Digital Cards Accelerate Engagement for Credit Unions

The 2020s have seen significant paradigm-changing interactions in terms of how members connect with their credit unions, just as the way they interact with the merchants they shop with has transformed. Digital functionality is now king, and credit unions’ competition for digital is no longer just the other financial institutions in their peer group; it is the vast array of digital experiences they are having every day. You are competing against how straightforward it is to add your card to DoorDash or to order that new cookware set and pick it up curbside at Target.

The question credit unions need to be asking themselves is, “How do we ensure that our card is readily available in those preferred environments?” Keep in mind that the card is the most common interaction point your members have with you — that card is used multiple times per day, more often than members log into mobile or online banking, more often than they contact the call center and more frequently than they visit a branch. Card usage is the indicator of the member relationship and the key to the doorway to a long-term profitable broad footprint relationship with that member.

Digital consumer spending has evolved dramatically in the past three years across three key interaction types.

The largest merchants are expanding their channel support and removing the barriers between their in-store and online experiences. The ability to offer curbside pickup or buy online and return in store has become table stakes, as consumers want fast and hassle-free experiences. A recent PYMNTS study found that the rise of digital-only grocery shoppers has skyrocketed from just 0.2% before the COVID-19 pandemic to 7.2%, with 62% of those citing convenience as a major factor in going digital.

Research from Raddon, a Fiserv company, found that the consumer is making just under 24 purchases per month, and they are rapidly shifting to more digital services. Four in 10 are carrying out transactions on their mobile device or computer as opposed to face-to-face or over the phone with a merchant.

Subscription services are not new, but they have proliferated from streaming services to almost infinite choice — prepared foods, wine, clothes, cosmetics, pet treats and more. And those build on the existing all-digital experiences for food delivery, shopping with Amazon, ridesharing and more.

All of these common examples of digital consumer spending require a card on file or to use digital wallets for checkouts and recurring payments to utilize the service. For issuers, this is a critical understanding because the tenure of a card in relation to a merchant is typically measured in years. The average U.S. consumer does not maintain a list of where they store their card, and they react in the moment in a payment challenge — reaching for the next card in their physical or digital wallet. If this happens, critical transaction revenue could be lost to an issuer for years.

As credit unions think about what they should be focused on, there are two buckets of considerations:

1. What are the interactions that are important to an individual cardholder/member?

2. How do they carry out those interactions?

The research data we have compiled tells us there are five interactions with the card that are meaningful to the cardholder:

1. Getting the card: How do we access a new card or replacement card quickly on our devices and use it immediately?

2. How do I use a card? For an issuer, the only thing worse than the member not having their card is not using it. So, while a member is enthused about the experience and the offering — how you get that in the wallet so that they are spending digitally is pivotal, because the wallet supports all three commerce channels (in-store, in-app and online).

3. Help me understand where my card is being used: Find out where it is being stored for subscriptions, etc., and provide insights into spend so the member wants to pull this card out of their digital wallet over the other cards they own.

4. Empower me to manage my card: The cardholder wants the ability to set controls and alerts, mark a card lost or stolen or submit a travel plan digitally. All without having to call the financial institution or stop into a branch.

5. Engage with me: I value-added features such as rewards or offers that are meaningful to the cardholder, convincing them it’s more desirable to pull this card out of their wallet.

Candidly, it is a rare financial institution that can execute effectively against all of the above unless they are at the higher end of the asset spectrum. Therefore, for community financial institutions it is imperative they find the right partner that understands the digital environment and helps them execute against those five key experiences with the card at a pace and scale that is relevant for them.

When credit unions empower the cardholder, not only is the cardholder using their card more and growing the institution’s portfolio in terms of spend, but the credit union also benefits from word of mouth and people migrating to the portfolio because they too want that engaging digital experience.

Fiserv conducted an analysis to understand the value of a comprehensive digital card management solution that enabled financial institutions to provide their cardholders with the five key interactions listed above. The objective of this analysis was to compare the growth of key performance indicators (KPIs) for financial institutions such as transactions, total spend and active card usage for clients with a comprehensive digital card management solution against a set of similarly sized financial institutions without the same solution. Those using the card management solution, on average, benefited from a 5.7% increase in active card usage, 5.1% increase in transactions and a 4.8% increase in average spend per transaction – resulting in an overall 9.7% increase in total cardholder spend from 2021-2022. This growth exceeded that of comparable financial institutions without the solution in every KPI analyzed.

Not to mention, there were downstream benefits, such as lowering operating expenses in the call center because consumers are now equipped to manage their cards directly from their devices.

According to another Fiserv analysis, financial institutions, with a digital card management system solution that offered transaction enrichment features benefited from a reduction in fraud loss. Financial institutions using the digital card management solution for more than a year had a 10.8% reduction in fraud loss per distinct card reported for fraud, compared against those without the solution. This reduction equated to a $23.42 savings per distinct card reported for fraud.

The new expectation is that cardholders can have the same types of easy, frictionless experiences with their financial institutions as they do when quickly adding their card to DoorDash to get food delivered, or downloading the Nordstrom app, picking out a new outfit and picking it up curbside in just a couple of hours. All of those are enabled through a purchase experience that is zero click or one click, simply because you can add your card or use the digital wallet.

It is very clear what credit union members are crying out for — they want every possible opportunity to be self-service from their mobile device, which in 2023 they are now using to bring convenience and portability to practically every facet of their daily lives, engaging where it suits them. The old adage “meet your customer/member where they are” remains relevant, and where they are is on their phone or in the digital environment.

Consumers are making the same demand of their financial institution and the merchants that they are shopping with. I no longer walk into a grocery store and push my shopping cart up and down the aisles; instead I pull up in the parking lot and load up my groceries or have them delivered to my home. Either way, I save approximately 90 minutes. Those credit unions that can offer an analogous experience, meeting their consumers in their most preferred and frequently used channel will encourage usage and affinity to their cards.

Randy Piatt is Vice President of Product Solutions for CardHub at Fiserv.