2023 Eye on Payments: Part 3 — Debit’s Dominance during a Time of Economic Uncertainty

Summary: With the economy top of mind, many consumers are reaching more frequently for budget-conscious payment methods like debit cards. Welcome to the third installment of our four-part blog series on PSCU’s 2023 Eye on Payments consumer payments study. In this blog, PSCU Chief Marketing Officer Tom Pierce explores the dominance of debit during a time of economic uncertainty.

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Over the past year, consumers have felt the ongoing pressure of the inflationary environment, with high interest rates, rising fuel and grocery prices and more. Consumers are also feeling less confident about their personal finances due to the collapses of Silicon Valley Bank, Signature Bank and Silvergate Bank, along with the crash of FTX, earlier this year. With the economy top of mind, many consumers are reaching more frequently for budget-conscious payment methods like debit cards.

Velera (formerly PSCU/Co-op Solutions) set out to gauge the current state of payment preferences among credit union members and other financial institution customers (“non-members”) in our 2023 Eye on Payments study. The sixth annual study explores the factors influencing consumers when it comes to their choice and usage of different payment methods, including how these factors may vary among different economic events and life stages. Key takeaways are provided to help credit unions decide how to best optimize offerings in order to adapt to the ever-evolving preferences and needs of their members to better serve them now and in the future. 

In this third blog from our 2023 study, we explore the dominance of debit during a time of economic uncertainty.

Concern about personal finances amid economic uncertainty

Ninety-three percent of credit unions members believe their financial institutions are stable and say they trust their credit unions, but six in 10 (63%) are more concerned about the safety and security of their money/savings then they were a year ago. The economic outlook weighs heavy on consumers’ minds, with eight in 10 reporting concern and 73% being concerned about their personal finances as a result of the economy. The recent bank collapses have led to 62% being more concerned about the security of their money or savings than they were a year ago. However, the good news for credit unions is that 81% want to do business with a financial institution that knows them personally, and 77% prefer a smaller financial institution instead of a larger national one. 

Similar to previous years, 70% of credit union members decide how to pay for something primarily based on which option is the most secure. In addition, 59% are more concerned about fraud given the continued shift to online banking and mobile apps. 

Growing debit-credit gap highlights debit’s continued dominance        

For the fifth year in a row, debit was the most preferred way to pay (43%), a finding underscored by a decrease in credit preference from 35% in 2020 to 29% in 2023. This is coupled with a consistent increase in preference for mobile wallets and P2P payment accounts, alongside a decrease in cash. Credit union members use their debit cards more frequently for all types of purchases, from coffee shops to fine dining, to grocery and pharmacy purchases and during almost all scenarios. This includes routine purchases between $10-$30, purchases between $30-$200, for subscription services and when buying consumables and other tangible goods. Sixty-eight percent of consumers have a debit card loaded in their mobile wallets. 

When asked to anticipate the next six months, 81% of credit union members reported they would likely use a debit card and 76% predict they will use a credit card. Consumers with an average or above average household income are more likely to choose their credit card (49% credit versus 23% debit), whereas those with an income below average tend to prefer debit (40% debit versus 34% credit). 

Key Takeaways

Credit unions should take advantage of the trust members have in their credit unions, which is a major differentiator from other financial institutions. This trust can provide the opportunity to grow relationships with existing and new members through positive word-of-mouth and focused advertising. 

As the “people helping people” philosophy is at the heart of all that credit unions do, now is the time promote financial wellness in order to let members know that their best interests are top of mind. This could include balance transfer campaigns, behavior modification alerts, education and more, all geared to helping members with their financial health and security. Ensuring that your credit union’s fraud toolbox is up to date and effective will help maintain a high level of trust with your members as well. 

With the economy at the forefront in consumers’ minds, it makes sense that members might be reaching more frequently to debit cards, a budget-conscious payment method, for the foreseeable future. However, for the second year in a row, there is a difference between what members are reporting as their preferred payment method versus what they are actually using. Just like last year, while debit might be the preferred way to pay, data from the monthly Velera Payments Index report is showing growth on the credit side, with increasing credit card balances. This trend is likely to continue with sustained inflation and the resumption of federal student loan payments in fall 2023.

Explore more key takeaways to help credit unions effectively market to members in order to achieve continual growth and success. Download the full 2023 Eye on Payments study now.

Author: In his role as Chief Marketing Officer, Tom Pierce is responsible for leading and executing Velera's (formerly PSCU/Co-op Solutions) 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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