them the generation most likely to leverage
BNPL. The survey noted that this is consistent with younger con-
sumers’ desire to build credit as well as the unfortunate fact that
younger consumers have been hard-hit economically, with 19% of
Gen Z respondents having lost their jobs in the past year.

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PYMNTS Intelligence

CUs can do more to

innovate

Credit unions have an opportunity to meet the growing desire for
digital payments while ensuring their own future by appealing
to key demographics. One study found that only one-quarter of
CUs had plans to offer real-time payments in 2022. With PYMNTS
research estimating that nearly half — 47% — of consumers are at
least very interested in making or receiving real-time payments,
CUs not already doing so should explore real-time payment capa-
bilities as well as instant approvals and denials for credit card
applications.

Many CUs are already taking steps to meet these preferences. Of
those regarded as early launchers — the CUs quickest to release
new products — 74% are offering mobile banking solutions, 74%
are providing contactless cards and 68% support BNPL, according
to PYMNTS. The industry is clearly shifting toward digital innova-
tion. In fact, only 4% of credit unions had not launched a digital
transformation plan by the end of 2022.

Share of consumers who
are at least very interested
in making or receiving
real-time payments

Share of credit unions that
had not launched a digital
transformation plan by
the end of 2022

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Chart Of The Month

CU Execs Target

Payments

Innovation

Many credit union executives have noticed the strong
consumer demand for more payment options and digital
innovations and are planning accordingly. A PYMNTS and
PSCU report found that more than half of CU executives
surveyed are investing in mobile banking capabilities, real-
time payments, peer-to-peer (P2P) payments and mobile
wallets, among other payment innovations. There has also
been a surge in executives investing in mobile card apps,
rising from only 8.9% in 2021 to almost 29% in 2022.

The Upward Trend In Payment Method
Innovation
Share of CU executives citing investment in select products
or features

Source: PYMNTS
Credit Union Innovation: The Race To Meet Consumer Demand, July 2022
N = 101: Complete responses, fielded April 4, 2022 – April 20, 2022

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Alliant is here to serve our

members, and a large part of that

is ensuring that we are continuing

to value the changing landscape of

how members pay merchants, how

they pay other people, how they pay

their bills and what they are looking

for in terms of efficiency, security,

etc. So when we think about

innovation, that is key for us.

SUMEET GROVER

Chief digital and

marketing officer

Insider POV

An Insider On Staying

Ahead Of Members’

Digital Needs

PYMNTS talks with Sumeet Grover, chief
digital and marketing officer at Alliant Credit
Union, about how the CU stays one jump
ahead of member demand for innovative and
varied payment solutions.

With consumer demand for digital payment
options surging, it can be hard for credit unions
to keep up. That is why Alliant Credit Union
— Illinois’ largest CU and winner of CNBC’s
Best Credit Union of 2020 — makes an effort
to stay ahead of the game. A few years ago,
Grover explained, Alliant made the strategic
decision to focus on innovation and payment
solutions, with the goal of building out capa-
bilities in advance of members requiring them.

“From a digital-perspective, we try to be pro-
active, not reactive,” he said.

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Debit cards (contactless)

Credit cards

ACH

Alliant Credit Union members’ top
three most popular payment methods

Insider POV

1
2
3

The approach paid off. When contactless and digital payment usage
exploded, Alliant was ready. The CU first released a contactless
debit card in September 2019. By 2022, it was Alliant’s most popular
payment method, and its popularity kept growing. In fact, Grover esti-
mates that contactless debit usage doubled last year. Members can
connect their debit — and credit — cards to popular payment apps,
including PayPal, Venmo and Zelle, as well as mobile wallets such as
Apple Pay or Google Pay.

“We offer the full spectrum of payment solutions to our members to
meet their needs, depending on what they’re looking to do,” he said.

