5 Spending Predictions for Credit Unions this Spring

May 1, 2023

Spring is here and Co-op’s SmartGrowth experts are eyeing some spending trends that are poised to blossom over the coming months.

To help your credit union plan ahead and capitalize on these emerging opportunities, here are 5 payment predictions for the busy spring season:

  1. Travel, Sports and Recreation Enjoy Seasonal Lift: According to industry forecasts, the world-wide travel and tourism sector will reach 95% of its pre-pandemic revenue level in 2023. In addition, per Expedia data, flight searches are up 25% for summer travel compared to last year, with interest in international destinations growing by triple digits.

    All of this bodes well for a busy spring and summer, with the travel, lodging, airfare and car rental merchant categories all showing seasonal lifts. In addition, spending within certain sports and recreation categories like camping and golf will enjoy big increases in both debit and credit.

    “Consumers have been itching to return to their vacation and tourism habits over the past few years,” says John Patton, Senior Payments Advisor at Co-op Solutions, “The post-COVID travel industry is still returning to normalcy, and we also expect to see strong upticks in sports and recreation spending as people go outside to enjoy golf, camping, events and other activities.”
  2. Subscriptions Offer a Mixed Bag: Subscription services of all types have experienced phenomenal growth over the past few years. However, seasonal factors will dampen spending activity in this sector in the short term.

    “Subscriptions—especially streaming services—tend to decline in the spring and summer months,” says Beth Phillips, Managing Director, Strategic Portfolio Growth at Co-op. “Consumers spend more in categories like dining and entertainment as they pursue activities outside the home.

    Over the longer term, subscription growth is expected to continue, especially for popular streaming services. However, some types of subscriptions, such as meal kit delivery, have lost ground as subscribers are quick to cancel following the initial introductory discount period. Recent research shows that one out of every seven food service subscribers are likely to cancel before their next payment.
  3. Deposit Erosion and Rising Delinquency Lead to Credit Tightening: The recent turmoil in the banking sector, as evidenced by the collapse of Silicon Valley Bank and Signature Bank, has highlighted the challenges financial institutions are facing in the race to retain deposits. A number of factors—including rising interest rates that haven’t yet been matched by deposit account rates, as well as ongoing inflationary pressures—have forced savers to pull from their deposit reserves.

    Economic challenges are also leading to rising delinquency in consumer loan, credit card and mortgage portfolios. Per TransUnion research, serious credit card delinquencies (defined as payments 30 and 90 days late) are forecast to grow from 2.1% to 2.6% in 2023, the highest rate since 2010. Personal loan delinquency is also expected to balloon to 4.3% this year.

    As banks and credit unions lose access to cheap sources of funding and borrowers struggle to make loan payments, our experts predict that lenders will begin tightening their credit standards.

    “Lenders are going to take a harder look at factors like bureau scores, household income and assets before granting loans,” Patton says. “I also think we’re going to continue to see accelerated consolidation in the banking sector, with large banks acquiring smaller community and regionals that have unstable balance sheets.”
  4. Retail Will Continue to Struggle: Recent economic data is pointing toward a slowdown in consumer spending over the coming months. And that news couldn’t come at a worse time for the retail sector.

    Several major brick-and-mortar stores in the home goods, grocery and specialty retail sectors have recently announced bankruptcies and layoffs, including Bed Bath & Beyond, David’s Bridal and Whole Foods. Combined with a challenging economic climate and declining consumer sentiment, it’s likely that more is to come.

    “The traditional department store is going to continue to struggle,” Patton says. “Unfortunately, that model is a dying breed. Today’s consumer appreciates the convenience of shopping online, and in a stagnant economy in-person retail is one of the first areas to suffer.”
  5. Homeowners Embrace DIY: High interest rates on mortgages and a difficult economic climate have led the Mortgage Bankers Association to lower its second quarter purchase volume estimates by 3%, down 24% from the comparable period in 2022. In response, home prices in March dropped to their lowest level in 11 years.

    As fewer families are looking to trade up to larger homes, our experts expect many to focus on sprucing up their existing residence, leading to a resurgence in “do-it-yourself (DIY)” home projects. This will likely result in increased levels of spending in categories like home improvement, landscaping and furnishings.

Opportunities Shine for Credit Unions this Spring

With households struggling under a growing financial burden, and trust in banks at an all-time low, credit unions have a unique opportunity to grow their membership and meet consumers where they are today.

Credit unions should focus on their unique differences in marketing campaigns, by highlighting the value of a member-owned cooperative model and the outstanding safety and soundness that it offers. It’s also important to recognize that the youngest consumers—Generation Z—have very unique expectations of their financial relationships and are particularly focused on growing their savings and personal wealth. The key to reaching this audience is through social media platforms like TikTok and Instagram, and via influencers whom they trust for financial advice and counsel.

To entice such new members into the fold, credit unions should offer compelling rewards programs that are not simply focused on the credit card product, but are designed to incent households to maintain their entire relationship with the credit union.

“Relationship rewards are key for credit unions – and a differentiator they can offer against rising FinTech competitors,” Phillips says. “In reality, becoming the one and only financial institution for a consumer in today's world is difficult. However, creating a loyalty program that rewards members through each life stage throughout their relationship - whether it's deposit, credit card or investment accounts or mortgage or auto loans - a compelling rewards program across their entire relationship with your organization generates long-term member affinity.”

To attract new members to open a credit card with the credit union, now is a great time to run a low introductory rate balance transfer campaign. Particularly as bank card rates are rising, credit unions have a compelling argument that they can offer a better deal.

“Bank Card Rates have raised as the Fed increases rates. to over 20% and higher while Credit Unions average Interest Rates are around 18%.,” Patton says. “This is a great time to offer a low introductory rate balance transfer offer to help Members manage their finances through lower Interest Rate and monthly payments.”

Once your credit union gets new members in the door through your payment products, you can run card utilization and retention programs to promote activation and usage.

Shine a Light on Your Portfolio with Co-op SmartGrowth:

Summer means fun in the sun, and Co-op’s SmartGrowth experts are ready to fire up your payment portfolio! 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.

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