As cooler temperatures give way to warmer weather from coast to coast, Co-op’s SmartGrowth experts foresee an uptick in spending across many merchant categories over the next few months.
To help your credit union plan ahead and capitalize on these emerging opportunities, here are 5 payment predictions for this spring:
- Travel, Lodging and Home Improvement Take Flight:
According to a recent survey conducted by travel insurance company Seven Corners, 58% of respondents are planning more summer travel in 2022 than before the pandemic. The nature of travel post-COVID will likely look much different, however, with more consumers considering taking “micro-cations” lasting 5 days or less. Ongoing inflationary pressures, including high fuel prices that are already driving up the cost of air travel, will likely contribute to this trend.
Meanwhile, with ballooning housing prices and rapidly rising mortgage interest rates driving many would-be buyers out of the market, home improvement spending will continue to be high as homeowners are deciding to stick with their current residences rather than trading up.
“I think we’ll see the travel and lodging sectors continue to flourish,” says John Patton, Senior Payments Advisor at Co-op Solutions, “along with categories like home improvement, as home sales start to trend down due to rising mortgage rates and inflation puts pressure on everyday household expenses.”
- Merchants Capture Loyalty through Subscriptions: One pandemic-era trend that is showing no signs of abating is the growth of subscriptions across numerous merchant categories, including womenswear rentals, travel, and even fast food.
Taco Bell launched its “Taco Lover’s Pass” subscription service nationwide in January. For $10 per month, the popular chain’s rewards members can enjoy one taco each day for 30 days. Panera, meanwhile, is offering unlimited free coffee and other beverages for just $10.99 per month.
The travel industry, meanwhile, has been slower to adopt subscription services since it is traditionally not conducive to a recurring revenue stream. But that may be changing. Alaska Airlines is offering a “Flight Pass,” starting at $49 per month, while luxury brand Inspirato offers a vacation rental subscription service for $2,500 per month.
With the number and variety of subscriptions growing across seemingly every merchant category— from fitness equipment to auto infotainment systems and even “Bark Boxes” for pet owners— the attractiveness to businesses is easy to see.
“Merchants are eager to use subscriptions as a way to meet revenue growth targets while holding on to an increasingly fickle consumer base – by charging subscription fees to their favored form of payment at regular intervals,” Patton says.
It’s obvious that consumers enjoy the convenience and flexibility of subscriptions across a wide range of purchases, and this new “subscription economy” is indicative of a larger trend of consumers adopting anytime/anywhere spending to fit their on-the-go lifestyle. Credit unions need to stay ahead of this trend, and ensure their payment options are readily available to their members for use in their preferred digital wallets and provisioned for recurring charges in their favorite services and shopping carts.
- Credit Balances to Rise as Household Debt Increases: Household debt rose above $15 trillion for the first time in 2021, a sign of growing consumer confidence. This trend is backed up by Co-op’s credit union portfolio data, which has shown a steady rise in credit balances since the beginning of the year. January 2022 saw 1% balance growth year-over-year, followed by 3% growth in February and 5% in March.
“As consumers begin to revert to pre-pandemic spending behaviors, they are becoming more comfortable carrying some revolving debt,” says Beth Phillips, Managing Director, Strategic Portfolio Growth at Co-op. “Our prediction is credit balances will continue to slowly build as we move through the year.”
- Open for Business – From the Home Office to Main Street: After a couple of challenging years, all signs point toward a triumphant return of small business.
Per PYMNTS’ quarterly Main Street Business index, small and medium businesses (SMBs) are showing increased resiliency, with a 1.6% quarter over quarter improvement in health indicators across the sector as of March 2022. The index now stands 18.5% above the lowest reading taken during the pandemic.
With four consecutive quarters of growth for SMBs in the books, enterprises from Main Street to the home office are poised to show strong gains in 2022.
Meanwhile, unemployment has fallen to its lowest level since just before the pandemic, and nearly all 22 million jobs lost due to COVID have been recovered. Yet many workers, unsatisfied with traditional employment in the post-pandemic era, are pursuing their own entrepreneurial dreams. It’s estimated 1.5 million new businesses will open in 2022. For some, this includes selling crafts and other goods on sites like Etsy and Pinterest.
“We’re looking at continued growth in business card spending, because professionals are back on the road and submitting their travel expenses to their employers,” Patton says. “But we’re predicting even stronger growth within the small business sector, as couples move toward one person working in traditional employment – either remotely or back in the office— while the other starts up and runs a home-based business.”
In a confluence of hot trends, some of these SMBs began offering subscription services to maintain some level of income during the depths of the pandemic. Now, those subscription programs – whether a book of the month club promoted through a local independent book store, or a quarterly beer tasting club at the corner tavern—are paying off through the certainty a loyal customer base coupled with steady, recurring revenues (charged via cards on file!).
- Health and Fitness Muscle Up: More Americans are heading back to the gym. Whereas the past couple of years saw huge growth among at-home fitness brands like Peloton, pandemic-weary health nuts are itching to return to well-known fitness center franchises like Planet Fitness, where the social aspect can provide extra motivation. Partially due to low monthly membership fees, Planet Fitness opened 100 new locations and saw 30% rejoin rates in 2021, versus just 20% pre-COVID.
This isn’t the only reason why the health and fitness category is poised for strong growth this year. Major pharmacy chains are betting on consumers’ desire for convenience and one-stop shopping, by rapidly adding in-store health clinics to their menu of offerings. CVS Health already has 1,100 such locations, where customers can receive basic medical services— from a flu shot to a physician consultation—while picking up their prescription and toiletries. Competitor Walgreens is planning to roll out 1,000 clinics of its own by 2027.
With all these exciting trends in the air, it’s important to remember that uncertainty continues to linger. From the tragic events in Ukraine, to continuing supply chain bottlenecks and rising inflation, expect the unexpected as we look out to the second half of 2022.
Opportunity Knocks for Credit Unions this Spring
Some modest tweaks to your payment portfolio strategy to take advantage of the latest spending trends can have outsized impacts this spring. As more merchants explore subscription services to grow revenues and customer loyalty, make sure you’re providing your members with an easy, frictionless way to get your cards into their digital wallets and favorite merchant apps and sites. Providing your members with Co-op Digital Card Issuance will give them instant access to their digital credentials, while easy provisioning into your members’ favorite wallet apps, like Google Pay, Apple Pay®, Samsung Pay, Fitbit Pay and Garmin Pay will keep your cards top of wallet, and top of mind.
As consumer household debt and credit balances begin to swell, it’s also a great time to initiate a balance transfer campaign. Offer your members a low introductory rate balance transfer while reminding them of your credit union’s competitive rates, low fees and exceptional service in your messaging. A well-timed balance transfer campaign will help to grow your credit union’s portfolio balances and burnish your primary financial relationships.
And with small businesses poised for serious growth, make sure your business credit card offering is ready for prime time. With the growth of home-based and online micro-businesses, a business card can help your credit union earn additional interchange income while capturing more of your members’ primary financial relationship.
Rejuvenate Your Portfolio with Co-op SmartGrowth:
Do your credit union’s debit and credit portfolios need some additional care and cultivation? Co-op SmartGrowth Consultants have the “green thumbs” to help you take your program to the next level. Discover how Co-op SmartGrowth can help you see beyond basic transaction data, analyzing your card portfolio to reveal new opportunities for growth. Contact us to learn more.