CU Members Shop, Spend More Using Mobile, Study Finds

New research from the University of Illinois has found that paying for things with a smartphone increases how much consumers spend and how often they shop — findings that two industry pros said highlights how critical it is for credit unions to have solid mobile strategies in place.

Using data from Alipay, which is the world’s largest mobile payment system and the most popular one in China, the study found that total transaction amounts rose 2.4% after the adoption of the mobile payment channel, and total transaction frequency increased by more than 23%.

“Switching to the mobile channel leads to more shopping overall, and it particularly affects more hedonistic shopping such as food, entertainment and travel,” University of Illinois professor of business administration and study co-author Yuqian Xu said. “But it doesn’t affect purchases like education or health care. So it’s changing consumer behavior.”

The greatest impact came on less expensive items that members buy often, such as beverages and movie tickets.

“The results of the study indicate that the mobile channel acts as a substitute for the offline channel — that is, paying with a physical credit card — and as a complement to paying online on a personal computer. For the physical card channel, the total transaction amount decreased by 3.9% after the adoption of Alipay. By contrast, for the personal computer payment channel, the total transaction amount increased by 0.3% after the Alipay adoption,” the university added.

For Kirk Drake, who is president and CEO of IT CUSO Ongoing Operations, the study results highlight why credit unions need robust digital strategies.

“Just as when credit cards first came out it lowered the friction to make consumer purchases earlier than planned — mobile payments further accelerate consumer activity through reduced friction and convenience. Therefore, credit unions need to make sure their cards are top of wallet in the mobile world and make sure they have deliberate strategies to encourage member usage,” he said.

Richard Crone, who is CEO at financial institution advisory firm Crone Consulting, LLC in San Carlos, California, said the findings are a leading indicator for credit unions.

“What does this mean for credit unions?  They better get their app together!” he said.

Doing nothing is not a strategy, Crone added. Many members turn to mobile applications for spur-of-the-moment research and shopping.

“This is why successful credit unions are taking a mobile-first approach, putting financial services in the moment of need. Obviously, credit unions should be working to put their payment tenders at the top of their members’ mobile wallets, regardless of which type of mobile device they may be using. The first move is to make it easy for members to activate and use all the Pays: Apple Pay, Google Pay, Walmart Pay, PayPal, Venmo, Zelle, and the like,” he said.

Credit union mobile strategies must go further than that, Crone added.

“Credit unions need to be thinking about how to bring their loan agents to mobile, new account openings to mobile, and financial counseling to the mobile device. And empower their credit union app to truly act as the branch in the member’s hand,” he said.