A triennial report, the 2016 study factors in a wide range of data from 2012 to 2015. According to a press release issued by the Federal Reserves Policy Committee, it is the agency’s most comprehensive look at the U.S. payments industry to date, as the data collected was “substantially expanded” to incorporate additional fraud-related information not included in previous reports.
Thought leaders at CO-OP have since had the opportunity to review the 2016 study. Here is what your credit union needs to know:
- Credit card usage surged from 2012 to 2015 – a full 8 percent (CAGR) compared to 5.1 percent for the 2002 – 2012 period. Resource this product well.
- Debit transactions are also on the rise. If your annual growth rate for debit transactions falls below 7.1 percent, you are losing ground to the competition. Take the necessary steps to close the gap.
- Usage of prepaid cards is up – 8 percent annually. Add this payment type to your portfolio to boost revenues and profits.
- Cash payments are declining. Both the 2016 and 2013 studies indicate negative growth in ATM cash withdrawal transactions. And while not stated in the study, other FRB sources report that cash represented only 32 percent of all U.S. payments in 2015, down from 40 percent in 2012. We suggest participating in an ATM network as opposed to making large investments in growing ATM infrastructure beyond new branch build or branch automation initiatives.
- P2P and other ad hoc transactions are not cannibalizing card payments entirely. ACH network transaction volume (not on-us debits and credits) continues to swell, growing at 4.9 percent annually. However, combined debit and credit transactions are still growing faster, at around 7.4 percent. As the ACH continues to evolve in support of faster funds movement and transaction settlement, it may siphon transfers away from Visa and MasterCard payment rails – and may also diminish the use of cash for settling transactions. Both shifts could adversely impact credit unions financially.
- Fraud remains a major concern. Counterfeit card fraud in the U.S. is five times higher than in Canada and the U.K. due largely to our delayed EMV roll-out. Yet those same countries, along with Australia and France, see fraudulent use of account numbers twice as often as we do here in the U.S. In these EMV-compliant nations, fraud primarily stems from data breaches – suggesting that once EMV is fully implemented here, we can expect to see more breaches of our own bank, retail and government databases.
Increasing card usage, and particularly credit card usage, is key to growing your income from interchange, interest and other fees. And no matter what happens to interchange rates, transaction volume is essential to maintaining top-line revenue growth. So take every measure to ensure that your cards outperform the competition – handily.
P2P technology is advancing quickly as well, so put the right strategies and technologies in place today to capture all the opportunities this “payment of the future” holds. While ATMs will remain relevant to members, a sharp pencil will be required to manage their profitability. And fraud will continue to keep credit union executives awake at night, so invest in the technologies and resources needed to win the war.
Ultimately, your brand equity – and member loyalty – depend on a strong payment offering. See what four key strategies can grow your card program and your overall brand by downloading our eBook below.
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