By Ray Birch
ST. PETERSBURG, Fla.—Yes, it’s risky to even be a fast follower in issuing contactless plastic, but Chuck Fagan has a warning for credit unions: Get moving or lose cardholders.
“The big banks and the big issuers have moved forward on this and that has really pushed contactless plastic numbers up a lot,” said Fagan, president and CEO of PSCU. “Last year we had over 500,000 contactless cards pushed out by our PSCU credit unions, and the queue for this year is pretty much full.”
Fagan said once contactless becomes accepted for mass transit in major cities such as New York, that’s typically an indicator contactless acceptance by consumers will begin to escalate. As CUToday.info has reported, contactless last year was introduced in some major U.S. cities, including the Big Apple, for mass transit.
Pay Attention
Fagan emphasized the need for credit unions to pay attention to this payments shift.
“It's OK to not be bleeding edge, but it's not okay—in this quickly moving payments space—to be a fast follower anymore. You have to at least be cutting edge,” said Fagan. “I would say if you go much deeper into 2020 without moving forward on contactless plastic, that won’t be good.”
Not being a fast entrant into the contactless plastic game could mean losing cardholders, emphasized Fagan, who agreed it will still take time for consumers to shift to digital wallets for tap-and-go payments.
“Not everybody is comfortable with using a phone for payments at this point and they are very comfortable with using plastic,” Fagan said. “And you have seen some pretty aggressive advertising from Chase, Capital One, MasterCard and Visa for contactless.”
Bridge to Another Technology
Fagan still sees contactless plastic as a bridge to greater digital wallet usage; first getting consumers accustomed to using tap and go with cards and then eventually migrating to digital wallets.
During 2019, when consumers pulled out their payment forms—contactless plastic, chip card or digital wallet—primarily it was for debit. PSCU studies show last year debit topped credit as the most common payments form. One of the reasons for the shift, explained Fagan, are recession concerns.
“You hear the news reports about the potential recession or economic slowdown, and a natural shift occurs,” said Fagan. “People start to use current funds, which means instead of using a credit line they use what they have in their checking account.”
Another Trend Driver
Chuck Fagan
Another reason for the shift, added Fagan, is consumers are getting more accustomed to using cards for small-dollar purchases.
“So instead of cash, which still makes up such a large portion of payments in the U.S., people are using their debit cards more,” said Fagan. “Credit unions really need to focus on knocking down cash, getting their members to use their plastic instead of paper. Cash still remains a very popular form of payment.”
Fagan sees the trend of consumers using more debit than credit continuing in 2020.
“You do see consumers moving up their credit balances to record levels,” noted Fagan. “And credit is such a strong payment avenue with its rewards and loyalty offerings. But I think people will continue to use debit a little more than credit due to fears of an economic slowdown and greater comfort for using cards for small-dollar purchases.”
A Robotic Future
As far as what’s ahead this year for PSCU, Fagan said the CUSO will continue to move into the use of robotics to not only streamline its internal processes but to also improve the business of its member owners.
“We've got a big push into robotics,” said Fagan. “We’re really trying to become even more efficient and make the consumer experience faster and better. For example, we have over 1,000 variable-rate card programs from our credit unions, and when the Federal Reserve makes an interest rate change you’re talking about 25 minutes to an hour for one of our people to go in and make a quarter percent adjustment on each variable rate card program. So, add that up for 1,000 portfolios and it's a pretty significant time investment. Now, using a robotics program we can complete that entire effort in 10 minutes. More and more we're working robotics into our internal processes to boost efficiencies and the consumer experience.”