by Phil Seely
Credit card use is on the rise, increasing from 18% of payment methods used in 2016 to 31% in 2022 (Federal Reserve). The way consumers use credit cards, however, is changing and has been influenced by advancements in digital technology, shifting economic conditions, and concerns about rising fraud. Understanding this shifting consumer behavior can help credit unions adjust their products and services to better meet member needs.
The impact of digital technology
Digital technology is playing an increasing role in the way cardholders use their credit cards. Contactless payment adoption increased heavily during the pandemic. This trend is expected to continue with contactless card payment use increasing by 119% from 2022-2027 (Juniper Research).
Virtual cards are an integral part of this contactless trend as they can be easily issued and added to mobile wallets or scanned with QR codes. To meet this growing demand, credit unions need to ensure they’re including virtual cards in their offerings.
The impact of the economy on trending credit card use
Inflation and high interest rates have made the cost-of-living rise, especially for younger adults with lower incomes and student loan payments. Other forms of loans, like mortgages, also become less accessible and less affordable amid high interest rates and conservative lending. This economic landscape has caused many to rely more heavily on credit cards to cover expenses. Use of credit cards for everyday items like groceries increased 50% from 2019 to 2022 (Forbes).
Economic concerns have also made card rewards and loyalty programs particularly important to cardholders. Along with their credit cards, consumers are harnessing rewards for everyday purchases, walking a fine line between using their cards enough to garner rewards while still being able to stay on top of their card payments. Personalized rewards based on data analysis is thus becoming important to effectively serve cardholders while maintaining profitability for issuers.
What do these economic-based trends mean for credit unions? To help members seeking loans, credit unions can work with partners to expand access to loans for those underserved by creating nontraditional paths to building credit or looking at alternative criteria for gauging loan risk.
Credit unions may also consider offering a credit program if they don’t already. With their rising popularity, credit cards have been an increasing source of income for financial institutions. Credit card programs can be a lucrative way for credit unions to diversify their portfolios while also supporting members in responsible card use with strategies that include offerings like targeted rewards and low balance transfer rate options.
Security an increasing concern
As fraud continues to rise, consumers are looking for additional ways to protect their personal information, particularly online. Indeed, more incidents of credit card fraud are reported by consumers than any other payment method (CreditCards.com). Tokenization and EMV chips have helped combat this fraud. Also, many consumers are starting to use masked virtual cards that conceal their account information during a transaction.
By implementing these features and communicating to members how to use them, credit unions can bolster cardholder trust. Credit unions can also offer members tips for recognizing fraudulent websites and tools like mobile apps that provide greater cardholder control.
By understanding the ways members use their credit cards and by staying on top of the latest technology and fraud trends, credit unions can better meet their members’ needs and create a positive experience that fosters loyalty.
At Envisant, our team of payments experts help credit unions provide relevant credit card programs that keep up with changing member needs. To learn how we can help, please contact 1-800-942-7124.
Originally Published on CUInsight
