It’s time to take a multi-pronged approach to payments growth

Despite some economic issues lingering from the global pandemic, rising inflation and threats of a recession banks are pursuing and capturing new credit cardholders with aggressive marketing strategies, more lenient underwriting criteria and rich rewards, while credit unions have largely remained on the sidelines. And credit union members are noticing.

According to Q1 2022 NCUA data, average balances for credit union-issued cards rose 9.8% year over year to just under $2,000, well below the estimated $3,000 average balance for all credit card accounts. While the growth in balances for credit unions is positive, it is still less robust than the industry average of 11.6% trailing bank segment increases.

Per NCUA data, for the first time in nearly 20 years, balances in the bank segment outgrew credit unions in 2021, with trends continuing into 2022. To further exploit their success, banks posted historically low annualized charge-off rates at 1.8%, .4% under credit unions annualized charge-off rates (Federal Reserve Board of Governors). As a result, for the first time ever, credit unions will post a higher calendar year credit card charge-off rate than the banking segment. This shift brings into focus the stark reality that historical credit union advantages are disappearing, highlighting a transformational shift in payments.

So, what gives?

 

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