The Financial Brand Insights - Fall 2021

1. Increasing Need for Enhanced Digital Capabilities Financial activities, along with many other categories, were already on a trajectory to be more frequently conducted via digital channels. However, the events of 2020 greatly accelerated the rate at which the digital transformation was occurring. Activities and processes transitioned out of necessity and in some cases, overnight.

As you can imagine, the increases in spend via digital channel are not going away anytime soon. The findings from the Elan and PYMNTS report discovered that a majority of people plan to maintain their digital shopping habits going forward. As shown below, 82.1% of grocery spenders indicated that they would stick with digital channels, followed by spending at restaurants at 81.4%, and retail shopping at 79.3% (figure 2).

Three Trends That Are Redefining the Credit Card Industry By Elan Financial Services The pandemic’s powerful impact on spending habits will have long-lasting effects on digital payment channels, loyalty and credit.

Increase in online shopping

Figure 2

Consumer plans to continue spending digitally

As people quarantined at home, one category of consumer behavior that experienced a notable rapid shift to online channels, was shopping. A recent report, “ Online Security and The Debit- Credit Divide ” by Elan and PYMNTS , found that 45% of people transitioned to digital shopping channels to purchase retail products, a fourfold increase since the start of the pandemic. The chart below details the increase in retail along with two other main spend categories: groceries and restaurants. Both groceries and restaurant purchases were on a steady incline to a peak of 21% by mid-November (figure 1).

Revert to previous spending behavior

17.9%

18.6%

20.7%

16.8%

Maintain some or all of shift to digital

82.1%

81.4%

79.3%

83.2%

Grocery

Restuarant

Shopping

Any

SOURCE: PYMNTS and Elan 2021 © August 2021 The Financial Brand

In addition to where and how consumers shopped, they also changed the manner in which they made their payments. When purchases via online channels increased, 41% of consumers reported a preference to pay with credit cards, versus 35% who opted to use debit and 15% preferring digital wallets. Key Point: As card users are more concerned about potential fraud when shopping online, banks and credit unions must build robust security features and fraud detection into the infrastructure of their credit card programs.

How consumers have shifted their spending to digital Figure 1

% increase, March 2020 to Nov. 2020

Shopping 32.7% Grocery 16.7% Eating 16.7%

47.6 48.8

45.8 45.0

The events of 2020 probably caused more upheaval in the credit card industry than had been experienced in quite some time. The payments industry had to quickly adapt, and banks and credit unions that were slow to respond found themselves losing share in a highly competitive market. The three new trends that are shaping the credit card industry in this time of rapid change are:

● The need for enhanced digital capabilities.

42.2

38.5

41.4 42.7 41.9

35.5

39.8

38.7

● A changing rewards environment.

28.8

24.4

● The uncertainty of future credit trends and losses.

21.9

20.9 21.4

19.1

18.6

19.0 18.4

17.6 17.7

16.6 17.2

15.3

21.4

15.1

It is imperative that banks and credit unions looking to offer a competitive credit card program be aware of these trends and implement any adjustments needed to remain relevant to card members. Here are details for each of these trends.

13.1

18.0

17.6

16.5

15.7 16.4

14.4

12.3

8.4

14.8 14.1 14.7

13.0

4.7

Shift to contactless payments

18.9

7.2

3.9

Mar 7

Mar 18

Mar 28

Apr 12

Apr 28

May 24

June 23

July 18

Aug 13

Sept 1

Sept 11

Sept 16

Oct 2

Nov 6

Nov 12

More than half of Americans report they are now using some form of contactless payment.

SOURCE: PYMNTS and Elan 2021 © August 2021 The Financial Brand

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THE FINANCIAL BRAND INSIGHTS FALL 2021

THE FINANCIAL BRAND INSIGHTS FALL 2021

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