By Ray Birch
TAMPA, Fla.—As more POS payments become digital, the costs of not being top of wallet—or in this case top of phone—are getting higher: possibly as high as $5,000 in annual card usage per account.
That’s why CSCU is emphasizing that credit unions need to not only do the things necessary to keep their plastic top of the physical wallet, they also need to execute well to be No. 1 in the digital billfold.
“A transition period is underway as we move more toward the virtual wallet,” said Barney Moore, director of portfolio consulting services. “Position in the consumer’s wallet has always been important, and becomes more so as we move more into the virtual wallet space.”
National Research
Moore cited national research that shows revenue loss can be significant by not being top of wallet.
“Looking at credit cards, the average monthly spend from MasterCard cardholders is $650, or $7,800 annually,” said Moore. “Visa is a little higher—$850 monthly and a bit over $10,000 annually. Consumer research says 70% of card usage occurs on that top of wallet card.”
Moore said that if the credit union drops from the No. 1 spot, it may give up about $85 to $105 a year per card in interchange. Overall, more than $5,000 in annual card usage per account may be at stake, combining interchange and potential balance carry that comes with card spend, he said.
“You see a big drop when you fall to second in the wallet, netting about 20% of card usage, studies show,” said Moore. “And card usage falls off even more quickly below that, under 10% for No. 3 and lower.”
Barney Moore
But Moore said that credit unions’ top-of-wallet strategies must be executed now and be even better than before digital wallets began emerging. Reason is, he said, physical wallet strategies to get the cardholder to elevate the CU’s card encounter less friction than trying to do the same thing with a digital wallet.
Moore said one obstacle is the extra step or two it takes to move up a digital card compared with moving up a plastic card, saying that consumers may just avoid taking the extra steps.
“The tendency is to just use what you’ve got set in place as your default card in the digital wallet,” said Moore. He also said that storing a card into the digital wallet, as least today, is more difficult for consumers than the physical wallet, since digital wallets are new to many.
Moore contends that credit unions playing in digital wallets need to have staff well educated in virtual wallets so they can teach new cardholders how to enroll the CU’s card in the virtual wallet and make it the default card.
“When a cardholder stops in you should say, ‘Do you know how to place your card into Apple Pay,’ and then make sure they know how to place the CU’s card top of wallet. Show them right there.”
New Enrolees
That kind of communication is even more important, said Moore, when members enroll into a digital wallet for the first time.
“You have to do the things necessary to increase your chances of being top of the digital wallet,” said Moore.
Moore said that typical top-of-physical-wallet strategies are just as important today as in the past and apply to virtual wallets, emphasizing the need for rewards—rewards tied to the needs of the membership—to sway cardholders. He also said ongoing card promotions are essential and that the CU should regularly be sharing the pricing advantages, including terms and conditions, of its plastic.
Moore also said that credit unions waiting around to launch their own CU-branded wallet to ensure top-of-wallet position are making a mistake. He said waiting, and not playing in the most popular virtual wallets, risks losing that cardholder to another player.
“Don’t wait, give your members digital wallet options now,” said Moore.