The term "digital wallet" has been floating around for the past few years. This technology doesn't require a physical credit or debit card and lets consumers pay for products and services using card information stored in a device such as a smartphone or a computer. In fact, according to a 2021 survey, around 150 million Americans have used a digital wallet at least once. Will this intangible payment method put credit cards out of commission? And what does this mean for your credit union?
Convenience is Key for Consumers
The convenience of digital wallets is the main reason people are so drawn to them. Instead of carrying all their cards in a physical wallet, they can always be sure they have them readily available as long as they have their phone, tablet, or computer. Not only that, but making payments at the check-out counter or online is much simpler and safer. They can conduct a touchless transaction with just a quick hover over the scanner without even having to enter their pin (if it's a debit card). Some examples of digital wallets include Google Pay, Apple Pay, and Samsung Pay.
The Real Threat to Credit Cards
The increased popularity of digital wallets doesn't necessarily mean credit cards are on their way out. Consumers still need credit cards to purchase products and services, and these cards are what connect to the digital wallets. Instead, there will continue to be a transition from using physical cards to using digital tap-and-go payment methods. However, the true threat to credit cards as we know them are Buy Now, Pay Later (BNPL) services, which allow people to make purchases and pay them off at a later date (usually without interest). This way, consumers make an upfront payment and pay what's left in a set number of installments, similar to an installment loan. These BNPL services offer another way to pay rather than using a credit card.
Action Steps for Credit Unions
This convenience-focused generation demands more flexibility, which means your credit union should be offering a variety of digital wallets. But just because digital payments seem to be taking over, that doesn't mean you shouldn't stop offering credit cards. Older credit union members probably won't catch on to the digital wallet trend as quickly as the rest and will most likely choose cash, checks, and credit cards as their preferred payment methods. However, the young crowd, like the Millennials and Gen Z members, will likely gravitate to digital payments.
Overall, providing your members with the option to pay with a digital wallet could significantly increase member engagement, improve member experience, and foster appreciation. One major way to appeal to your members is to reinforce the fact that digital wallets are more secure than physical cards due to each transaction being tokenized (given a random number that hides card numbers from retailers).
Nowadays, people are searching for banking services that are quick, easy, and convenient. Digital wallets offer just that. Even though credit cards may seem like a thing of the past, they're still valuable. But it's vital for credit unions to also consider providing alternative methods like Apple Pay, Google Pay, and other digital wallet payments.
Thanks to new strides in digital banking, your credit union can offer second-to-none digital banking services and intuitive, user-friendly features that earn member trust. Download our Digital Account Services eGuide today to see how you can improve your services!