Money makes the world go round, but where we once exchanged gold and silver for goods and services, we're now clicking and tapping our phones. Are we witnessing the death of cash? It is estimated that by the year 2024, non-cash transactions will nearly double from 2019. In addition, the number of people who made sure they always had cash on hand fell from 60% in 2015 to 53% in 2018. These trends lead to the same conclusion: we need to invest in smarter ways to exchange funds that meet the demands of the modern consumer, and digital banking is likely the answer.
The Ups & Downs of Payment Options
The way we transfer value from person to person has evolved in response to behavioral and technological changes, but there is a literal cost-benefit analysis made every time we choose which to use.
- Cash: The cost of cash is that it requires planning, whether it's leaving home with bills in hand or knowing you need to hit up an ATM near your destination. You need to have the cash, and enough of it, to make your transaction successful. The benefit of cash is there are no outside factors to consider. Cash has been the most direct and simplest way to make a transaction, with no delays in payment, no worries of overdraft or interest fees, and no unknowns--this is what it costs and here is that amount.
- Checks: The pitfalls of check use include potential delays in payment, the potential for bad checks and/or overdraft fees, and, of course, remembering to carry them with you. The benefit of a check is you just need the one and the amount can vary.
- Credit: Credit is often the most convenient, but also most costly, option. Credit cards make it easier to purchase on the fly; as long as you have your card, you're set. But, on the negative side, it's akin to a bank loan for the user and there can be risks of incurring interest payments. It can also prove difficult when paying another person, person-to-person (P2P), making it not a viable payment option. There is also the potential loss to the card issuer for non-payment.
- Debit: Debit has seen major popularity in recent years with almost 80% of consumers using them for daily purchases. A debit card limits the spending to actual funds available, eliminating the interest payment and solving some of the issues found with credit. But, if credit cards aren't usable, neither are debit.
Of all these channels, cash has the least cost. However, people just don't carry it as much anymore. In our on-demand society, where we can watch a movie, buy a shirt or get a loan right from our phone, we want things to happen now and with as little friction as possible. Digital payments can address both of these wants and solve the failings of the other payment avenues.
The Benefits of Digital Banking
If you want money to flow freely, without delay or interruption, digital banking is the way. While we have been headed increasingly towards going cashless, the natural next step is going card-less.
- Frictionless P2P: Digital payments, like those made via Zelle, can instantly transfer funds from account to account, with no cards, cash or checks needed.
- Record-keeping: Cash spending often goes untracked, which can leave people unsure as to where their money goes. Digital banking automatically creates your payment record so you know who you paid and for what. They are the check register of the future.
- Easy Bill Payments: From bill payments to P2P, once a recipient is set up with your account, you can transfer money quickly and easily, on a schedule or as needed. With the right core processor, there is no need for separate apps. Your members can have access to all account features within a single app.
- Enhanced Tracking: While members are making quick and easy payments, your CU will gain visibility into spending habits that may not have been visible before, allowing you to further customize your product and service offerings to the individual.
- Contactless Payments: While mobile wallets have been gaining in popularity for convenience, with the current state of the world in COVID-19, contactless payments have gained a new level of relevance. In fact, Zelle is seeing major changes in just the last few months: "Since the beginning of March 2020, enrollments increased, running more than double-digit rates above average. More than half of consumers sending money with Zelle are ages 25-54, part of both the Millennial and Generation X demographics, while boomers, ages 55- 72, have recently increased their overall use of Zelle. These generations across the U.S. are enjoying the convenience of Zelle within their banking app, with funds typically available within minutes when both parties are already enrolled."
Digital banking is the cash of the future and offering robust digital payment and lending options through your credit union will ensure that you are part of that future.