Credit Unions Stake Future On Contactless Cards, Digital Wallets

Credit unions (CUs) are known for catering to consumers with a personal touch and for helping small business clients thrive and grow, which has positive ripple effects throughout their communities.

Jeremiah Lotz, managing vice president, digital and data at PSCU, told PYMNTS that, as the pandemic wanes, CUs will have to ramp up their digital strategies to keep the momentum going.

The conversation came against a backdrop of turnover: The June CU Tracker, done in conjunction with PYMNTS and PSCU, found that as many as 36 percent of members are “likely” to leave if their CU’s competitors offer contactless payments.

In a nutshell, Lotz said, consumers are “looking for the best experience – and they are looking for what is convenient for them, and ties into a range of experiences across the board, including shopping online, making payments and even using social media.”

As those same consumers make decisions about their interactions and relationships with credit unions, they expect them to keep “up to date” with new technologies and services that are tied to payments innovation.

He noted the June CU Tracker found that 86 percent of CU CEOs are investing time and money in mobile wallets, while only just over a third are making similar investments in contactless cards.

In explaining that apparent gap, Lotz said that the difference between credit unions investing in digital wallets and investing in cards has been largely driven by the timing of each of those technologies’ availability in the market.

As he put it: Making digital wallets available is something that “from a credit union perspective, isn’t necessarily a high-cost initiative.” Much of the tech innovation and capital allocation is borne by the wallet providers in the market, and by extension makes it possible for CUs to broaden their portfolio offerings and tokenization capabilities available to their members.

By way of contrast, contactless payments, from a card perspective, mandate that CUs invest in the physical plastic and then get them into the hand of members.

“What we have seen most recently, especially with the pandemic,” said Lotz, “is that merchants are also pushing contactless payments at the physical point of sale, both mobile as well as the physical card.”

With the combination of digital wallets and contactless cards, CUs must strive to create ubiquity across channels and different payment types so that consumers can conduct their daily financial lives across mobile devices and physical cards with a universal tap-and-go experience. The growth of debit transactions through the past few years — surging at triple-digit percentage rates — represents an opportunity for CUs to step up their efforts with contactless payments.

The SMB Focus

There’s also the opportunity for CUs to cement their relationships with the small businesses that are the pillars of their respective communities, said Lotz. Small businesses were forced to innovate quickly in the midst of the pandemic, he said, and had to develop new online channels to reach customers and maintain operations to survive. Many smaller firms, he said, started to experiment with curbside delivery, or bringing POS devices directly to (masked) consumers in their cars. Alternatively, small businesses have broadened payments acceptance to include QR codes and rewards programs, making storefronts more digital, fluid and flexible to ensure customers are comfortable committing to their transactions.

Looking ahead, credit unions have an opportunity to make sure their members and small- to midsize businesses (SMBs) understand how contactless and mobile options can help make the commerce ecosystem more effective, even beyond the pandemic.

“That’s what consumers are looking for,” he said, of the twin engines of contactless cards and digital wallets. “And ultimately, credit unions are going to have to make the investment in both areas,” he said.