When it comes to payments, credit cards are king

Is 2018 the year of the credit card? One new study says that may be the case.

With credit card debt hitting pre-recession levels late last year, PSCU's "Eye on Payments" report finds credit cards to be the preferred payment method across a variety of demographics, particularly as more and more consumer purchases are made online. Credit unions are certainly seeing evidence of that – as of August, credit card lending at CUs was up 7.9 percent year over year to $59.8 billion, according to the most recent Credit Union Trends Report from CUNA Mutual Group.

The PSCU study, conducted in partnership with research firm MartizCX, surveyed 1,000 credit union members and 500 bank customers during two weeks in September. The findings revealed various consumer payment preferences along with other behaviors.

But why credit? According to PSCU Chief Marketing Officer Tom Pierce, it boils down to security and convenience. Debit remains the most popular payment method for in-sure purchases, and the study found older millennials (those ages 31-38) prefer that channel by a four-point margin, though just 29 percent of young millennials (ages 23-30) say they prefer debit. Referred to as “the debit exception,” the young millennial demographic had the highest preference for credit cards outside of baby boomers.

What’s more, while one-third of respondents have used some form of digital payments within the last year, even more (38 percent of respondents) said they are still unsure about using mobile payments platforms – a big concern for credit unions, many of which have placed significant efforts into deploying mobile payments solutions.

And while the CUSO continues to urge credit unions to add mobile payments features, it also recognizes that there are obstacles ahead. Not only will consumers have to adopt the technology themselves, but credit unions will have to convince members that their platforms are both safe and effective.

PSCU’s survey also revealed that credit union members remain targets for fraud. The company found 13 percent of credit union members surveyed had been victims of card fraud within the last year, while 4 percent were victims of identity theft.

While counterfeit cards have decreased with the proliferation of EMV-enabled plastic, Lynch noted that identity theft is on the rise – and some consumers may not even realize they’ve fallen victim to synthetic identity theft since fraudsters often steal fragments of data from large groups of people.

Different CUSOs, different data

PSCU’s findings aren’t universally accepted, however. A recent webinar from CO-OP Financial Services cited data claiming debit as consumers’ top payment method, followed by cash, credit cards and checks.

Though PSCU's data shows boomers and millennials leading the way in today's purchase preferences, both CUSOs agree that Gen Z holds the momentum in the payments sphere both in technology use and in cost-consciousness. CO-OP data shows 12 percent of Gen Z members are already saving for retirement.

And even if Gen Z doesn’t hold the bulk of the purchasing power today, said PSCU’s Pierce, it’s a demographic CUs need to be paying close attention to.

“Now as [Gen Z members] are starting to establish their own financial relationships, it’s clear that they are starting to look for that relationship where they can have that personal type of support and be safe and secure,” Pierce said. “So credit unions have the opportunity to target these groups as new members to join their forces.”

But those younger consumers will want to conduct business in entirely different ways than older members, warned Pierce and Lynch. Engaging that younger demographic could prove challenging, since many younger consumers avoid making phone calls in favor of utilizing e-channels. The pair said SMS text messaging and emerging forms of artificial intelligence such as chatbots should be on CUs’ radars.

“It’s a brave new world,” quipped Lynch.