PSCU Sees Contactless Cards And Digital Wallets As New Experience Gateways

In a research study conducted earlier this year, PYMNTS found that more than 50 percent of cards will be contactless by the end of next year. And it’s no surprise. The pandemic made us scared to touch things in stores or use cash, fearing what dangers might lurk on surfaces and via physical contact.

These behaviors led to an accelerated digital shift, including a surge in contactless payments and digital wallets used in stores, at the curb and online. With the shift to contactless comes the opening of new revenue streams for credit unions (CUs), given the dual tailwinds for consumer adoption of speed and convenience — attributes that will remain valuable long after the pandemic is (finally) vanquished.

Jeremiah Lotz, managing vice president of Digital Experience and Payments at PSCU, said the contactless shift is permanent — and will accelerate even with the pandemic in the rearview mirror.

“We’re seeing large investments and new strategies within the credit union space that are driving long-term digital plans, implementing experiences and technologies” that a few years ago would not have been done at such scale, he said.

Contactless cards are gateways to new experiences for consumers, said Lotz, and new experiences (with the caveat that they are positive ones) can cement future behavior.

“It’s just easier to wave or tap that card than it is to wait for the ‘insert’ [prompt] and wait for something to occur,” Lotz said. “By having that type of experience, I, as a consumer, now am often going to ‘pick up’ that contactless card, choosing it because it’s given me that great, non-friction experience.”

For CUs, the benefits accrue of having more transactions run through payment accounts. They gain revenue visibility and cash flow through interchange fees, and the willingness of end users to use their contactless cards in new settings. That gives the CU the chance to parlay the payments experience into, say, bringing customers to lending or investment-related activity.

It’ll take a while for the contactless cards to “cycle” through the membership base, said Lotz. But getting to that projected penetration level of contactless cards will be possible if educational efforts ramp up — where CUs market and reach out to end users, but internal education takes place at the CUs themselves.

“For credit union staff, to understand the value of this type of payment mechanism — specifically contactless — means that you are able to have that conversation with members and prospective members to help them understand how contactless is used and where it’s accepted,” said Lotz. “Here’s how you do it. You just wave it. Here’s how you look to see if it’s accepted.”

The Importance Of Outreach

Outreach to consumers needs to happen with merchants too, he said. Even amid the pandemic, not every merchant has made the leap toward enabling contactless payments onsite. As for progress, Lotz noted that PSCU has distributed nearly 7 million contactless cards in less than a year and a half.

“By doing that, we can carry that burden for those credit unions,” said Lotz, of getting contactless cards to members.

As contactless cards are increasingly embraced, consumers are starting the realize the value inherent in digital wallets, he said. Part of the uptick has been driven by the pandemic. But members are finding that digital wallets have a place across all manner of digital experiences. Credit purchases using digital wallets are up more than 30 percent year over year, he observed, and debit digital wallet purchases are up more than 50 percent year over year. Smaller-dollar transactions, once dominated by cash as the key payment conduit, are quickly going digital.

Just as the pandemic has set the stage for digital wallets and contactless payments to take flight, so too is the stage being set for virtual cards. Lotz noted that those offerings have been around for a while, but new initiatives are boosting their visibility. He pointed to Apple’s past debut of its Apple Card, which he said “reset the bar” for what can be done with virtual accounts. Merchants have become more comfortable with Apple’s (and other providers’) cards, he said.

“Credit unions and issuers have an opportunity to continue to enable that full experience and that full ‘virtual capability,’” he said.

PSCU, he noted, recently launched its digital issuance capability, which is essentially putting a virtual card into a member’s mobile wallet and to their digital “Pay” of choice. (And they don’t have to wait days to receive their new physical cards.)

“We expect to see continued increases in consumer usage of digitally pushing cards to their wallets and using them in card-not-present situations,” he told PYMNTS. “And we expect our issuers and our owner credit unions to quickly move into pushing that functionality into their experiences.”