Though 2021 ended on a note of uncertainty as COVID concerns continued to disrupt consumers’ travel, shopping, and return to work plans, there is hope the current surge will begin to wane over the coming months, opening the door to a new normalcy in the second quarter.
Overall, CO-OP’s SmartGrowth experts predict a strong year of growth for credit union payment portfolios following stabilization of spending behaviors in the second half of 2021. Our experts are watching the emergence of these 5 trends that should come to full fruition in 2022:
- Spending Behaviors Normalize: After the shocks of 2020, in 2021 consumers largely recovered and have solidified their spending habits – whatever they may be…
“We can tell from CO-OP’s spending data that once the vaccine was released, many people settled into their ‘new normal’ spending habits,” says Beth Phillips, Managing Director, Strategic Portfolio Growth at CO-OP. “Those who remained comfortable socially distancing, socially distanced, while others returned to attending in-person events.”
Per CO-OP’s credit union client spending data, credit merchant categories like theatrical productions, movies, dining out, drinking and billiard/pool establishments, and tourist attractions and exhibits were all up significantly in 2021 year over year.
Although credit balances remained depressed in 2021, Phillips does expect portfolios to grow in 2022.
“For 2022, the opportunities lie within building balances – slowly,” Phillips says. “Credit unions should focus on rebuilding their existing member credit balances with consistent balance growth initiatives, paired with at least one credit line increase effort.”
- Inflation Drives Higher Average Tickets: With inflation rates staying high for much of the year, our experts expect an increase in average purchase amounts, even while consumers seek out better value for their dollar.
“As ticket amounts increase, consumers will look for less expensive alternatives,” says John Patton, Senior Payments Advisor at CO-OP. “I expect more families will cook at home and migrate away from prepared food delivery. The grocery store will be their main place for buying weekly groceries. The wild card is COVID as those areas experiencing a rise in cases will opt for pickup and/or delivery versus in-store shopping. In the end, food, gas, heating/cooling, clothing, toys, shoes…most everything will be more expensive this time next year. Credit unions will need to consider changing their marketing messages to focus on value and financial benefits.”
To combat these inflationary pressures, credit unions need to beef up their rewards and loyalty programs. This should include the addition of flexible redemption options such as cash back in the form of a credit to the member’s outstanding card balance or a deposit to their checking accounts.
- The Return of In-person Shopping: In the latter part of 2021, shoppers showed an increased willingness to return to brick-and-mortar stores, although the types of retail outlets they are visiting have evolved during the pandemic.
Consider that consumers are flocking to open-air shopping centers, including strip malls and larger retail complexes that allow shoppers to stroll outside and maintain social distancing. According to the Wall Street Journal, an additional 17 million square feet of open-air shopping center space was filled in 2021’s third quarter, a nearly 50% increase over 2019.
Much of this growth can be attributed to increased grocery store foot traffic and the rise in curbside pickup services. Big-box stores are enjoying renewed growth as well, as November’s Thanksgiving weekend sales (coupled with slow shipping and supply issues at online rival Amazon) drew more shoppers at retailers like Walmart and Target.
“Everybody went back to the store for their holiday shopping because they were worried they wouldn’t be able to purchase the gifts they wanted for their families,” Patton says. “The shipping situation was a big piece of the puzzle.”
- Digital and Subscriptions will Remain Strong: This by no means indicates that consumers are giving up on the digital channel. On the contrary, CO-OP spending data year to date as of November 2021 shows credit spend in the Amazon/bookstores merchant category was up by 13% in count and 20% in amount over the same period in 2020. The Digital Goods category was up by an even more impressive 54% and 59%, respectively.
The widespread introduction of subscription models has been a key driver of this digital growth over the past year.
“Walmart unveiled their new Walmart Plus subscription program, offering free delivery of products for $99 a year,” Patton says. “More retailers are now offering these subscription programs, and I think you’re going to see more of these models going forward, allowing shoppers to get their purchases delivered to the home.”
- New Healthcare Delivery Models: The pandemic experience is spurring innovation across the healthcare sector, and Patton anticipates seeing new models of delivery take hold, with partnerships between big pharmacy chains and tech companies leading the way.
For example, CVS Health and Microsoft recently announced a joint initiative to offer personalized healthcare options to 100 million CVS customers.
“Healthcare is going to be a huge business in 2022,” Patton predicts. “CVS and Microsoft have connected through a new omnichannel healthcare model. Firms like Walmart will also expand their presence in the sector, especially around lighter services like booster shots and digital medical services.”
What Credit Unions should focus on in 2022
This year, credit unions should look to optimize payment portfolios to capitalize on these emerging trends. One strategy is to grow credit balances through robust, flexible loyalty rewards programs and regular credit line increases to incent members to keep your card at the top of their wallets.
Your members will continue to expand their use of digital payment methods, both in-store and online. Provide them with contactless cards to meet the needs of these shoppers who enjoy the in-person retail experience but desire a touchless payment interface. Make sure your members also have instant access to their digital credentials through CO-OP Digital Card Issuance, and keep your credit and debit cards top of wallet by enabling provisioning into your members’ favorite wallet apps, like Google Pay™, Apple Pay®, Samsung Pay™, Fitbit Pay™, and Garmin Pay™.
Lastly, if you don’t currently offer your business members a business credit card, now is a great time to do so. Experts predict as many as 1.5 million new businesses will open in 2022, including home-based, online micro-enterprises selling goods on websites like Etsy and Pinterest. Offering a small business credit card is a smart way to grow your credit portfolio while meeting your members’ evolving needs.
Grow Your Portfolio with CO-OP SmartGrowth:
Are you ready to optimize your credit union’s debit and credit portfolios? CO-OP SmartGrowth Consultants are prepared to support you and 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.