Fiserv Research Also Reveals Digital Card Interest Growing with Physical Cards Still in Demand
By Roy Urrico
Finopotamus aims to highlight white papers, surveys, analyses, news items and reports that provide a glimpse as to what could, or potentially, impact credit unions and other organizations in the financial services industry.
Physical credit and debit cards remain the most preferred payment method, according to the latest Expectations & Experiences research from Fiserv. However, card usage habits vary by generation and interest in digital card options has grown.
“Credit and debit card usage among consumers remains robust, with each generation displaying unique habits and preferences when it comes to card choice and management,” said Himanshu Patel, co-head of banking at Brookfield, Wis.-based Fiserv, a provider of payments and financial services technology solutions. He added, “Aligning card offerings to consumers’ purchasing needs and giving them control of and insights into card use will enable card issuers to attract and retain a range of cardholders and grow transaction volumes.”
The Harris Poll conducted 3,007 interviews online from November 23-December 7, 2021 with U.S. adults ages 18 and older for the survey.
Consumers Want Options
The Expectations & Experiences research found, digital card options are gaining interest, yet consumers are not ready to leave their physical cards completely behind as 43% of debit card users would opt to use mobile debit. This is a marked rise from 25% in 2018. Even so, 68% still want a physical debit card too — with the most common reasons as backups for lost or stolen phones (61%), if their mobile device stops working (56%) or a store does not accept payments via smartphone (50%).
Consumers also like the idea of having an in-person option to replace a card. While two thirds (66%) of debit card users would be more likely to request a replacement debit card online than at a branch, 62% of consumers overall and 74% of millennials say the ability to get a replacement card at the branch would influence where they bank.
Younger consumers also have a preference for a personal touch when it comes to paying bills, with 48% of Gen Z and millennials using in-person bill payment within the past 30 days, more than any other generation.
When it comes to managing cards, self-service is important. For example, 82% of consumers manage their credit cards online and 69% manage their cards via mobile devices, a figure that reaches 90% for Gen Z, millennials and Gen X consumers.
David Cencula, director, business strategy, card services, Fiserv, touched on the importance of understanding behavior and digital channels. “Because that is where the captive base exists, that’s where credit unions and banks will be competing for the next generation of users. The ability to offer products through those digital channels is going to be incredibly important. What does the behavior and product usage look like for your member base? What does that mean in terms of how you evolve into serving the next generation of credit union members?”
Deciphering the Data
Cencula offered insight into the research results, which he broke down into three overarching categories: payment preferences, credit card behavior and digital interaction.
Whether dining at a restaurant (75%), buying groceries (75%), or purchasing tickets for a sporting event or concert (77%), consumers of all ages prefer to utilize cards — whether it is debit or credit, contactless or chip — as their primary payment method compared to other options like cash, checks, or buy now, pay later (BNPL).
While preferences for card type shift depending on the channel and purchase amount, cards themselves still rule. “The headline is card products still rule the day,” observed Cencula. “We found that 80% of consumers use their card as the purchase mechanism.”
While credit is generally a popular choice for big-ticket purchases, with 51% of consumers preferring credit for in-store purchases exceeding $500 and 56% preferring credit for online purchases of the same amount, age is a notable influence.
Among baby boomers and seniors, 66% prefer credit for large in-store purchases and 73% prefer credit for large online purchases. In contrast, Gen Z prefers debit for large purchases – with 46% choosing debit for in-store purchases exceeding $500, and 49% choosing debit for online purchases of the same amount, compared to only 25% and 23% respectively for consumers overall.
Cencula noted, “There is a second level to that takeaway. What our survey found is that consumers preference for debit first/credit varies by purchase type.” For example, the study found that 40% of consumers prefer using debit for groceries versus 35% for credit. Whereas for larger online purchases, over $500, 56% prefer credit versus 23% for debit. “There's always been that sentiment that everyday purchases are really driven by debit, but I would say the magnitude of that difference was a big takeaway when we looked at the results.”
What does this debit/credit survey information mean for credit unions and banks? Cencula responded, “It is critical to have programs that compete in both debit and credit space. You may be able to attract top of wall usage for debit but when it comes to credit, there is an opportunity on the table.”
Credit Card Behavior
Cencula suggested credit card behavior revolves around two focus points: how many cards consumers carry, and what actually drives their behavior in terms of card use.
About a third of credit card users in the survey answered they have one credit card and that is what they use. The other two thirds have multiple credit cards in their wallet and may use different cards depending on the purchase.
Sixty-eight percent who have a credit card have more than one, with 90% of those having a “go-to” credit card they use most often. More than 70% of multiple card users choose their card based on the opportunity to accumulate rewards. This increases to 80% for those making more than $150,000 per year.
What drives the behavior when consumers have multiple cards? “We know (rewards) to be a huge factor in influencing behavior, but that data point kind of jumped off the page,” Cencula said. “We all anecdotally understand the importance of rewards, but a really nuanced rewards program can help drive, spend, and ultimately interchange revenue for our clients.”
However, younger consumers who use multiple cards have different drivers for credit card selection than other generations. Likely reflecting their newness to managing credit, Gen Z consumers are much more likely to only use one of several cards because they believe it is too difficult to manage multiple card accounts, with 37% of Gen Z consumers citing this reason compared to 17% of consumers overall.
“Generational differences are very apparent when it comes to digital interaction,” noted Cencula. “It's important our clients, our credit unions, have a really nuanced understanding of their population, both in terms of age, but other demographics that may drive behavior and understand the competitive implications of that base.”
Cencula explained if a credit union member base has a meaningful Gen Z and millennial presence, it needs to ascertain whether it is offering the digital tools required to retain that customer relationship. “Not just for their DDA (demand deposit account), but for their spend behavior, which is really kind of a primary monetization of that consumer.”
Cencula pointed out, “Forty-three percent of Gen Z and millennial users reported engaging with their online or mobile application on at least a weekly basis compared to 15% of baby boomers. “You have a real captive customer base engaging directly with your brand on at least a weekly basis. Each engagement is an opportunity.”
Another data point Cencula highlighted was that 73% of millennials are set up to receive alerts for debit activity versus 47% of boomers. Alerts are essential for many people, with 61% receiving debit card alerts, 70% getting credit card alerts and 63% of those receiving alerts saying an alert has stopped fraud. “That is a real financial impact to the credit union or banks to understand. I have got engaged users receiving these alerts and more than half are saying that ‘this helped prevent a financial burden on either them or our financial institution.’”
Cencula suggested education is vital in making sure members are set up for mobile, online, email or phone call alerts. “Are you equipped (credit union or bank) to offer alerts to your consumers in a way that is customizable and meets them in their time of need? Understand the implications of an effective alert and notifications environment.”