Understanding member needs and preferences is central to Alliant’s
proactive approach to innovation. Alliant was ready for 2022’s surge
in contactless debit usage because the CU did its homework. Grover
explained that Alliant thoroughly researches what its members want
and how best to provide these features.

“We look at needs beyond just the transaction. We want to under-
stand the journey members will go on,” he said.

To do so, the CU talks to its members regularly and solicits feed-
back directly through member surveys, net promoter scores and other
channels. Based on this feedback, Alliant puts the budget in place,
focuses on the right platforms and builds the solutions to match.

Alliant is always exploring new ways to help its members via inno-
vation. In September, for example, the CU released an enhanced bill
pay solution, modifying its old platform to create a more seamless
and frictionless experience. The CU is also focused on allowing mem-
bers to integrate Alliant’s products with other solutions. Blockchain is
another area that Alliant is exploring, as well as the expansion of its
use of two-factor authentication.

If it sounds as if Alliant is looking to innovate everywhere, that is
because it is. Grover explained that almost everything is on the CU’s
radar as it thinks about how to leverage new technologies to meet
emerging needs.

“We try to be ahead of that innovation curve and be ready to meet
our members’ needs digitally,” he concluded.

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Full-service, not-for-profit Skyla Credit Union
announced that Parsons Federal Credit Union has
approved a merger between the two companies.
The merger will expand Skyla’s area of operation
beyond the Carolinas.

Companies To Watch

Credit Unions Turn

To Mergers And

Partnerships

St. Petersburg, Florida-based PSCU recently acquired Juniper
Payments LLC, the largest U.S. cloud-based third-party non-
bank provider of interbank transaction systems. Capstone
Strategic Inc. advised PSCU during the acquisition.

Lumin Digital, a PSCU company, announced that American
Southwest Credit Union has signed an agreement to use the
former’s cloud-based digital banking platform for both mobile
and online services.

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What’s Next

Personalization

On The Horizon

Personalization will play a major role for CUs as they
continue innovating their product offerings to sat-
isfy members and cement loyalty. In an interview with
PYMNTS’ Karen Webster, Chuck Fagan, president and
CEO of PSCU, explained that CUs are well-positioned to
harness their members’ data to provide connected, per-
sonalized experiences. Fagan said CUs should look to
partner with FinTechs to create seamless experiences
for members, from lending products to financial advice.
As the demand for digital payments continues to grow,
credit unions cannot afford to ignore investing in inno-
vation that delivers seamless digital solutions.

CHUCK FAGAN

President and CEO

Those areas that are more

instantaneous in the decision-

making process and get

consumers through a purchase —

through an experience — fast and

efficiently, that’s what we’ll see

continue to evolve as we look

into 2023.

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Disclaimer

PYMNTS is where the best minds and the best content meet
on the web to learn about “What’s Next” in payments and
commerce. Our interactive platform is reinventing the way
in which companies in payments share relevant information
about the initiatives that shape the future of this dynamic
sector and make news. Our data and analytics team includes
economists, data scientists and industry analysts who work
with companies to measure and quantify the innovation that
is at the cutting edge of this new world.

PSCU, the nation’s premier payments CUSO and an integrated
financial technology solutions provider, supports the suc-
cess of more than 2,400 financial institutions and processes
nearly 7.7 billion transactions annually. Committed to service
excellence and focused on continuous innovation, PSCU’s
payment processing, fraud and risk management, data and
analytics, digital banking, strategic consulting and real-time
payments platforms, along with 24/7/365 member support
via its contact centers, help deliver personalized, connected
experiences. The origin of PSCU’s model is collaboration and
scale, and the company has leveraged its influence on behalf
of credit unions and their members for more than 45 years.
Today, PSCU provides an end-to-end, competitive advantage
that enables credit unions to securely grow and meet evolv-
ing consumer demands. For more information, visit pscu.com.

We are interested in your feedback on this report. If you have ques-
tions or comments, or if you would like to subscribe to this report,
please email us at feedback@pymnts.com.

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