Strong consumer and business card programs are well positioned to meet bank, consumer, and business challenges fueled by excess deposits, changing payment channels, and post-COVID-19 pent-up demand.
According to the Visa Spending Momentum Index, a measure of the health of consumer spending, the U.S. economy continues to rebound as businesses reopen. Sixty-five percent of consumers spent more in April compared to the same time last year (the first full month of the pandemic’s impact on the U.S. economyand 51 percent of consumers are now spending at levels higher even than those seen in April 2019, according to an article in Digital Transactions.
Small business optimism is also on the rise due to improved small business expectations of the future, according to Michael Brown a principal U.S. economist at Visa. “Many small business owners are becoming more comfortable expanding employment and increasing inventories. However, weak sales and difficulty filling positions are still presenting challenges for small businesses,” Brown noted.
For banks, low interest rates coupled with increased reserves have heightened the need for non-interest income—the largest source of which continues to be interchange income from debit and credit cards.
Taken as a whole, the opportunity for community banks to serve their customers, increase market relevancy, and grow non-interest income through card offerings has never been better.
Card program opportunities
While the pandemic has unquestionably impacted the economy, certain card-related offerings—most notably mobile wallets and contactless payments—have seen a surge in use. Adding new card options or functionality can help banks stay competitive and retain these valuable relationships.
Mobile wallets are increasingly turning into a preferred payment method for in-store payments and e-commerce purchases. And while mobile-wallet adoption is holding steady at 45 percent, younger consumers are embracing the payment technology more readily than they were pre-pandemic, according to research from FIS. As of February 2021, 65 percent of young Millennials use a mobile wallet, compared to 59 percent in April 2020. In addition, 57 percent of Gen Zers use mobile wallets, up from 50 percent in 2020, according to another Digital Transactions article.
Whether a contactless card or mobile phone was used, contactless forms of payment continue to rise. In fact, usage has grown 150 percent since March 2019. The country now has 175 million contactless cards, the most in the world, according to a 2020 Visa report.
Buy now, pay later (BNPL) is another offering that has become hugely popular. With these programs, consumers receive their products at the time of purchase and pay in installments without interest. It is the new layaway program and could jeopardize cardholder relationships.
You can serve a pivotal role, helping your customers better weigh the pros and cons of using BNPL solutions by highlighting the protections offered with credit cards (BNLP does not offer purchase protections and is not typically eligible for rewards), and the additional value they gain with their cards, which may prove to be more favorable for customers and could shape their use of the service.
Faster payments are also gaining traction. This is a method for the immediate transfer and settlement of funds between two parties. See Finzly’s article on faster payments technology options and learn why now is the time for community banks to begin adoption.
As new technologies emerge or you see an increase in customer demand for new payments functionalities, reach out to ICBA Bancard at 800.242.4770 or [email protected] We can provide a credit card portfolio review to ensure it is healthy and thriving, while discussing your broader needs to help you navigate the payments landscape.
Julie Hanson is ICBA Bancard executive vice president of product and relationship management.